A difficult task for any company is reviewing bids and proposals for cables, harnesses, or electromechanical assemblies and determining the best to select. The final cost, while key, is not the only important factor to consider. This is particularly true when proposals come from companies that are offering to complete the work at an offshore manufacturing facility.
When final delivery is in the US, proposals for offshore manufacturing most often involve either Mexico or Asia. Sourcing from one of these locations adds a level of complexity to your decision over simply selecting domestic manufacturing. Of course the main reason to consider offshore production is to achieve a lower landed price. Assuming the lower price is attractive, there are several other things you should consider before making an award. These include:
- Control of the offshore manufacturing location
- Existence of multiple facilities
- Focus, ISO 9001 certification, and employee training
- Ease of access and lead times
Each of these points can help you narrow the proposals and choose the best contract manufacturing partner for your organization.
Control of the Offshore Manufacturing Location
The attraction of offshore production is the cost, but you don’t want communication to suffer because of different languages and distance. The first important consideration is to select a company with a US operation that owns and controls the offshore production location. You want to deal with local people that speak your language and are readily able to visit your facilities and see your needs first-hand.
A US company that operates the offshore facility that will produce your assemblies gives you several distinct advantages beyond communication. By working with an American company, you won’t have to deal with the importing and exporting issues inherent with offshore manufacturing. The company will also be in a better position to manage lead times and shipping logistics and can offer domestic based inventory management programs like Just-In-Time (JIT) and Vendor Managed Inventory (VMI).
Be aware that many contract manufacturers that purport to have offshore manufacturing capabilities are actually sending your work out to a third party that they don’t control. When the work is contracted to a third party, get ready for the excuses and finger pointing. Delivery delays and quality issues are sure to be more prevalent in such an arrangement.
Existence of Multiple Facilities
Offshore or not, it is always good to work with a contract manufacturer that has multiple facilities. With multiple facilities comes flexibility and redundancy. Flexibility in that if one facility is experiencing long lead times, your contractor has the ability to load balance by shifting work to a second facility; keeping your deliveries on-time. Redundancy in that your contractor is much more likely to have a credible recovery plan in the event of a natural disaster, trade issues, or other unforeseen problem that could shut a production operation down altogether.
Of course, multiple facilities are even better if one is domestic and the other offshore. This means that you reap the benefits of both domestic and international production while gaining flexibility and redundancy. If you have a prototype or emergency order that needs to be turned quickly, you will have the advantage of the domestic operation. Meanwhile the offshore operation will give you the benefit of lower cost manufacturing for larger orders and production runs.
Focus, ISO 9001 Certification, and Employee Training
Often offshore production is much less specialized than what we are accustomed to in the US. Many foreign manufacturers will work on several unrelated products to ensure they stay busy. For products as complex as cable harnesses and electromechanical assemblies, you want an experienced partner who can help you avoid problems throughout the process. It may be alright in other fields, but when it comes to electromechanical assembly, you should select a contractor that has focus.
You should also insist on a contract manufacturer that has invested the time and effort to gain the proper credentials for their offshore facility. Among the most important of these credentials are a quality system that is at least ISO 9001 certified and a staff that is trained to IPC-620 and J-STD-001. Watch out for operations that claim to be “ISO compliant”. This term means that the facility has never withstood a third party quality audit. As a practical matter, any operation that is truly ISO compliant would take the extra step of having their quality system audited and certified. As far as staff training is concerned, make sure that everyone working on your assemblies have the training, their training is current, and that the contract manufacturer can offer proof to that effect.
Ease of Access and Lead Times
The location of the facility should play a big role in which proposal you ultimately accept. If your proposals are between Mexican and Asian production, this becomes even more important. At some point, you or your quality team will want to inspect the facility, even if it is ISO 9001 certified. Mexican facilities have a distinct advantage in terms of access because the cost of visiting is considerably lower and travel time considerably less than to any facility in Asia. Depending on the location of the facility, you could make a trip to Mexico in a day or two. Visiting an Asian facility will cost significantly more and you will need to block out a week to make the trip.
While Asian facilities may in some cases offer lower costs, they have a considerably longer lead times. Unless you plan to air freight your product back to the States, lead times from Asian factories are measured in months and order quantities typically need to be in the tens of thousands. And you better have predictable demand and lots of notice to affect product changes because your inventory pipeline will literally stretch half way around the world. It typically takes months to make a product or rate of production change when an assembly is being sourced from Asia.
The good news is that most Mexican operations do not have this issue. Typical lead times from Mexico are measured in weeks and the best Mexican operations can have lead times as short as those of any domestic manufacturing facility.
Although important, cost is but one factor to consider when selecting a contract manufacturing partner that will be producing your product offshore. Below is a review of this blog in the form of a short list of questions you should ask when analyzing potential manufacturing partners.
- Will communication be with a company based in the US?
- Does the US company own and control the offshore facility or are they actually just a middle man?
- Does the manufacturer have at least two production facilities? Is one domestic and one offshore?
- Is the manufacturer an expert in electromechanical manufacturing, or does the facility also produce other, unrelated products?
- Does the offshore operation have an ISO 9001 certified quality system? Are its production employees trained to IPC 620 and J-STD-001?
- How accessible is the offshore facility for visits?
- What is the average lead time of product produced in the offshore facility?
The answers to these questions will help you narrow the proposals to the one that will best meet the long-term needs of your organization.
About the Author
Fred Morr is Senior Operations Manager of RESCO Electronics in Acuna, Mexico, a manufacturer of electronic assemblies and value added reseller of auto ID equipment to original equipment manufacturers. Before joining RESCO in 2011, Fred owned and operated his own company MorrCo Enterprises LLC in Del Rio, TX/Acuna, Mexico, an organization specializing in contract assembly of PCB’s, cables and harnesses and was sold to RESCO Electronics in 2011.
From 2001 to 2004, Fred was General Operations Manager of Sample Group South LLC in Del Rio, TX/Acuna Mexico, a company that manufactures books/cards for the textile and vinyl wall covering industry where he helped build a Mexican corporation and ensured compliance with NAFTA regulations for all US customs transactions. He was also the President of NAFTA, Inc. in Del Rio, TX/Acuna, Mexico from 1997-2001 where he helped them achieve ISO 9002 Certification for Fiber Optic Cable Assembly and restructured the company profile from consignment to turnkey supplier.
Fred studied at the University of Texas, has taken numerous professional training courses, and is fluent in English, Spanish and German. He is married and lives in Del Rio, TX with his wife and children.