Reasons to Partner with a Contract Manufacturer

Manufacturing. It’s the bridge between an idea in someone’s head, and an actual product that customers can hold in their hands. That bridge, however, requires ample space for a lean production line, specialized equipment that transforms raw material into finished product, and a skilled workforce to staff & operate the production machines.

From inventors, to startups, and all the way up to large original equipment manufacturers (OEMs), B2C companies often turn to contract manufacturers in order to turn their design into a product reality. By providing manufacturing, supply chain management, and logistical operations as an on-demand service to their customers, contract manufacturers (CMs) have the ability to offer unique opportunities for larger ROIs.

In this article, we’ll explain how partnering with a contract manufacturer can help OEMs improve their product quality, provide production capacity and logistical support, and decrease costs.

Contract Manufacturers Can Help Improve Product Quality

RiverStar contract manufacturers are far more than just external factories for assembling products. Many CM’s have very experience technical teams (assemblers, technicians, and machinists), with deep expertise in electronics, pneumatics, optics, plastic or metal, tooling, etc. This expertise can be a valuable resource that OEMs can take advantage of during design for manufacturing (DFM) reviews. A CM’s team is often well-experienced in the critical considerations of finding the right balance between product materials, cost, production yield, product performance and everything else in between.

Contract manufacturers also tend to have established and rigorous quality control processes in place. Certification to a quality standard like ISO 9001 is a common feature among CMs. Some even have additional specialty certifications for servicing companies with products in the aerospace & defense, medical, automotive, electronics, and etc. industries. In addition to the established policies and procedures in place, CM’s also already have the actual fixtures, training, inspection devices, and calibrated equipment needed to ensure that only high quality products reach the customer.

Improving Production & Logistics

Almost as important as the quality of the product is the quantity. Whether it’s augmenting or replacing in-house production, OEMs turn to the scalability of CMs for complete product and subassembly production.

To OEMs, partnering with a CM has several advantages over in-house production:

  • CMs (especially mid-size and larger) have the space and industry connections that some smaller OEMs do not have. Thus, CMs can provide specialized machining and automated production options which can save the OEMs money.
  • Outsourcing the production of sub-assemblies (especially PCBAs and wiring harnesses) can relieve bottlenecks throughout the manufacturing process. This in turn, can greatly help the OEM meet promised delivery dates, keeping customers satisfied and leading to continued business.
  • Smaller OEMs can benefit from the CM’s vast supply network, opening the door to better part prices and shorter lead times. Larger OEMs have their own advantage for better pricing and buying power, but add that to the efforts of the CM, and the combination is sure to save money throughout the partnership. OEMs also get the advantage of shedding the costs of production support personnel by utilizing the CM’s parts management and project management expertise. Some OEM’s however, will choose to maintain relationships with multiple suppliers, manage part lead times, take care of purchasing and inventory management, and handle pricing. It all depends on where the OEM sees the most return when pooling resources.
  • Some contract manufacturers provide additional logistical support after manufacturing, such as warehousing and drop-shipping directly to the OEMs customers or distributors. In reality, many contract manufacturers are also third-party logistics providers (3PL), providing their customers a full-service suite of production and logistical operations under one roof.

Decreasing costs

In addition to help with product improvement, and increasing production and delivery capacity, contract manufacturers can also decrease the costs associated with production and logistics. Partnering with a CM can reduce costs in a number of ways.

Perhaps the most obvious savings come from freed up cash flow that would have been invested in machinery, facilities, maintenance, training, benefits and extra personnel. Those instead can be spent on attracting and retaining talent that can produce revenue (like engineering or marketing and sales), or they could invest in new product development, future growth, or acquisitions.

There are opportunities for savings in the supply chain as well. Smaller OEMs that partner with a CM can benefit from the latter’s volume purchasing discounts from suppliers, lower labor rates, and discounted shipping rates. This is especially attractive for smaller firms that have very little buying power on their own.

Whether it’s making production more affordable, providing or increasing production capacity, or helping improve the design and quality of the finished product, contract manufacturers help OEMs transform design concepts into delivered products.

Looking for a contract manufacturer for your mechanical, electronic or electro-mechanical product design? RiverStar, locations in Minnesota, may be the perfect partner for you. RiverStar has two sister companies, RiverSide Electronics and RiverBend Electronics

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Best Reasons to Partner with a Contract Manufacturer
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Best Reasons to Partner with a Contract Manufacturer
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B2C companies often turn to RiverStar contract manufacturers in order to turn their design into a product reality by providing manufacturing, supply chain management, and logistical operations.
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RiverStar Inc.
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