8 Red Flags to Watch out for in Contract Manufacturers
Picking the wrong Contract Manufacturer partner can make or break your company. Often startups have one shot at launching their product and they neither have the time nor the funds to try again. So making sure you pick the right partner is absolutely critical to the long terms success of your product and your customer satisfaction. Below are a few things to watch out for when trying to pick the right CM for you.
1. They don’t have quality certifications.
At a bare minimum, all suppliers should have ISO 9001 certification for Quality Management System. Prototype shops can get away with not having this. But if you’re looking at tooling up for higher volume production and manufacturing sellable products, make sure they are certified!
2. They won’t share a costed BOM with you.
A good manufacturing partnership is based on trust and open communication. If your CM is shy about sharing a full cost breakdown with you then they have something to hide. Cost is cost, profit is profit. We all need to make a living. They should be totally open to sharing all their costs and their profit markup. Also, as the paying customer, you have a right to know where your money is going.
3. They don’t have a dedicated program management team
You need a point person at the CM keeping track of project to make sure the right steps are being followed. This person develops the program timeline and share that with you and provides period updates as to whether they are on schedule or not. In smaller companies, this can be your sales engineer or your account manager fulfilling multiple roles, but larger companies have a program management department where they assign personnel to each project to keep it moving forward. This is a good indication of a well run company.
4. They refuse to use other suppliers or component manufacturers
Every supplier or manufacturer has their favorite list of suppliers they go to. But sometimes, they’re not the right fit for the job (or they’re just somebody’s cousin). Your CM should be willing to explore sourcing their materials from other suppliers and provide you with options to chose from. If not, there might be some under the table dealings that you would be better off avoiding.
5. They don’t communicate in a timely manner.
Time is money, and you have a right to expect a response within 24 hours. If they take several days or even weeks to get back to you, then it shows they don’t really care about you as a customer and you’re better off finding someone who does care. You don’t want to be with a CM where you are 10th in line to receive some attention. You can’t launch a successful product without a communicative and dedicated CM behind you.
6. They don’t do end of line testing
Manufacturing defects are a fact of life. Due to tolerances and variables in both machine and human performance, you will always have some parts that don’t meet the requirements. Its important to catch those parts before they get to your customer. This should be done in the manufacturing facility and non-conforming goods should never even make it to the warehouse. This is where a good CM can help you, they can design specialized EOL test equipment designed to catch any products that don’t perform as intended.
7. They make you pay for everything up front
A good supplier or CM should be willing to negotiate payment terms. Firstly, because they have payment terms with their suppliers – you shouldn’t pay them 100% on day 1 because they are not turning around and paying 100% to their suppliers on day 1. Also, reserving some payment for the end of the line build process is a good way to guarantee that they spend your money wisely. For example, its common to reserve 30% of tooling or assembly line set up fees to the very end after the supplier has done a capability study to verify the equipment manufactures the parts as expected. A supplier should agree to this not only to demonstrate they are confident in their ability to provide high quality equipment, but also to provide a guarantee that you don’t have to pay until you are satisfied with the results.
8. They don’t ask questions about your RFQ
No RFQ is perfect, no matter how much time you spend on it. There will be vague specifications or confusing information. If your CM just makes their own assumptions, or doesn’t even properly read through your entire RFQ, that is a big red flag. They should be asking lots of questions to make sure they have a very clear picture of what you’re looking for so they can quote and deliver exactly what you expect.