Case Study

Client to Contract Manufacturer Relationship on Unsteady Ground

Clients challenges revolved around cost down, better factory performance on critical metrics i.e. CT, quality, clearer reporting on status of projects, fixes and 3wi’s (what is to be fixed and what will be the projected impact in improvement), second sources/ sprint capacity, no one in the factory addressing issues and fixes real-time, factory responses are slow, decisions in the factory being made without consideration to delivery and revenue impacts.

Challenges

• Learning both the Client and the Contract Manufacturer players
• Understand the Client’s needs for strategic and tactical reasons
• Needs related to specific full turn-key, second sourcing, forecast volumes and timelines
• Best methods to Insert “stop the bleeding” fixes in preparation for a long-term cure
• Determine the Client’s current pricing, price target objectives and projected forecasts from the Client
• Understanding what work has already been done to address issues and with whom
• Finding the right match in a Contract Manufacturer for the Client’s needs and how to get the Contract Manufacturer interested in the Client’s business
• How to get the Contract Manufacturer and Client on the same page to begin understanding the issues relevant to better performance, clearer reporting, fixing issues real-time, etc.

Methodology for Improvements

• Met with Client players to clearly understand the requirements and establish detailed objectives.
• Established rules for the Client’s team to interact with the Contract Manufacturer i.e. engineering, quality, management and established lines of communication with decision makers at the Contract Manufacturer to communicate the Client’s concerns/requirements concisely
• Discussed with both the Client and Contract Manufacturer requirements for an understanding of what is needed from each to improve the effectiveness of the working relationship
• Identified prospective new sources and developed plans for transitioning products to a new Contract Manufacturer, recommending a list of potential new Contract Manufacturers capable of supporting the Client, research to identify all existing potential Contract Manufacturers to match the Client’s requirements, i.e., pkg requirements/mix, volumes
• Investigated cost down opportunities by negotiating with the existing subs, leveraging volumes and technology, as well as introducing other means of reducing cost ie. moving to Cu wire or smaller diameter wire, matrix lead frames, etc.
• Set-up the lines of communications between the Client and the Contract Manufacturer real-time on their communication channels to determine/remove barriers. Daily communications with the factory floor staff; forecast, planning, required documentation, real-time problem resolution, etc.
• Communicate directly with the Contract Manufacturers via phone or face to face to establish credibility

Results

• In 90% of the cases dealt with, Communication was the #1 issue. Establishing real-time communications between the Client and the Contract Manufacturer we were able to avoid ill feelings resulting in knee-jerk decisions potentially costing thousands of dollars.
• Drastically improved communication between the Contract Manufacturer and Clients saving customer deliveries
• We were able to bring both the Client and the Contract Manufacturer to mutual understanding of both their businesses and the benefits in terms of revenues
• We provided second sources delivering alternatives and additional capacities
• We improved response time on manufacturing problems with much greater clarity of problem identification and real-time corrective actions
• We reduced cost between 10% to 50% reductions
• We provided comprehensive project plans for those customers needing to transition their product to Asia, including design, manufacturing, logistics, timelines and cost

Summary-95% of the problem was the way, or the lack thereof, the Client communicated requirements/expectations to the Contract Manufacturer and the lack of Management focus for their outsourcing efforts.