A wire harness comprises cables, connectors, and wires that transmit electrical power or signals to devices. Completing the task of assembling cables and wires needs cutting, soldering, crimping, and creating. All in all, it is a critical task; you must choose a contract manufacturer wisely. This blog post will discuss why you must outsource assembling tasks to a harness manufacturer and how you can select one. However, before learning that, what is a contract manufacturer?
Table of Contents
- What is a Contract Manufacturer?
- Contract Manufacturing Process Flow
- The Contract Manufacturing Industry
- Types of contract manufacturing
- Benefits of contract manufacturing
- Risks of contract manufacturing
- Factors to consider while evaluating contract manufacturers
- Tips for Selecting Contract Manufacturers
- Custom Contract Manufacturing Needs Wiring Harnesses
What is a Contract Manufacturer?
A contract manufacturer signs a contract with a firm for various components and products. In this case, they are known as turnkey suppliers. This contracting is a form of outsourcing. Some contract manufacturers also perform packaging tasks known as co-packers or contract packagers. The leading brand company mainly focuses on design, product innovation, and sales, while the manufacturing takes place at independent factories of turnkey suppliers.
Turnkey suppliers mainly specialize in manufacturing simple physical products, while others can handle manufacturing specific designs and parts. Also, some manufacturers specialize in one base process (like plastic molding) or one base component (like memory chips).
Contract Manufacturing Process Flow
In the contract manufacturing business model, a hiring firm first reaches out to different contract manufacturers with a design and formula. Then, ask for a quotation for the product. The contract manufacturers provide quotes based on the processes involved, tooling, material costs, and labor.
The contract manufacturer works as an off-site factory for the hiring firm producing and shipping products and components. Once the bidding process is done, the hiring firm will agree with the contract manufacturer based on the agreed-upon price. This agreement is called the Manufacturing Services Agreement (MSA).
Sometimes, the contract manufacturer or CM also outsources the manufacturing of some parts in the Bill of materials (BoM) to other sub-contractors.
The Contract Manufacturing Industry
Many industries utilize the services of contract manufacturers.
In the electronic industry, contract manufacturers manufacture and assemble several advanced products such as appliances, smartphones, or computers for some of the world’s biggest electronic companies. Contract manufacturing is essential for these companies to focus on product innovation, development, and marketing to offer their customers more advanced technological solutions.
Metal fabrication industry
Contract manufacturing is a less expensive option for companies that do not have expertise in the metal fabrication process and those without machinery and tools for all these processes. Many companies hire contract manufacturers for fabrication services like forging, casting, machining, drilling, spinning, broaching, and bending. The parts formed after these processes are further fabricated at the leading company’s site.
Rubber and plastic industry
Rubber and plastic products require several methods, including molding, thermoforming, rubber vulcanization, coating, and many more. A contract manufacturer helps create the product’s design, fabrication, prototyping, and trial runs after production.
Chemical based industry
A contract manufacturer is responsible for synthesizing and producing many chemicals. These chemicals are the raw material for specific products or help create several complex products. Sometimes, companies directly use chemicals for their industrial operations.
Aerospace and automotive industry
Contract manufacturers manufacture and assemble many vehicle components, including suspension components, gearboxes, front-end modules, automobile electronics seating, and other auxiliary components like security systems or dash cams. Automotive companies have to outsource the manufacturing of these components for accuracy and quality, which is essential for the functioning of the entire automotive system. Similarly, aerospace industries deal with contract manufacturers for manufacturing different parts for helicopters, space vehicles, airplanes, and more.
Contract manufacturers provide raw materials, packaging materials, and several other ingredients for producing medicines and other supplements to pharmaceutical companies. Some companies also hire contract manufacturers for manufacturing medicines used for private labeling, R&D, clinical trials, and sales and advertising.
Some dedicated contract manufacturers deliver medical supplies and devices to clinics and hospitals. These CMs follow all regulatory requirements and stick to high-quality standards as these products are directly related to people’s health.
Contract manufacturers provide food companies with ingredients, packing materials, and other items. Contract manufacturers have facilities to manufacture and pack, so food companies hire them for production and operation functions. Like the pharmaceutical industry, private labels dominate the food industry.
