Subcontracting: What You Can Do To Do It Right
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Subcontracting has become standard practice as many companies seek to focus on their key capabilities in the ever-ending goal to improve profits. Focusing on in-house design and handing off less profitable manufacturing to those who can profit on it has grown into a necessity for many companies. Subcontracting can make both the contractor and the contracted more profitable ? if it is handled right.
Since the need to increase profits is one of the major reasons for subcontracting, it should come as no surprise that the cost of subcontracting is an important factor. If a product can be made for less money somewhere else, why bother to make it in-house? There are other factors that should be considered before a decision is made, though, two of the most important being the speed of production and the product quality.
Most subcontracting goes to commercial houses that specialize in building a specific line of product. Commercial houses that have grown into companies accepting anyone and everyone's outsourcing business have no experience building YOUR product. If you simply hand them the specifications for your specific product to your subcontractor and walk away you are asking for them to give you bad product back. This is especially true if your product is complex or involves very specific processing knowledge to build. They may be able to build it cheaply, but who knows better how best to build your product than you do?
It is important to have open lines of communication between the contractor and contracted companies. No matter where the two companies are located or what the product type is, this is an essential business practice. In some cases there may be a language barrier which requires translators and work above and beyond what might normally be expected in the corporate world, but this is becoming more and more common and is something that can be handled without too much difficulty. This is especially true with the technology that is now available. No matter where a contractor is, using a digital camera to take a picture of the problem part and send it to a design engineer may be the fastest way to solve a problemiacertainly faster than flying a person or an entire team to another site.
One way a large business working with a smaller business can help itself is to improve the communication system internal to the smaller business. Introducing basic computerization is often an asset. For example, small machine shops that worked with a larger company had just started using email. In order to improve communications, the larger company bought them Microsoft Outlook and offered simple lessons. Both companies benefited.
In all industries, there are certain standards that must be met. A small subcontractor may not be able to test to a larger companyas standards, and, particularly when said standards are an industry requirement such as ISO9000 or minuscule mechanical tolerances, this can seriously impact business. A small operation here and there may be able to do this, but it is very much a needle in a haystack situation. However, a larger company may be able to help train quality control staff at a small company. This training benefits both sidesiathe larger company is able to use the smaller, less-expensive company that would not have been able to do the work to the required standards before, and the smaller company now has employees with skills that will be useful in the long-term.
Working with a larger firm with greater demands upon their inspection and test facility often leads to a subcontractor upgrading their test equipment. If possible, this involvement encourages a subcontractor to add a test capability the larger company lacks. Close contact between the engineers at both companies should allow those for the larger firm to be aware of the new capability. Once that capability is known, it would be a good idea to run through your still-in-house processes for any other areas where this new test procedure could help identify currently escaping defects. The smaller vendor would thus gain a faster return on their investment on the equipment upgrade and the larger company gains a testing capability they previously lacked access.
By approaching subcontracting correctly, it is possible for the contracting company and subcontractor to share information, experience, and equipment cost. Financials are often the primary consideration in subcontracting, but the best way to have a true long-term effect for both companies is to improve the employee skill set and the overall manufacturing process.
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