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Wednesday, 18 November 2015 03:12

4 Myths of Contract Manufacturing

    Contract manufacturing is one of those topics where everyone has a different opinion, mostly based on their own experience. Sadly, misconceptions often have roots in personal negative experiences. Don't let your competitor's mistakes affect your ability to make a profitable choice for your business.

    CM done right can mean more revenue for your company, so it´s important to examine these myths before making any decisions:

    1)    Myth: When choosing a CM, low cost outweighs any other consideration.

    True. And false. More important than getting a low quote is to obtain a real quote. In the business, we often hear stories about costs ending up at 20 to 30% more than the initial quote, due to hidden fees and unexpected charges.  To avoid such scenarios, it is important to work with a contractor or broker who will provide a comprehensive quote, especially when outsourcing to Mexico or any other country. A realistic quote will allow for better margin estimates –not to mention a smoother ride.

    2)    Myth: You should choose a Tier 1 manufacturer in Mexico.

    False. Be wary of the assumption that a larger CM company will produce your product at a lower cost. This is not always true.  Tier 1 manufacturers are great for large operations, but not a fit for every company. For startups or businesses in the early stages of development, a smaller manufacturer may be more appropriate. It will also afford the possibility of producing smaller product batches.  A good fit entails a variety of elements, including geographical location, technological capabilities and a good track record in your industry. An experienced outsource manufacture broker will be able to match you with the most compatible manufacturer for your needs, and save you unnecessary expenses.

    3)    Using a CM, especially abroad, means giving up control of my operation.

     

    False. Outsourcing your manufacturing shouldn´t feel like kissing away your supervision rights. And if it does, you are either working with the wrong CM, or lacking internal strategies for outsource operations. A communication protocol should be put into place to obtain weekly updates and reports on contingencies affecting deadlines. At Outsourzia, we become the communication agent, making sure there is a fluid and constant information flow between parties. Moreover, most manufacturers in our network are located a short drive South of San Diego Border, which makes it easy for clients to visit as often as they wish. You can choose how involved –or detached to be, since we will be responsible of oversight and quality control.   

    4)    Vertical integration will be problematic if I choose a Mexican Contract Manufacturer to outsource my production.

    False. Again, this element depends on the implementation strategy. Granted, when outsourcing to Mexico it may seem like we have too many moving pieces: customs, transportation, workforce, raw material supply… Most brokerage services will perform basic services like finding you a facility and hiring workers. But setting up and then leaving just leaves too much to chance. And if you wanted to gamble, you'd be in Vegas, right? A way to decrease risks is to hire an outsourcing broker that goes above and beyond the basic real estate and HR tasks. The most comprehensive broker services include manufacture strategy planning, material sourcing and quoting, manufacture supervision and quality control, product design, sample production, and even final product delivery in the U.S., seamlessly integrating all parts.


    A final word:

    Remember that lack of planning is usually the source of problems at any manufacture endeavor, be it outsourced or in-home. So be clear on your expectations, goals and strategies. Moreover, consult with a Contract Manufacturing expert before making any commitment.  Instead of paying credence to myths, become your own success story.

    Ezequiel Nacach

    Ezequiel Nacach, founder of Outsourzia, is an entrepreneur with 35+ years of business experience in the B2B and B2C worlds. Having owned and managed multiple retail businesses in Mexico, and manufacturing companies in both Mexico and the US, he has a vast knowledge of what it takes create and develop new products. Originally from Mexico City and now living in San Diego, California, Ezequiel helps American inventors and business owners to bring their ideas to life by manufacturing their products in Mexico. 

    Learn about Ezequiel on LinkedIn

    About Outsourzia

    Outsourzia offers a complete contract manufacturing outsourcing solution.

    We're not just an outsourcing broker or agent, but a company that helps businesses, inventors and entrepreneurs through the entire product manufacturing process and do everything to turn ideas and visions into REAL physical products.

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