Contract manufacturing has become more popular of late, seeing how it offers numerous benefits to companies. While outsourcing the manufacturing of your products and equipment can be healthy for your bottom line, it does come with its associated risks.
Fortunately, there are several ways to mitigate contract manufacturing issues or even avoid them entirely. We’ll go over some common risks and how to resolve them here.
Common Contract Manufacturing Issues
Six of the most common contract manufacturing issues include:
- Supply chain
- Quality control
- Lacking knowledge of production techniques
- Intellectual property risks
- Poorly communicated requirements
- Increased liability
The nature of these contract manufacturing issues and how to resolve will be described below.
1. Supply Chain Issues
One contract manufacturing issue is with the supply chain.
While you’d have complete control over your supply chain if you were to manufacture items internally, you let go of some of that control when you outsource production. That can become a problem if your product needs high-quality components or involves hazardous materials.
If the use of certain materials might cause your product to fail or otherwise expose your company to liability, you’ll want to make sure you’re aware of the contract manufacturer’s supply chain practices.
The solution: To avoid supply chain issues, make sure you choose a contract manufacturer who has a positive reputation. Choose companies that are reputable and transparent about their processes.
Also, building accountability into your agreement can further help avoid this risk—if you communicate on the exact materials being used in the product, you’ll have more confidence in a healthy supply chain.
2. Quality Control
The second issue is quality control.
In-house manufacturing allows you full control over the quality of your products. As soon as you contract a third party to produce equipment or consumables on your behalf, you lose that control.
In industries that process food or pharmaceuticals, quality control is a massive issue, meaning you’ll want to make sure your contract manufacturer has stringent quality control practices in place.
The solution: Hire a contract manufacturer who has solid quality control practices in place.
In particular, it’s often best to choose a manufacturer who has experience in your industry. They’ll already be familiar with the standards and regulations you need to meet, allowing them to already have the necessary procedures in place.
3. Lacking Knowledge Of Production Techniques
When you produce items in-house, you know exactly what processes and techniques are involved in their production. A third-party contract manufacturer might not necessarily have all the needed skill sets and knowledge in place.
This contract manufacturing issue means you might either have to spend extra time making sure they get your product right, or simply having to deal with a subpar result.
The solution: Selecting someone who specializes in your industry is key.
A specialist contract manufacturer will have the necessary training, knowledge, and equipment in place to meet your exact requirements. Clearly communicating your processes might also help in cases where you’re dealing with a company that offers broad contract manufacturing services.
4. Intellectual Property Risks
The fourth contract manufacturing issue moves beyond process into property risks—namely your intellectual property.
The design of your products is patented (and if it isn’t, it should be), and you’ll need to let your contract manufacturer in on the details of that patented information. That carries with it a certain amount of risk since they could potentially use that knowledge in an unlicensed way.
If you’re producing equipment with your branding on it, you need to make sure proper licensing is in place to prevent any IP breaches and ensuing legal entanglements.
The solution: If your contract manufacturer needs access to patented or otherwise legally protected information, make sure you discuss the conditions and details of that information’s use. A well-drafted licensing contract is necessary in these cases.
5. Communicating Requirements
Sometimes contract manufacturing issues come down to communication, especially in cases where you want to create something that hasn’t ever been made before. If you’re putting a new product out into the market, it’ll be easy for a contract manufacturer to misinterpret your requirements and get something wrong.
The solution: Clear communication of your requirements is vital in any outsourcing situation, and especially when you’re manufacturing a brand new product. Have detailed schematics, blueprints, and so forth ready, and work together with your contract manufacturer to make sure all the details are hashed out.
Also, having the manufacturer build a prototype before production can be beneficial in many cases.
6. Increased Exposure To Liability
The final issue is simply exposure to liability. You don’t have control over what the contract manufacturer does, and if their practices, procedures, or results cause harm to others in any way, you could get drawn into a rough legal situation. Even if you’re not to blame for their practices, the process of proving as such can be financially taxing.
The solution: A well-phrased contract and careful communication are key, but so too is making sure you choose a company that is reputable and honest about their practices.
The contract manufacturer you select should adhere to the highest standards of integrity and quality. Typically, those companies tend to last a while, so a company that has been in business for decades should be reliable.
General Solutions To Contract Manufacturing Issues
To sum up, the solutions detailed above, it all comes down to the following:
- Communicate your requirements clearly and completely
- Build accountability into your agreement
- The more specialized and experienced the contract manufacturer, the better
- Include adequate licensing clauses in your contract
Above all, you want a reputable company. By choosing an honest company built on integrity and quality, you’ll avoid most of the above contract manufacturing issues.