Too Big, Too Small or Just Right: A Guide to Finding Your Perfect Fit Contract Manufacturer
When it comes to choosing a contract manufacturer (CM) is bigger is better or do you prefer the personal touch small CMs provide? Whatever your preference, there are certain advantages and disadvantages to CMs of different sizes. The trick is getting the best of both worlds.
This is your first priority. You need to trust that your contract manufacturer will avoid escalations and de-risk every step of production lifecycle.
Do they have the people, facilities, expertise and equipment you need?
Probably not on site so they either handle just a portion of your process or farm it out to their own third parties… whom you’ve never met.
When they tell you they have everything in-house to handle your full project, take that with a grain of salt. To a giant CM, “in-house” generally means facilities spread over a wide and very complex supply chain.
Look for a CM partner whose global operations are streamlined enough to contain complexity and capable of handling at least 80% of your processes.
Can they get you through tough times?
When resources are limited, CMs rarely have the buying power to compete with the big guys.
Big CMs are able to secure scarce resources but often will allocate them to their “most important” (highest spending) clients. Do you fit the bill?
A right-fit CM has both clout and a sense of equal responsibility to their clients. They also have contingency plans when plan A gets shaken off course, they have plans B, C and D to put your project back on track.
Can they adapt to your requirements?
They may have been the perfect size for your initial run, but can they ramp up if demand explodes?
A CM is too big when their minimum order forces you to think about warehousing costs and logistics for the next year or two.
Look for a CM partner who can handle a range of volume orders and, even better, offer options to ensure that whatever the size of the run, you are getting it at the best cost per unit.
Ok, so you’ve made a selection of contract manufacturers that can manage your business. Of course, you don’t want to unexpectedly re-do this exercise again in the next 2 to 3 years. You’ve got better things to do.
Are they financially stable?
Even solid foundations can be shaken if a CM has to grow very quickly in order to accept you as a client.
Giant CMs tend to be financially stable, but are you big enough to get their lowest rates based on the business you bring in?
By all means, choose a company that is fiscally sound and risk even further by making certain that you are neither their largest nor smallest client.
Do they have (and keep) good people?
Often these are family-run and their people hold the same position for many, many years. When someone does leave or retires, it can throw the company into chaos.
Change in management or strategy is a major business disruptor and in big companies job hopping is commonplace, even at senior levels.
High retention rates says a lot about a company, namely that they appreciate talent and go the extra mile to keep them. Oh, and don’t forget to look for a partner with a nice balance of senior experts as well as young professionals.
This is the toughest item to checklist yet it is vital to your long-term success. How well will your team get along with your counterparts?
Are you equals?
Having a smaller number of clients could mean they can’t contribute as many ideas or options as a company with more experience.
The “too big to fail” mentality of large companies makes them less inclined to learn your language and more likely to insist doing things the “right” (their) way.
A right fit company is an experienced and trusted advisor who collaborates with you to achieve your desired results.
Who can you talk to?
If they are overseeing processes done by their suppliers, there is little chance of you talking face-to-face with anyone but your point person.
The spread out nature of a big company means that yes, you have all the experts you need but there is little chance of them sitting at the same table.
Your point person is a facilitator rather than a gatekeeper. You will have access to leadership as well as team members such as managers, engineers, manufacturing and supply chain specialists, and more.
Will they pick up your calls?
Definitely… when possible. Small CMs often suffer from overstretched resources and a gap between what they would like to do for you and what they can do.
If you are one of their top clients, maybe. Too-big CMs tend to over-rely on processes and once plans are approved they are not keen to revisit them.
Choose a CM who has their eyes on a long-term partnership. Make certain they have the expertise and resources to deliver the quality products you want on time and within budget, but also demand more. Find a CM who is guided by your strategic goals and is proactive in highlighting opportunities for lowering costs or improving your product and processes.
Don’t settle for anything less than a perfect fit.