The journey of a product begins with a concept, an idea that has been vetted by customers. For products in the physical space, this idea then becomes a set of engineering drawings. At some point during its life-cycle, these drawings need to come to life. This can occur in one of two ways, the customer has their own facilities or production is handled by a contract manufacturer. Contract manufacturing can rapidly get a product to market and is presently changing the landscape of advanced manufacturing especially for complex highly engineered products.
The Growing Importance of Contract Manufacturing
There are several reasons why businesses are turning to US-based contract manufacturers:
Specialized Expertise
It is possible that even large corporations may not possess the expertise to create specialized goods. This is where contract manufacturers shine. Plus, using a CM can also de-risk your production strategy while mitigating CAPEX exposure.
Functional Flexibility
Establishing facilities requires a huge investment and by working with a contract manufacturer, companies can save money and stay much more flexible.
Ideal For Startup or Mid-size companies
Those with great ideas but little experience in manufacturing or those who don’t have production that can scale can use the services of contract manufacturers to help them translate their ideas into products.
What Occurs in Contract Manufacturing?
In contract manufacturing, the buying firm hires a third party, the contract manufacturer, to manufacture part or all of the company’s products. This enables firms to harness the strengths of specialized producers without incurring huge costs of tools and equipment.
Advantages for Small and Mid-Sized Companies
Contract manufacturing levels the playing field, allowing smaller companies to compete with larger rivals by providing:
- Access to advanced manufacturing capabilities
- Reduced capital investment and overhead costs
- Flexibility to scale production based on demand
- Faster time to market
These are big advantages that are quite helpful for startup and high-tech companies that are planning to launch their products into the market. For instance, one customer of DWFritz from the datacenter industry had come up with a new battery backup design but they did not have the production capability to meet the new increasing demand.
In this case, they were able to leverage on the facilities, the workforce, our procurement capabilities, and in only 90 days, DWFritz was shipping out hundreds of finished products every month; meeting and even surpassing the demand forecast of the startup.
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Enabling Reshoring
Contract manufacturers located in the US are helping to drive this trend by providing a full- service solution to the problems and risks of offshoring.
There are numerous strategic and geopolitical factors driving the reshoring movement:
Supply Chain Resilience
The outbreak of the COVID-19 pandemic revealed the weaknesses of the global supply chain and the need to focus on domestic production. Thus, by working with US-based contract manufacturers, companies can strengthen their supply chain and reduce the chances of production disruptions.
Intellectual Property Protection
Offshoring production to countries with weak IP laws have resulted in cases of technology theft and counterfeiting. Reshoring helps companies protect their intellectual property as they work with reliable local partners since they are not outsourcing to another country.
Geopolitical Tensions
China, over time, has become the factory floor of the world. The increasing tensions between the US and China, and other geopolitical risks, are forcing firms to cut down on their offshore manufacturing. Reshoring reduces the impact of trade disputes and tariffs.
Quality Control
Here’s another important aspect that has been reported to be well-observed that US-based contract manufacturers deliver high quality products. Unreliable QA/QC processes used by overseas manufacturers have caused poor customer experience(s) due to various defects.
Proximity to Customers
Manufacturing goods closer to the end market enables the firm to respond faster to the market, provide better customer service, and also reduce the cost of shipping the goods.
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Navigating the Process
Successful contract manufacturing requires careful navigation at each stage such as:
- Identifying the appropriate contract manufacturing company
- Efficient processes and teams in the creation of products
- Smooth move to mass production
Medtronic, is expanding its U.S. production of ventilators and other life support devices. By working with domestic contract manufacturers, Medtronic is enhancing its supply chain and the ability to meet the growing demand.
Real-World Success Stories
Here are some notable examples from the medical device and consumer electronics sectors:
- BK Technologies, a producer of two-way radio communications equipment for first responders and the military, has expanded its in-house PCB manufacturing and changed its supply chain to U.S.-based suppliers.
- Hobson & Motzer, a precision metal component manufacturer that is heavily involved in the medical sector, has claimed that OEMs are now looking to reshore their production.
- Apple has invested $100 million in the production of Mac computers in the United States and has used contract manufacturers in Texas.
- Element Electronics has returned television production to South Carolina and is employing an ERP system in its new facility. This has helped them reduce the time to supply products, improve the products’ quality, and handle changes in demand better.
- Tesla has changed the procurement of semiconductors within the company and started to use SiC’s to minimize reliance on silicon chips from Asia.
Choosing the Ideal Partner
The following are some of the factors that you should consider when selecting a contract manufacturing partner:
- Have an experienced team of manufacturing & engineering professionals
- Have global supply chain relationships
- Have a US based production facility that can support advanced manufacturing at optimal costs
- Have some level of experience in your industry
- Be able to handle your demand forecast
- Be able to deliver, install and support equipment
- Have a strong and committed management team
DWFritz Automation – can help with the entire product journey and allow you to go from the concept stage to a solid finished product without any hassle or headaches. Working with the right contract manufacturing partner can be a key element to the effective implementation of your manufacturing strategy and being competitive in the marketplace.