Types of contract manufacturing
Companies enter into different kinds of contract administration agreements with contract manufacturers.
Private label manufacturing
In this agreement, a contract manufacturer delivers a final product per the hiring company’s specifications. The hiring company sends that product to the inventory warehouse or store directly.
Individual component manufacturing
As evident from the name, the contract manufacturer will produce only one or more components. These components are part of the larger and more complex product.
Labor or service subcontracting.
The contract manufacturer acts more like a subcontractor in this contracting and is only one part of the more extensive process. Mostly, the general contractor hires these contractors for their specialized services. You may need this to produce complex products, and with contract manufacturing, you can get products at lower costs with quick production cycles.
Like private label manufacturing, in end-to-end manufacturing also, you outsource the manufacturing of a complete product or component. However, the contract manufacturer is mainly involved in product design and has to give feedback to the product manager. Here, both the hiring company and the contract manufacturer make equal decisions. This deal is good for companies when they cost-effectively need quick production.
Benefits of contract manufacturing
If you outsource the production work to manufacturers, you can enjoy it.
You also save a lot on labor costs like wages and training. You may also look for contract manufacturers from low-cost countries like China to reap the benefits of low-cost labor.
Contract manufacturers have skills that companies may not have; thus, by outsourcing, companies can reap the benefits of those skills.
Contract manufacturers have quality control standards to detect or eradicate damaged or wrong products in the early stages of production.
When you outsource your base production to some outside company, you get ample time to focus on core competencies to make them better and more efficient.
Economies of scale
Contract manufacturers can give you raw materials at much lower costs as they benefit from economies of scale as contract manufacturers serve multiple customers. The more units you order in one shipment, the lower the price per unit.
The contract between your company and the contract manufacturer is a long-term contract. The manufacturer gets a steady flow of business while the company’s production process gets streamlined with CM. So, it serves as a mutual benefit for both.
Risks of contract manufacturing
Of course, you may suffer from the contract.
Lack of control
If you hire a contract manufacturer to produce one of your products, you are losing significant control over that product. You can suggest some strategies to implement during production, but there is no guarantee that the manufacturer will indeed implement that.
It may be possible that the manufacturer is also working for your competitors. In such a case, you cannot force them to deliver your products before them. You can maintain a good relationship with your manufacturer by offering additional business.
Before signing the agreement, you must ensure that the manufacturer’s quality standards are congruent with yours. Also, ensure that the manufacturers’ suppliers meet all these standards.
Intellectual loss of property
When entering a contract, you must reveal your secret formulas and technologies to the contract manufacturers. However, ensure that you do not share any core competencies with the CM, as the cases of intellectual property loss are increasing daily.
Mostly, hiring companies look for manufacturers in other countries to save costs. However, this brings risks. Due to language barriers, long lead times, and cultural differences, managing such contract manufacturers becomes difficult, time-consuming, and expensive.
If you are not a primary customer for a contract manufacturer, the CM may prioritize other companies over you during high production periods. In such a situation, you may have to wait for your products when you need them.
Loss of responsiveness and flexibility
As you do not have direct control over the manufacturing facility, you may lose the ability to respond to disruptions in the supply chain.
Factors to consider while evaluating contract manufacturers
A contract manufacturer is supposed to be with various qualities.
Ensure that the contract manufacturer has all updates related to current market trends and occurrences, as it will help develop your brand.
The contract manufacturer must have a certificate following ISO manufacturing quality requirements (ISO 9001:2015) to prove their service excellence.
If the products are complex, the manufacturer must have an automation facility to get precise details in less time.
To streamline the production timeline, check for value-added services, including knitting, assembling, and shipping products.
Your contract manufacturer must comply with the host country’s regulations and regulatory requirements for the product. Review all their documents before signing an agreement.
Undoubtedly, every manufacturing process will involve human resources. So, always check for the competence of the CM’s employees and whether they can complete the task. The best way to assess is to examine the final product samples.
Business contract agreement
Tips for Selecting Contract Manufacturers
Then, how to choose a contract manufacturer?
Ask about CM’s previous experience.
Always learn about the manufacturing capabilities and experience of the manufacturer. Get regular updates about their ongoing projects. Discuss the challenges they faced and any innovative solutions.
