look at their business models to determine what is really important to the future growth and profitability of their companies.
There is a recognition by customers that activities which were
deemed core to the organization in the past, such as a specialized manufacturing capability, are perhaps not as value-adding
and can be conducted more efficiently by an external partner who
has expertise and scale in that area. Therefore, we are seeing increased demands from our customers to provide such services
and capabilities on an outsourced basis.
Burns: Reliable quality and the ability of their supply chain
partners to ramp up their capacity quickly and with flexibility
to shifts in demand and product mix. As products mature and
volume grows for the OEM, it is imperative that supplier
processes are made more efficient and costs are reduced to
bring pricing down. OEMs want to see Lean/Six Sigma tools
being deployed to manage the product life cycle successfully
and maximize profitability.
Anderson: Knowledge to properly develop and fulfill their
product. Then assistance in getting their product to market with
proper documentation. Last but not least by any means, confidence that you’ll be around in a year or five. Today’s economy is
depleting the contract manufacturing world.
Every business venture has some degree of
risk associated with it. What are the risks in-
volved in full-service outsourcing? How can
companies overcome these risks?
Ryan: The main risk associated with full-service outsourcing is that
you are only as good as the weakest link. You need to be expert at
all aspects of the service and you will not be successful if you do
parts of the process excellently and then fail to deliver other parts.
As a supplier, I think it is very tempting to position yourself as
being able to provide all the services even when you have limited
expertise in some parts, as this appears to present bigger opportunities. But, in general, that lack of expertise will come through to
your customer and may severely limit future opportunities. The
best way to manage the risk is to play to your strengths and make
sure you are an expert in the services you provide.
Burns: The biggest risk is when there are not clear expectations between the OEM and the contract manufacturer. At a high
level, there must be clarity on each other’s role and project leaders should be clearly identified and empowered on both sides. In
the event of a situation that goes beyond the project leader’s
scope, a clear understanding of who/how to elevate the discussion is important. Peer-peer relationships at different levels and
functions in the two companies can help mitigate risk efficiently.
Schulzki: Project scope creep is something that we deal with
frequently. It is important to determine the implications of
changes to product specifications early, discuss them and redefine
the project if necessary. A detailed requirements document and
clear definition of deliverables on the front end also reduce the
risk associated with full-service outsourcing.
Olson: Consistent communication and client proximity significantly reduce the risk in outsourcing a project.