What are the challenges of choosing a contract manufacturer?

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There are two distinct company types with different starting points when they begin searching for suitable European contract manufacturer. The first is a new start-up in search of their first contract manufacturer. The second is a mature company seeking to change their contract manufacturer or has otherwise need for another contract manufacturer. Reasons for this change may include risk diversification or increased production demands.  


Start-up challenges  

Asking other companies for recommendations or using search engines: The initial question where to find a contract manufacturer in the first place as there is no existing network to explore or resources to invest into the search.  


DMR readiness: At which point should you start thinking about a contract manufacturer? Must the DMR (Device Master Record) be ready, so that the contract manufacturer can comment on manufacturability? In general, it is good to have this discussion early so that there is no need to redesign the product in terms of manufacturability later.  


Metrics for bidding: How to tender a contract manufacturer? External consultant is an extra cost but may be necessary due to start-ups time constraints.  


Flexibility and scaling: Choosing the right contract manufacturer is a multi-stage process, because in the beginning the series are small, and you may not immediately be able to catch up with large series (mass) production, not to mention automated manufacturing lines.  


Production transfer process: For start-up companies primarily focused on R&D, sales, and distribution channel creation, the division of labor with the manufacturer is straightforward. A strong collaborative relationship forms during the transition to production, establishing the basis for effective communication. The ramp-up (NPI) phase is crucial as it builds trust between partners. Subsequently, serial production commences, allowing customers to monitor manufacturing through audits and other metrics.  


Project management and change management: During serial production, specific practices and continuous development processes are in place. When customer handles the design, including electrotechnical and/or software aspects, the division of labor is straightforward. However, if a third party is engaged for electromechanical design, it requires more collaborative effort. One party must take the lead in the change project, ensuring smooth cooperation.


Other noteworthy challenges: company's ownership structure, financial stability, references, current quality systems, auditing authority (Notified Body), traceability, access to real-time production data, contract terms, and future considerations for sustainable development processes and integration.  


Companies looking to change contract manufacturer or add another contract


One or multiple reasons for change, or lack of trust: Sometimes, existing partnerships with manufacturers end, prompting the company to seek replacements. Reasons for this may include communication difficulties, increased costs of collaboration, or supply chain inefficiencies.  


The company knows it’s needs: The company understands its requirements when switching contract manufacturers, making agreement with the new partner easier. However, the new manufacturer must acknowledge and address customer expectations, learn from previous experiences, and understand current needs. Changing manufacturers is always a costly endeavor for the customer.  


Multiple contract manufacturers to split the responsibility: When considering multiple contract manufacturers, determining responsibility division, such as a 50/50 split, is crucial. Clarifying the reasons for the divisions is also important. Clear communication and aligned expectations benefit all parties.  


 How Innokas tackles these challenges as a contract manufacturer  


  • Understanding the customers entire business and objectives.  
  • Providing transparent pricing and addressing potential risks upfront.  
  • Making significant investments in customer-oriented production transfer.  
  • Conducting in-house planning and utilizing DfX (design for excellence) principles.  
  • Hosting weekly customer team meetings during serial production, with a Steering Group meeting every 1-3 months to address issues, improvements, and monitor business operations and supply chain.  
  • Leveraging over 30 years of combined experience in larger companies and startups to navigate challenges.  
  • Prioritizing open communication with customers to effectively resolve issues.   

If you would like to consult us about your need for a contract manufacturer, do not hesitate to leave a contact form through the link below.
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Päivi Leppänen, who has been now three years in the OPS team looking for new long-term partners for electromechanical assembly and testing in medical and non-medical business. She has previous experience in B2B sales and marketing, both in manufacturing and ICT business areas ranging from start-up world to mature businesses.  


+358 40 136 1061