Manufacturing

outsourcing
http://www.youtube.com/watch?v=runrl4AVWUU
Manufacturing concept:

The process of converting raw materials, components . Or parts into finish
goods that meet a custumers expectations or specification, commonly
employs a man-machine setup with division labor in a large scale
production.
Questions
what that you thing that are the most important elements that
the client must to have in a manufactured outsorcing contract ?
What do you thing are the main risks in a manufactured
outsorcing contract?

Why to outsorced
manufactures?

Labor Costs




Part of any analysis for a manufacturing company deciding
to outsource any of its operations includes the cost of
labor. Labor remains one of the biggest costs of any
manufacturing company. Having employees on the
company payroll means paying them a competitive wage
and, for most companies, it also means providing some
form of employee health benefits.
But outsourcing labor costs doesnt always mean moving
the production to another country. Companies can
outsource labor simply by using workers from temporary
agencies instead of having employees on the payroll.
Benefits for the company that outsources its labor include
the flexibility of increasing or decreasing staffing needs as
required, a lower hourly wage paid to a temporary worker
than that of a comparably skilled fulltime employee and
less employee healthcare benefits expenses.

Overhead Cost


Many United State companies have outsourced their manufacturing to
eliminate the overhead cost associated with operating a manufacturing
facility stateside. These overhead costs include utilities, such as gas, electric
and water, and the maintenance required to operate production equipment.
Other overhead costs include indirect labor such as quality assurance
personnel, equipment technicians, material handlers, and shipping and
receiving personnel.
Flexibility
Some manufacturing companies have gained increased flexibility by
outsourcing their production. Typically, production gets outsourced
to a contract manufacturer, or a company that produces goods
under the label or brand of another firm.
Contract manufacturers might produce goods for two or more
companies, and even for competitors within the same industry.
Since the contract manufacturer has more production capacity (the
ability to produce more goods) than the original manufacturing
company, it can respond to increased production requirements
faster than the original manufacturer. Instead of the original
manufacturer making a capital investment in new equipment to
increase its production capacity, it informs the contract
manufacturer that it requires more goods. Although the requested
increase (or decrease) in production might change the terms and
costs associated with the original production contract, its more
flexible than making a one-time capital investment that could sit idle
if the increased demand diminishes.


Focus



Some companies have experienced extreme paradigm shifts that have
prompted them to outsource their manufacturing. A company that realizes its
core competency, the thing it does best, is the sales and marketing of its
product and not the production of its product may often choose to outsource
its non-core activity, or the manufacturing of its goods. With the production
outsourced, the company can now focus its resources, both human and
financial, on the areas that increase revenue and profit. Normally, outsourcing
reduces manufacturing costs, so if the company increases its revenue through
a better focus on sales and marketing, it increases its profit margin as well.
managing your manufacturing
outsourcing relationship
:



1: Enable manufacturing outsourcing collaboration It is important to
establish a collaborative relationship with your suppliers, contract
manufacturers (CMs) and design partners from the start. By building a
strong alliance it will be easier to tackle any challenges that arise during the
design or manufacturing stages. Creating a process to submit feedback or
other suggestions (like manufacturing change orders) enables
communication to take place and strengthens collaboration between all
parties.

2: Make it easy to share product data with outsourced manufacturers Even
if you work with just one outsourcing partner, the process of sharing
product data and documentation should be easy. Your product may go
through several changes and you will need to ensure your supplier is up-to-
date on information that impacts their role in building your product.
Consider how best to share information with your partners. Many
companies exchange product data with their partners via email or fax. But
how can you be certain your partner obtains only the information that is
pertinent to them? Plus, these methods can become laborious to manage
as your product line changes and grows or you change suppliers. A cloud-
based solution to help manage product data and changes may be the
solution for you one that can help streamline the process and also
provide secure access rights.

3: Support closed-loop design and sourcing processes selecting the
right manufacturing firm for your business may mean working with a
partner that is onshore or offshore. But regardless of your partners
location, establishing a way to capture improvement suggestions
from your outsourced manufacturers that allows all product team
members to stay in the loop can help to manage the impacts of a
design change efficiently.

4: Drive active outsourced manufacturing participation It can be
challenging to keep all parties involvedespecially if groups are
geographically dispersed. Provide a framework for effective
collaboration to get everyone on the same page. An infrastructure
that allows all parties access to product data (i.e. bills of materials,
engineering changes, etc.) can help drive contributions and keep
everyone focused on the projects at hand.

RISKS


Lack of Control When a company signs the contract allowing another company to
produce their product, they lose a significant amount of control over that product.
They can only suggest strategies to the contract manufacturer; they cannot force
them to implement them. Relationships - It is imperative that the company forms a
good relationship with its contract manufacturer. The company must keep in mind
that the manufacturer has other customers. They cannot force them to produce their
product before a competitors. Most companies mitigate this risk by working
cohesively with the manufacturer and awarding good performance with additional
business.

Quality concerns When entering into a contract, companies must make sure that
the manufacturers standards are congruent with their own. They should evaluate the
methods in which they test products to make sure they are of good quality. The
company has to rely on the contract manufacturer for having good suppliers that also
meet these standards
Intellectual Property Loss When entering into a contract, a company is
divulging their formulas or technologies. This is why it is important that a
company not give out any of its core competencies to contract
manufacturers. It is very easy for an employee to download such
information from a computer and steal it. The recent increase in intellectual
property loss has corporate and government officials struggling to improve
security. Usually, it comes down to the integrity of the employees.

Outsourcing Risks Although outsourcing to low-cost countries has
become very popular, it does bring along risks such as language barriers,
cultural differences and long lead times. This could make the management
of contract manufacturers more difficult, expensive and time-consuming.
Loss of Flexibility and Responsiveness - Without direct
control over the manufacturing facility, the company will lose some
of its ability to respond to disruptions in the supply chain. It may
also hurt their ability to respond to demand fluctuations, risking
their customer service levels.