What Does "Full-Service Contract Manufacturing" Mean Anyway?

“Full-service” used to be a phrase exclusively associated with gas stations. Today, however, this term is applied to contract manufacturers (CMs) who offer end-to-end services beyond just product assembly. As OEMs look to consolidate vendors, minimize their supply chain risk, and reduce their total operational costs, many of them are turning to full-service contract manufacturers.

Why It’s Often Better to Bundle

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.

What Full-Service Means: Procurement, Production, Logistics, and Support

What specific services do these CMs provide in their bundle, and what’s to be gained by bundling them?

Sourcing of Parts

Like all other contract manufacturers, their large and already-vetted supplier network can be utilized to source new parts for an OEM’s products, negotiate lower prices on existing parts, and obtain shorter lead times.

OEMs are also spared the overhead cost of activities like supplier review and qualification, first article inspection, ongoing material resource planning (MRP), conflict minerals compliance management and RoHS compliance management.

Kitting

Once those parts arrive, the individual components need to be parceled out from inventory bins with the exact parts & quantities of each, and then placed into kits for use on the assembly line. Accuracy is critical here because an incorrect pull ticket, or an incorrect reading of a pull ticket, can bottleneck downstream production, as well as wreak havoc with inventory management.

Full-service CMs have the benefit of having the whole production process take place in the same facility, which enables rare mishaps like these to be quickly caught and speedily rectified, resulting in less supply chain disruption and less risk to delivery dates.

Assembly

Since full-service contract manufacturers also offer their services a la carte as well as combined in a convenient bundle, they are able to offer complete product assembly in addition to the more standard production of subassemblies, just like other CMs. The full-service variety, however are able to pass along the cost savings of eliminating the costs of transporting material from the kitting area to assembly floor, and from the assembly floor to the distribution warehouse.

Fulfillment and Distribution

By combining climate controlled warehousing space with drop-ship capabilities, cross-docking, and blind shipments, full-service contract manufacturers complete their turnkey outsourcing offerings. By handling the fulfillment of eCommerce, direct-to-consumer, and retail orders as well, these firms provide OEMs a critical capability at a scalable capacity and a competitive cost.

Reverse Logistics

Reverse logistics requires diagnostic equipment, floor space, and technical personnel that many OEMs can find to be more economically provided by a contract manufacturer than doing it in-house.  Examples of these services: issuing and managing return material authorizations (RMAs), repair and maintenance operations performed on the returned products, and extraction of still usable components & subassemblies from scrapped units.

Although reverse logistics is technically a product and customer support function, it requires the same kind of skills, facilities, and tools as manufacturing does, which makes it natural for full-service CMs to add this to their list of services.

Full Service = Fullest Value

For OEMs looking to free up resources and save money, contract manufacturers already present a compelling value proposition when the above services are offered individually. By consolidating all these workflows into a turnkey operation, full-service contract manufacturers enable their OEM customers to remain lean, nimble, focused, and profitable.

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What Does "Full-Service Contract Manufacturing" Mean Anyway?
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What Does "Full-Service Contract Manufacturing" Mean Anyway?
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This term is applied to contract manufacturers (CMs) who offer end-to-end services beyond just product assembly. Consolidate vendors, minimize supply chain risk and reduce total operational costs
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RiverStar Inc.
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