Using contract manufacturers to outsource product production can be very advantageous to many businesses. However, quality must be a paramount requirement when considering outsourcing any product with your business’s name attached.
Advantages Versus Risk of Outsourcing Product Production
There are a number of advantages for a business looking at outsourcing their product production needs, including these four:
• Cost reduction from lower labor costs.
• Flexibility for evolving business strategies.
• Rapid response to changes in production demand and capacity.
• Resource allowance efficiency.
Contract manufactures also pose a risk, though. The main risk is quality assurance. This is particularly true for businesses in a highly regulated niche or industry because their products have such rigorous standards and inspections to meet. Such businesses must absolutely take measures to ensure any contract manufacturer is both capable and proven to have quality output standards congruent with their own.
Eight Steps to Ensure Quality When Outsourcing Production
The goal of contract manufacturing is to maintain the cost and strategic advantages… while also ensuring quality production and end products. How does a business do this? The business must set a firm protocol on how to manage relationships with contract manufacturers.
This eight step guide will allow the business to simultaneously maintain all the advantages and mitigate the risks.
Step 1: Develop a comprehensive list of criteria to be used in assessing contract manufacturers.
The criteria should include external standards, such as from applicable federal and state regulations. It should also include the businesses own internal standards. Specifics should include environmental, safety, manufacturing principles, product testing, quality management systems, and other applicable standards.
An audit should be done on any potential contract manufacturer to assess their ability and history on meeting the criteria set forth. Those that fail may need to make adjustments or corrections to be reconsidered.
To save time and money, businesses may even consider providing potential contract manufacturers with their criteria upfront. This allows manufacturers to rule themselves out if their standards are clearly not up to par with the business.
Step 2: Major changes implemented by the contract manufacturer must be assessed and approved by the business.
Business should include a clause in the contract that requires the manufacturer to get any major changes, such as a change in facilities or third-party subcontractors, approved by the business beforehand. Require that the manufacturer provide documentation and information on any changes so that it may be assessed prior to any physical inspections for re-evaluation.
Step 3: Include a business-specific risk assessment in the evaluation of potential contract manufacturers.
Take the time to throughly determine the high risks to your specific business and industry and which manufacturers present the greatest risk.
Factors that should be taken into account may include customer risks, how reliant the business is on a specific product, and how stringent any regulations are on the product.
Consider working with a procurement agency to determine which manufacturers have the highest potential for a mutually beneficial, long-term relationship.
Step 4: Develop a system to track the contract manufacturer’s performance.
This system should be in place from the very start. The system may include one or all of the following approaches:
• Formal assessments
• Informal assessments
• Routine performance reports
• Non-conformance metrics
• Random sampling and testing
• Routine sampling and testing
The combination used here varies based on compliance needs, production stages, and so forth. For example, a business may want to test every lot and perform multiple, frequent audits when they first bring on a contract manufacturer. The performance checks may then become less frequent as the results are proven to be uniform and consistent.
Step 5: Provide a path to improvement.
A contract manufacturer can’t improve upon that which they don’t know is not efficient and effective for a client’s specific needs. When a business monitors their contract manufacturer’s performance and quality through the above mentioned steps, they’re able to help the manufacturer recognize areas that must or could be improved, such as through achieving higher internal production standards, implementing new production capabilities, or gathering a larger scope of workforce talent.
Step 6: Include a specified timeframe standard for all communications between the contractor and the business.
Let’s say there is a recall on an ingredient or component of the product the manufacturer is producing for a business. Maybe, the business needs to be able to immediately assure customers that their product isn’t affected by a recall on a different good the manufacturer produces. In any event, the business needs to be able to immediately correspond with the manufacturer, not wait days or weeks for a reply.
The potential for pressing issues like the above examples make it crucial for businesses to include communication standards. Response expectations should be clearly defined within the contract as to who responds and the timeframe.
Step 7: Have a system and personnel in place capable of managing the information received from the contract manufacturer.
It does little good to have a contractual obligation for the information if the business isn’t capable of managing, tracking, and interpreting the proffered data.
Step 8: Ensure that the business’s quality personnel and the contract manufacturer’s personnel routinely collaborate.
Quality department heads from both sides need to have regular meetings to discuss outcomes, proactive approaches to potential problems, manage existing problems, address regulation changes, determine opportunities for improvement, and so forth. By working together, this allows for both sides to find approaches and solutions that are mutually beneficial.