Contract manufacturing companies are enjoying a period of high growth by dropping barriers to new product development. No longer is invention and innovation the exclusive purview of massively funded research and development arms of big conglomerates. Today, even sole proprietors can work with manufacturers to bring their products to the mass market.
One of the significant advantages of contract manufacturing outsourcing is that it allows creators to do more with less. They take advantage of the expertise, resources, and workforce of this $2 trillion industry and compete alongside market leaders. With so many companies offering services, new creators may find themselves confused on which way to go. Understanding the industry, what’s available, and how to vet contract manufacturing companies goes a long way towards setting a project up for success.
Choosing the Best Contract Manufacturing Companies
Contract manufacturing companies come in all shapes and sizes, from small specialty firms to major overseas operations. However, at the very basic level, all firms will fit into one of four categories: private label, component, service, and comprehensive.
Retailers who delve into the consumer packaged goods industry use private label manufacturers to take advantage of the demand for high-quality, low-cost goods. Walmart’s Great Value line, Target’s Market Pantry, and Costco’s Kirkland Signature are good examples. Private label manufacturers will sign contracts to create the products for brands, often alongside other similar products.
Some types of products are far too complex for beginning-to-end assembly in a single space. Auto manufacturing is a good example. It would be near impossible to create all the parts needed and then assemble them in a single plant. Instead, the components are developed in one space and then sent to another plant for assembly. This process is common for expensive, highly technical items.
Some manufacturing plants sell the service of their workers in putting together items. An example would be a soda bottling plant where the company furnishes the product and containers, and the workers combine them. This process can often be a carryover from the component manufacturing method as the service plant finishes off the product.
In some types of manufacturing, the entire process from product design to mass production happens in-house. This type of contract manufacturing is one that new creators choose, as it allows them to work with a single entity for the life of their development cycle, from conception to creation. Those who offer these services are usually low-volume manufacturers who provide the first small batch of products for testing market demand or meeting a niche need.
These types of contract manufacturing options serve a wide range of needs. Most newer creators will do well to work with one that offers a complete process as they will need significant guidance to bring their concept to market.
Understanding the Contract Manufacturing Process
Stage 1: Design the product
The new product introduction process all starts with design. The creator should have a firm idea of how their item will work before choosing a contract manufacturer. This step includes fleshing out the concept to ensure it’s possible and viable for the market. However, the design will need to undergo some changes to ensure it’s feasible to mass-produce cost-efficiently.
Stage 2: Build and test prototypes
The iterative product development process is a method of building, improving, and building again. By doing this, the developer can create the best possible concept that’s also cost-effective to produce. The product may go through several iterations and testing processes before manufacturing.
Stage 3: Establish the manufacturing process
Manufacturing isn’t a standalone step; it’s a plan that starts in the design stage. This method is also called “design for manufacturing.” As a developer designs a product, they also consider how the creation strategy applies to a mass-market process. The reason for this is simple: it must be easy to train laypeople to recreate the same product. Otherwise, the creators will need a staff of specialists and equipment that would not be cost-effective. This stage is where tooling also becomes vital. The creation of custom parts, models, dyes, and other resources will help to streamline manufacturing later.
Stage 4: Distribute the product
The distribution stage is handled primarily by the creator, as they are the ones who will build relationships with retailers and other sales partners.
Of course, none of these steps are possible without a thoroughly fleshed-out idea. Many creators attempt to jump into manufacturing too soon and suffer setbacks or run out budgets as a result. There are a few necessary things to have in place before moving on to contract manufacturing partnerships.
Is the Concept Ready for a Manufacturing Partner?
Moving on to contract manufacturing is a big step in any process. Going in too soon can cause a creator to waste funds or understate the overall scope of the project. It’s wise to have a few critical components in place before choosing a manufacturing partner. Specifically, creators should have:
A Vetted Concept
The idea should be a solidly fleshed-out concept with sketches, possible prototypes, and other plans in place. Otherwise, the creator may develop an idea that’s not possible or has already been invented and patented by someone else. It’s best to learn this before moving into the expensive product development phase.
A Business Plan
The business plan needs to include a complete budget, strategy for market entry, advertising plan, and potential investment targets. Having this in place will keep creators from facing scope creep that runs out their budget—and their patience—early into a project. It’s also vital for sharing with potential investors.
It’s easy to overestimate audience enthusiasm for a product. Knowledge of demand may include market analysis, patent searches, focus groups, and other strategies for learning how the item will be received before its introduction. This step is also vital for knowing how large a first manufacturing order to put in.
While it’s not necessary to know everything about an industry, the creator should have a basic idea of its manufacturing process. They should know, for example, what types of materials are generally used and how they’re sourced. They should also be familiar with major players and competitors in the market.
Knowledge of these four components will help ease the transition from startup idea to market. With this information in hand, the creator will be ready to move onto vetting potential manufacturing partners.
Vetting Potential Contract Manufacturing Partners
Choosing the right contract manufacturing companies will make all the difference in determining the success of a project. While many may focus on price, this is a short-term strategy that could result in long-term costs. Questions to ask a contract manufacturer should cover:
It’s important to know what kind of design processes the agency uses to ensure the best possible results. This may include rapid prototyping, design for manufacturing, iterative product development, or other time-tested methods.
Manufacturing strategies run the gamut from Lean to Just in Time manufacturing and everything in between. While they may not follow these strategies to the letter, the potential partner’s knowledge will prove their product market experience.
Specific Industry Experience
It’s best to work with a company that has prior knowledge of a specific industry. Through this, they can choose paths with proven results and avoid common mistakes. They can also guide the creator on better development methods.
Some companies stick strictly to a particular product development method, like CNC machining or molding and casting. While that allows them to specialize, it also ties them to one specific plan when another may have been better.
Culture is an integral part of any partnership, as the partners’ culture can filter into the creator’s own business. Working with a company with happy employees and a safe, productive workforce ensures a better overall experience.
A good manufacturing company will have a comprehensive portfolio of successful projects that they can share to prove their knowledge. Ideally, this portfolio will include successful developments within the creator’s industry.
By asking these questions, the creator can predict how such a partnership will go. Of course, they should only narrow down the initial list of potential companies. Creators should also do an on-site visit to complete their investigation.
Going with a Local Manufacturing Company
One of the final decisions someone looking at contract manufacturing companies will face is whether to outsource their project to an overseas company. In many cases, this strategy is undertaken to control costs and take advantage of resources in the region. However, this can have long-term consequences.
With an out-of-area manufacturer, the creator won’t have the opportunity to tour the facilities, check working conditions, or connect with someone directly in the event of a problem. They’ll also have to deal with customs and shipping delays that can lead to missed deadlines and lost opportunities.
Choosing a local manufacturing company provides benefits that creators may overlook when selecting the company with the lower price point. Just a few include:
Collaboration: A local company will work directly with a creator through all stages of the process. They can advise through product design and prototyping, all the way to mass production.
Improved communication: It can be challenging to reach a single point of contact with a major overseas operation. A small, local company will offer dedicated project managers to allow for rapid communication.
Rapid project completion: Shipping time is just one reason why overseas manufacturers will offer slower turnaround. They will also have thousands of other projects and limited time to manage them. Smaller creators may have to take a backseat to more lucrative, larger contracts.
Agility: It’s not easy to quickly change direction when dealing with a large overseas organization. It’s much more flexible to work with a small local company to update strategies as conditions change.
Choosing a local provider is the best solution when vetting contract manufacturing companies. They offer a hands-on approach that enhances collaboration and makes the project more successful. Taking a product to market is a significant endeavor, and choosing a local company that provides ongoing support can help ensure a much smoother journey.