CONTRACT MANUFACTURING

What is it?

• Refers to the hiring of an outside firm to deliver all or a portion of a project

• Designed to take advantage of firms who have a higher skill set in specific areas

• Should not compromise core competencies

What is it?

Local Example: Fortin Discovery Lab

• Beyond skill set of some businesses to do 3D design

• Easy to streamline production

• Important to guard trade secrets at all levels

• Don't hire someone to do what you do best

What is it?

Global Example: Apple

• Adept at the software development, but the hardware can be built better out of house

• Offshored to China, specifically to Foxconnfor iPad as well as iPhone

• Foxconn manufactures other devices as well including Kindle, Blackberry, Xbox one, PS4

• This ultimately affects competition

When are you ready?

Design Factor

• Are the parts designed properly to be manufactured?

• Is the product engineered, is the design stamped, does it have all the necessary certifications for its intended purpose?

When are you ready?

Cost Factor

• Upfront costs vs per item costs

• Profit margins: supply and demand

• Certification costs: electronics, retail, underground, etc.

• Retail and storage space

When are you ready?

Sales

• Clients or customers

• Suppliers

• Retail partners

• Service and support

Domestic vs Foreign

Cost

• Lower overall cost associated with foreign manufacturing

• More support opportunities for utilizing domestic options

Domestic vs Foreign

Quality Assurance

• Very little control or guarantees provided when dealing with overseas manufacturer

• Higher standard of care and faster revision implementation with local companies

• More involvement in the process leads to higher confidence in the final product

Domestic vs Foreign

Relationships and Communication

• Face-to-face meetings and site visits to establish better working relationships

• Less likely to have a language barrier or varied interpretation of the design

• More work involved in finding and establishing domestic manufacturing contacts

Costs

Economies of Scale

• Making more costs less

• More beneficial to both sides, with higher quantities

• Important to consider the effects on the company of tying up capital in large amounts of product prior to high sales volume

Costs

Tooling

• Could cost a lot to get proper set up (IE; molds, dyes, etc)

• Cost per unit will then help to offset this

• Aiming to align with experts at this particular skill set

Costs

Lack of Hands-on Control

• Cannot change certain aspects

• Hard to streamline

• Contractors must prioritize, you may not always be at the top of the list

• Cost more for rushed parts

Costs

Unforeseen Issues

• What works in the garage doesn't always work in the field

• Focus group testing may be ideal

• Understanding the needs of your client must be a priority

Design Considerations

Prototyping vs Manufacturing

• Some designs are ideal when prototyping, however are difficult to mass-produce

• Techniques:

– Additive vs Subtractive

– 3D printing vs injection molding

– CNC vs casting

– Arduino vs custom PCB

Design Considerations

Materials

• Product needs to have the right look and feel in order to be successful

• Material can have a high impact on cost, need to optimize for quality and cost

• Minimum strength and other engineering considerations need to be followed

• Allowable tolerances in dimension

Design Considerations

Timing

• First batch will take much longer to produce

• Implementing changes at this point will take significant amounts of time

• Controlling volume flow: managing manufacturing, assembly, shipping and storage times

Intellectual Property

Overview

• IP is intellectual property: it can be protected under copyright, trademarks or specifically in manufacturing, patents

• Compared to Trade Secrets which is a device or procedure kept secret within a company I.E; 11 herbs and spices

• Important to consider the risks of allowing another company to see and use your IP

Intellectual Property

Country vs Global

• Important to recognize if patent is enforceable in Canada only, or in multiple countries

• Canada is part of the Patent Co-operation Treaty – not perfect, but more protection

• Re-engineering and reverse engineering can still occur

Intellectual Property

Protection

• Non-Disclosure Agreements (NDA)

• Non-Compete Agreement (NCA)

• It is the responsibility of the parent company, NOT the manufacturer, to secure this

Risks

Quality

• No longer under your management

• Less room for error

• Higher volume leads to more potential for difficulties in quality control

Risks

Reliability

• Will shipments and supply be consistent?

• Will quality of parts be consistent and stay within given tolerances?

• Is the relationship between you and your contact dependable?

Risks

Scalability

• Will the manufacturer be able to increase volume of production with your growth?

• Will scaling up the volume affect the product cost and quality?

• Can your manufacturer support additional products or product lines?

Risks

Interpretation

• There is potential for the design to be interpreted incorrectly

• Are all details clear and communicated properly?

• Are you confident that they understand the product?

To Conclude

Finally,

• Difficult to start, can ease as it develops

• A necessary difficulty for any product based company

• Be careful to not rush any decisions, this will be an important relationship for your company

Q&A – Ask Away!

Contact Us:

• general@cmdprototyping.com

• www.cmdprototyping.com

• @cmdprototyping on Twitter