Contract Manufacturing service providers should be viewed as an extension of the parent company’s factory.

Vertical integration models are not always the best business models.  The vertical integration model has been abandoned by many large corporations in mature industries such as Toyota in the automotive industry, Apple in the electronics industry and Boeing in the Aerospace industry.

Contract Manufacturers can provide quick reductions in costs and elevate efficiencies in production without major capital expenditures.

Engineering Staff can remain focused on Research & Development efforts instead of Manufacturing and Supply Chain Management efforts.

Direct Labor can be dedicated to Core Competencies within the parent corporation to best utilize skill sets and to protect intellectual and proprietary information and technology.

These efficiency enhancements can include:

  • Cash flow improvements resulting from:
    • Demand Fluctuations.
    • Limited or under utilized staff and skill sets
    • Downtime on equipment.
    • compromised quality of component parts.
    • Designs and processes in need of enhancement.
    • Financial ratios when coupled with forward placed inventory.
  • Cost Reductions
    • Labor influenced costs, both direct and indirect
    • Long term capital expenditures
    • Improved Return On Investment
    • Better economy of scale, ” Right Sized & Flexible“
    • Predictable and more visible Cost of Goods Sold.
  • Cost of Quality
    • Development & Enforcement of the Quality Process
    • Testing and Traceability
    • Quality Assurance ( process focused )
    • Quality Control ( product focused )

OUTSOUCING VERSUS AUTOMATION

When a corporation is looking at lean margins in a mature product line they are facing a Y or T decision….To Outsource or To Automate.

Knowing where a company’s costs and wastes lie is key to a good decision.

Outsourcing provides:

  • Reduction in labor force, direct and indirect.
  • Low capitalization requirements.
  • Quick influence on financial ratios.
  • Flexibility for variability in product models, upgrade or reconfiguring.
  • Lower volume requirements to be effective.
  • Quick and positive returns for performance quarter vs quarter.
  • Shorter product life cycles.

Automation provides:

  • a reduction in labor force, direct and indirect
  • the best alternative for high volume, low variability in assembly models.
  • an increased in yields, quality, and uniformity.

Automation is expensive and the risks are high.  Automation requires debugging at the front end and it’s success is dependent on consistent quality and delivery from the supply chain.  Consistent demand flow from customers is a must to minimize downtime and production leveling.

Contact Core Component Resources to be your contract manufacturing services partner and begin enhancing your bottom line today !