Archives for "Outsourced Manufacturing"

Posted by Jennifer Bomze on 8th July 2010
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Manufacturing success strategies: Use well-crafted agreements to build strong supply chain relationships

SupplyChainBrain.com offers a summary of a new whitepaper on outsourced manufacturing that focuses on how to develop agreements with supply chain partners that lead to positive relationships and successful results. The whitepaper was written by practitioners and academics from University of Tennessee, Georgia Southern University, Cranfield School of Management and the International Association of Contract and Commercial Management. Titled “Unpacking Oliver,” it’s based on the work of 2009 Nobel Prize-winning economist Oliver Williamson, who studies transaction cost economics and its impact on contracts and organizations.

The whitepaper offers 10 lessons for crafting agreements that help you make the most of your relationships with contract manufacturers and other supply chain partners. At a high level, these lessons are:

  1. Outsourcing is a continuum, not a destination.
  2. Develop contracts that create “mutuality of advantage.”
  3. Understand the transaction attributes and their impact on risk and price.
  4. The greater the bilateral dependencies, the greater the need for preserving continuity.
  5. Use a contract as a framework – not a legal weapon.
  6. Develop safeguards to prevent defection.
  7. Predicted alignments can minimize transaction costs.
  8. Your style of contracting matters; be credible.
  9. Build trust; leave money on the table.
  10. Keep it simple.

An excerpt of the executive summary of the whitepaper, with more detailed descriptions of these lessons, can be found at SupplyChainBrain.com. The complete whitepaper can be downloaded from the Vested Outsourcing website (registration required).

 

Posted by Helen Shaughnessy on 22nd April 2010
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A product designer on “going it alone”

At a Chinese contract manufacturer, an employee mounts a PCBA in a fixture before soldering a sensor.

In 2003, Adam Hocherman went big and founded a consumer electronics company called American Innovative. With the help of the U.S. government’s SBA loan program, he began turning his ideas into products that were built in China. Hocherman has written about this in a series of guest articles for CrunchGear. In Part 1 and Part 2 of “Going It Alone: How to Make Your Stuff in China,” he interleaves the experience of his manufacturing trips to China today with the process he went through to build his first product there in 2003.

Hocherman talks about why a company would pick the “go it alone–build it” route instead of licensing a product idea to another firm, and he offers suggestions on how to get the build process started. He recommends steps like having a detailed product specification so you can clearly communicate how the product should act, feel and perform, and he goes into detail on where to find manufacturing partners (for instance, through services like Alibaba and Global Sources), how to approach potential partners and how to narrow your choices.

Contracting out your design and manufacturing always has its challenges, but those challenges are greatly multiplied when you work with people many time zones away in a different language and different culture. Hocherman’s first two installments have brought back my own memories of the exhaustion of jetlag, sketchy taxi rides and having to communicate through pictures. They also remind me of the satisfaction of seeing rows and rows of pallets of my product, boxed and ready to ship to customers. I can’t wait for the rest of the series to learn how building products in China has changed since 2003 and how it has stayed the same. (Keep an eye on Hocherman’s new blog, DesignTheatre.net, for future installments as well as other articles on product design, outsourced manufacturing and starting a company.)

Posted by Eric Larkin on 16th February 2010
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Thoughts on outsourced manufacturing…inspired by the 2010 World Cup soccer ball

I was fascinated by the video in Marc’s recent post about the official soccer ball of the 2010 World Cup.

What struck me was the highly optimized combination of handwork and custom tooling involved in the manufacture of a high-quality commodity product. For example, the inner shell panels are die-cut from sheet (tooling), then sewn by hand into a sphere (a manual process), then manually inverted on a simple-but-still-custom fixture, and then inflated and molded to a perfect sphere in purpose-built spherical molding stations. This kind of high-volume custom-tooled manufacturing is evidence of years of manufacturing investment and optimization around a stable product design, and demonstrates one end of a spectrum. At the other end of the spectrum is lower-volume design-intensive and rapidly changing products (e.g. networking equipment) that use “generic” manufacturing processes like metal stamping, injection molding and PCB assembly.

I think mid-market manufacturers who are considering outsourcing should keep this spectrum in mind – if your product is more like soccer balls, in which the bulk of your intellectual property lies in your tooling and process rather than your product, then traditional outsourcing with a large contract manufacturer such as Solectron, Flextronics or Celestica is probably not going to make sense. You might still consider offshore manufacturing to reduce tooling and labor costs, but success requires that you “own” your manufacturing facility, at least emotionally if not legally. On the other hand, to succeed in making wireless routers you need to “own” your product design. With careful vendor selection and management, though, you can safely rely on a trusted third party to do your manufacturing using generic manufacturing processes and tooling. In many cases – especially with industrial products – a product combines design-intensive and commodity-tooled elements with a custom-tooled “special sauce.” For example, an optical assembly may require highly specialized manufacturing processes but produce an image that is then captured with an image sensor that is part of a custom—but easily manufactured—PCBA. A company manufacturing this kind of product might want to pursue a hybrid manufacturing model, using outsourcing for the electronic subassemblies but keeping the more specialized and tooling-intensive manufacturing steps in-house.

Take a look at this video showing an assembly line for the Xbox 360. Compare it to the soccer ball production video from Marc’s post and you’ll get a feel for the extreme ends of the manufacturing spectrum.