Benefits of OEM Outsourcing to Contract Manufacturers

Original equipment manufacturers (OEMs) have a couple of options when it comes to producing their components. They could use their own resources to create the product and invest heavily in in-house capabilities. Or they could outsource the process to contract manufacturers and experience a variety of benefits, from reduced costs to higher-quality parts.

The benefits of outsourcing manufacturing are extensive and can affect many areas of operation. Let’s explore outsourced manufacturing benefits and what this powerful approach can bring to your business.

OEMs vs. Contract Manufacturers

OEM refers to a manufacturer that creates a product to the specs of the client — they may not necessarily fabricate the component. The role of the OEM is often geared toward customization, as they can either create the product entirely or customize existing components to the needs of their clients. They may use custom-produced molds or tools to alter or customize an item for the client’s needs.

A contract manufacturer is usually focused on new production, completely fabricating the parts or components needed. These manufacturers are often the ones that provide the parts or components that OEMs customize. OEMs don’t necessarily need to modify the components they get from contract manufacturers and can often use them as-is to better support the needs of their clients.

Both options have their place, and OEMs can significantly reduce the burden of production by outsourcing to contract manufacturers and focusing on what they do best.

Why OEMs Should Outsource to Contract Manufacturers

The pros of outsourcing manufacturing include factors such as:

  • Increased and flexible capacity: OEMs can take on just about any job when they partner with contract manufacturers, thanks to greater production capabilities. Contract manufacturers can eliminate bottlenecks, grow with your clientele and even step in for temporary support when you need it.
  • Improved parts quality: Contract manufacturers have full teams of highly trained staff focused on fabrication. You can usually expect exceptional quality from these producers that matches or exceeds what an OEM could produce in-house. Other teams dedicated to efficiency and project management help ensure a cost-effective operation that saves you money.
  • Reduced costs: Minimizing or eliminating the overhead involved in manufacturing can be a significant benefit to OEMs. Contract manufacturers can take on the costs of equipment, staff, maintenance and quality control.
  • Fresh perspectives: The team at a contract manufacturer works with many types of products and clients. They have a vast range of experiences and can bring new ideas to the table, approaching manufacturing in innovative and up-to-date ways. Experts in various subject areas, from welding to finishing techniques, can bring unique perspectives and ensure successful implementation of those areas.
  • Fill staffing gaps: OEMs that lack the labor force to support their manufacturing needs can turn to contract manufacturers to fill the gaps. There is a significant labor shortage currently that could cut into an OEM’s capabilities, so contract manufacturers, who have a stronger focus on fabrication staff, can usually help.
  • Shorter lead times: OEMs can avoid long lead times by working with contract manufacturers, who can often provide consistent, responsive manufacturing practices and maintain the appropriate inventory needed to deliver short lead times.
  • Quality assurance: Contract manufacturers have expertise in quality assurance, whereas many OEMs do not. Where this competency is not available to an OEM, the contract manufacturer can provide expert quality assurance services and help ensure high-end products and components, reducing risk.
  • Reduced overhead: The overhead costs associated with manufacturing are also minimized when outsourcing to a contract manufacturer. From staffing to material storage, these aspects are taken care of by the contract manufacturer.

While the benefits of outsourcing manufacturing are wide-reaching, you’ll only get them if you partner with the right contract manufacturer.

Mistakes to Avoid When Outsourcing to a Contract Manufacturer

Outsourcing is an excellent method for obtaining your products, but there are a few downfalls to be aware of that could eat into the benefits. These include:

  • Not choosing the right contract manufacturer: No two contract manufacturers are the same. The right one will depend on the needs of your business and the capabilities of the organization. Make sure you do your due diligence and find the right one for your needs, factoring in aspects like location, capabilities, quality control and reputation.
  • Disregarding your team: Before implementing a partnership with a contract manufacturer, it is essential to converse with your team. Discuss the impact it will have on them and how it will affect day-to-day operations, along with the benefits that it’s bringing them. With the right preparation, you can avoid problems with job retention and resistant or resentful employees that could come from outsourcing.
  • Not identifying hidden costs: Remember, working with a contract manufacturer entails more than labor and materials. There are also less overt costs to consider, such as the amount of time your team is spending organizing services and assessing quality. Think about shipping costs, too. Many OEMs don’t realize the extent of the costs to ship materials overseas — both through monetary costs and long lead times.
  • Failing to get cost transparency: You need total visibility from your contract manufacturer about what you’re paying for. Between material prices, labor, overhead and testing requirements, there are many factors that will affect your final cost. Before signing with a contract manufacturer, you need to ensure they can provide the transparency required for a strong and mutually beneficial partnership.
  • Not securing your intellectual property: Whenever you outsource, you must control the risks related to intellectual property through physical, digital and legal means. Your contract manufacturer needs to support your intellectual property and maintain all the necessary protections required to keep it safe.
  • Having unrealistic expectations: Contract manufacturers still have issues from time to time. Some will prioritize different aspects of work, such as on-time delivery or quality. Determine what’s most important to your business and find a provider that can meet those demands.

If you can avoid these common mishaps, your chances of having a strong relationship with your contract manufacturer rise significantly.

Your Trusted Source for Fabrication and Machining

To reap all the benefits of outsourced manufacturing, look no further than Pro-Cise. We’re a trusted fabrication and machining contract manufacturer with an expert team and a strong commitment to quality. We do what it takes to make sure you’re satisfied with our services. From material traceability and in-process inspections to a massive portfolio of certifications and capabilities, Pro-Cise can meet OEM demands quickly and accurately, offering profitability and peace of mind.

Our team is well-versed in outsourced manufacturing for OEMs and is happy to walk through the process with you. To learn more about working with Pro-Cise, reach out to a knowledgeable representative or request a quote today!