Assess different manufacturers
Before you finalize your contract manufacturers, get information about different manufacturers. Compare their knowledge and, based on your judgment, select the most suitable one.
Inspection of contract manufacturer’ facilities
Don’t blindly rely on what your CM exaggerates about his facility. Always visit the facility and assess if they have all the equipment and resources required to manufacture your products.
Determine the capacity of the manufacturer
Before signing an agreement, assess whether the manufacturer is capable enough to deliver your desired products in the given timeframe. Also, see if they have enough storage capacity, employees, and access to power supply for high production requirements.
Industrial facility for manufacturing of transformers
Custom Contract Manufacturing Needs Wiring Harnesses
Similarly, you enjoy the benefits of a wiring harness manufacturer. And, you can choose one according to the rules above.
The benefits of Wire harness outsourcing
Expertise: Wire harness manufacturers with decades of experience gain expertise in their work over time.
Lower production costs: If you decide to manufacture a wire harness in your set-up, you may have to bear various additional charges, such as labor costs, equipment costs, taxes, insurance, and other expenses. On the other hand, a contract manufacturer has all set up for mass production of products. Eventually, it will lead to increased prices of the products.
Efficient production capabilities: Inefficient production may lead to product shortages or other inventory crises. Outsourcing the manufacturing of wire harnesses ensures that you get a highly efficient production facility with all equipment, infrastructure, resources, and workforce.
More capital to invest in your business: Setting up your manufacturing unit for wire harnesses is, any day, relatively more expensive than the outsourcing option. When you outsource, you have a good amount of business capital saved which you can invest in other business developments.
Get raw materials at cheaper rates: Wire harness manufacturers are in the manufacturing business and deal with various subcontractors for geto materials in large quantities. When they get raw materials at discounted prices, it ultimately benefits you.
Flexibility in hiring manufacturers: When you outsource wiring harness manufacturing to contract manufacturers, you choose other manufacturers. In addition, working with multiple manufacturers also ensures that you always get your products and their components on time.
Qualify Wire Harness Manufacturers to Ensure a Successful Contract
Equipment: Ensure the contract manufacturer has all the necessary equipment for manufacturing harnesses. If the manufacturer also makes products manually, check for hand tools. With advanced equipment and tools, you get consistent quality products with on-time delivery.
Delivery lead Times: No matter how high quality your products have, it’s no use if products do not reach the customers on time. Get assurance from the contract manufacturer about the delivery times.
ISO 9001 Quality standard and procedures: As you know, ISO 9001 specifies quality standards for a company to improve its systems and processes. So, make sure that your contract manufacturer is ISO 9001 certified.
Can you purchase on terms? Check whether your CM agrees to purchase on words so that you can pay the invoice 30 days after the invoice. If you offer more business to the manufacturer, you can ask them to follow your terms and conditions.
Does your CM accept blanket orders?
In such orders, you can order 1000 pieces, and the wire harness manufacturer will ship 250 articles per month, and you have to pay for the shipped quantity only. With such terms, you are sure of getting 1000 pieces, but you get time to release money at a slower pace. Also, with high orders, manufacturers become willing to offer you lower prices than usual.
Do they produce buffer quantities? In the buffer quantities, you place an order for some amount but take somewhat lesser than that and keep the rest as a buffer for immediate release when required. When you consume your buffer quantity, the manufacturer again starts manufacturing in the same pattern.
Does your CM pay for shipping? Always ask for the threshold for free shipping with your potential manufacturer. When you get free shipping and discounted products, it is a considerable saving for you. Do not leave any opportunity to save money.
Ask for a List of Wire Assembly Services from the Potential Contractors. Last, you must ensure whether the potential manufacturer can cut wires and cables as desired, crimp, solder, or terminate the wires, meet quality standards or follow specification sheets. Don’t hesitate to ask about their quality processes and quality control measures with them. Based on the information and your judgment, make a wise decision and choose your wire harness manufacturer.
ISO 9001 certified icon
Do you need a contract manufacturer for the wiring harness needs? Cloom has been a leading one focusing on building custom cable/wire harnesses, integrating those harnesses into complex electromechanical assemblies for different applications, including life-saving equipment, mission-critical systems, or robust equipment to work in harsh environments.