4 Ways a Contract Manufacturer Adds Value to Your Organization

When OEMs know that parts will arrive on time, in the correct quantities, and at the right revision, they can develop and execute the plans necessary to meet crucial business deadlines. This allows OEMs to ship products to customers on time or ensure that regional distributors have enough products for launch day. Predictability is the foundation of planning, which in turn provides the roadmap for growth.

The certainty that a dependable Contract Manufactuer brings to an OEM, can make tough choices a little easier to make. For example, suppose an OEM performs the final assembly of a complex product in-house, but relies on a CM to provide one of the critical subassemblies. There’s a tight deadline coming up on a Monday, needed subassemblies have yet to arrive, and shop floor management must decide whether to ask for overtime from the assemblers in order to meet a shipping deadline.

One problem: management doesn’t know if those workers will have anything to work on even if they come in on Saturday. Not only is the final product’s shipping deadline in jeopardy, but the morale of the assemblers and technicians who would have to sacrifice half their weekend would be too.

Certainty

Full-service contract manufacturers are like a combination of a traditional contract manufacturer and a third party logistics provider (3PL). By combining part procurement, assembly, and distribution, this breed of contract manufacturers offers true “one stop shopping” to OEMs, who are freed from the capital investment, personnel, and other costs associated with keeping these functions in-house.

Besides cost savings, the other major advantage of partnering with a full-service contract manufacturer is the much shorter lead times made possible by keeping all these processes under one roof.

Flexibility

Since CMs can scale production up and down as necessary to respond to market demand, firms who partner with them are better able to outmaneuver their competitors. They are also able to break into new markets right as they open up, and supply products just in time to meet spikes in demand.

OEMs also gain another kind of flexibility from using a CM. By freeing up funds which would be otherwise reserved for capital investments (like facilities and machinery), CMs allow OEMs to be more financially flexible, enabling them to more quickly divert money to sudden, high-priority needs.

Those types of needs highlight just how connected flexibility is with certainty. The ability to change priorities and schedules in response to a manufacturing issue requires knowing with certainty what can be accomplished within the time available.

Focus

As OEMs grow in revenue, they have a habit of growing just as much in size. As a result, their attention tends to get diverted away from core innovation, strategic planning, and other principal business activities. When they partner with a CM, however, that doesn’t have to be the case. By taking on the burden of parts management, purchasing and maintaining machinery, and balancing production schedules, RiverStar Contract Manufacturing solutions can keep their OEM customers from getting bogged down in the minutiae of manufacturing. As a result, OEMs can stay laser-focused on their primary business challenges.

Not only does the OEM as a whole remain focused on core business value, so do individual employees. For example, buyers no longer have to spend the time to order individual parts and juggle delivery dates, lead times, build schedules, and shipping dates. They can focus instead on smarter, more strategic planning since they can rely on the predictable delivery of subassemblies and assemblies. This is also true for quality control (QC) personnel who are freed from having to perform first article inspection (FAI) and receiving inspection on those parts to ensure that the parts coming in from suppliers match the required dimensions and tolerances.

When time is freed up, so is money. That money can then be invested into the training and equipment which multiplies worker productivity, making the OEM leaner and more competitive.

Expertise

By focusing on details such as procurement, assembly, testing equipment, and training on behalf of multiple customers, CMs naturally build up and preserve a vast pool of technical knowledge. This is valuable expertise which the OEM would otherwise have to pay for. Standard design for manufacturing (DFM) reviews are only one way OEMs benefit from their CM’s extensive knowledge. From knowing how—and when—to use each of the myriad settings of a digital multimeter (DMM) when testing a PCBA to being able to spot a misaligned mechanical assembly, modern manufacturing requires plenty of technical knowledge in order to function smoothly.

Contract Manufacturers Provide Much More Than “Value-Add”

OEMs need to view contract manufacturers as business value multipliers. The combined benefits of basic supply chain predictability, operational nimbleness, increased focus on core business value, and access to vast technical expertise produce a compelling business value for companies looking to manufacture their next great product.

RiverStar is your one-source partner—we can handle part sourcing and provide inventory management from fulfillment and distribution

Summary
4 Ways A Contract Manufacturer Adds Value To Your Organization
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4 Ways A Contract Manufacturer Adds Value To Your Organization
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Partnering with a contract manufacturer (CM) brings an OEM several tangible and quantifiable benefits. These benefits may include lower production costs and higher yield through Design for Manufacturing (DFM) reviews, or shorter lead times and lower part prices from vendors.
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RiverStar Inc.
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