Companies looking to develop products with embedded electronics typically outsource the manufacture of their printed circuit board assemblies to a contract manufacturer. Selecting the right contract manufacturer is a critical success factor in both the launch, support, and long-term evolution of the product.
In this article, we asked the acting CEO of Circuitwise, Duncan Reed, for his insights on what makes a successful partnership between product developers and contract manufacturers. Duncan has 20 years of experience in electronics manufacturing in executive leadership roles - one of the most successful electronics manufacturing companies in the world with over 3000 people working in nine manufacturing locations across four countries.
Q: What is your best tip for starting negotiations with a contract manufacturer?
A: The first question I ask new prospective clients is “why are you here”. It’s important to understand what brought them to make the inquiry and initiate the discussion. Sometimes people are new to electronics manufacturing and just need guidance, but more often people are dissatisfied with their current manufacturing arrangements. Helping people understand what their issues are is a first step to improving the situation. So initiating this kind of conversation would be my first tip.
Q: How do you help clients identify problems in manufacturing?
A: I tend to ask the classic “what are your pain points” question and get them to elaborate on that. For example, companies may well be great at engineering but are not as skilled at optimising supply chain and manufacturing processes. Streamlining manufacturing processes is a core competency for us, as continual improvement is a core part of our quality management systems. So, we will get to know how they do things and collaboratively identify potential issues or areas that could be improved.
Another way I approach it is to ask them “what is the ideal outcome”. I get them to visualise their perfect relationship with a contract manufacturer and what would be different if they achieved that. For most companies, time to market is critical. Being close, nimble and fast is the key to that, which is difficult if your supplier is in Asia.
Q: What kind of issues are typically raised?
A: Unfortunately, the issues raised are all too common. For example, prospects often complain it was hard to get hold of people at the last manufacturer they dealt with. Other issues include being informed of extra costs after the deal was done or late deliveries without notice. Generally, they want their contract manufacturers to be highly responsive. If issues are occurring with production then the contactor often becomes unresponsive, which just makes matters worse.
Q: What tips do you have for a successful contract manufacturing relationship?
A: It's all about relationships. Where there is a lack of trust there will be micromanagement and inefficiencies.
The goal of any such relationship is for the contract manufacturer to be viewed as the manufacturing team of their company, a seamless extension of its business. When I first talk with a company I ask if they trust their contract manufacturer to the point they can leave it to them, so they can focus on their core strengths.
Trust emerges from the contractor understanding the company’s business intimately and being vested in the success of the company. So, both parties need to take the time to explain each other’s business, it’s processes and goals.
Aim to develop a long-term relationship with a contract manufacturer. Issues are always going to arise, but the secret of a good relationship is collaboration - to work through the problems and develop the trust needed to rely on each other. Some companies deliberately have two or three suppliers, to keep them “honest”, but this is a lot of work and very costly to manage.
Q: What does a successful relationship look like?
A: A successful relationship goes beyond the transactional business of manufacturing and delivering products at the lowest price. It needs to be understood that the lowest price is not always the least cost. A successful relationship continually looks for ways to improve processes and successfully launch and support products.
Our customers often do not know what a good contract manufacturer can do for them. Some of these value-add services include:
Stocking programs
Supply chain lead time reduction
Aftermarket services
Configured to order
It’s a matter of exploring the opportunities.