Article | December 10, 2021
The benefits of contract manufacturing are triggering manufacturers to utilize it as a strategy to speed up production and increase revenue. According to BCC Research, the worldwide contract manufacturing industry should increase from $2.0 trillion in 2018 to $2.7 trillion in 2023, a 6.7% CAGR.
Given the growing demand, contract manufacturing has a long way to go in innovating new solutions for manufacturers.
As technology takes over and enhances many of the processes we used to handle with manual labor, we are freed up to use our minds creatively, which leads to bigger and better leaps in innovation and productivity.
– Matt Mong, VP Market Innovation and Project Business Evangelist at Adeaca
Let us look at the benefits and concept of contract manufacturing, often known as manufacturing partners in some circles.
Contract Manufacturing: Concept and Benefits
Contract manufacturing is a business model in which a company agreeswith a contract manufacturer to make components or finished goods based on the hiring company's design. In short, it is a business model in which one company hires another company to manufacture components or goods for them or their products.
The following are some of the primary advantages of contract manufacturing that attract manufacturers to adopt this concept and find a trusted supplier to manufacture any product or part of their product without much difficulty.
Cost Efficiency: In contract manufacturing, companies do not have to pay for the facility, equipment, or labor needed.
Resource Allocations: The money and resources saved through contract manufacturing can be redirected towards other company operations.
Faster Lead Times: Hiring a contract manufacturer reduces manufacturing time. This improves market speed, delivery time, and customer service.
Quality Control: Contract manufacturers are likely to have their own quality control processes in place, which allow them to spot counterfeit or damaged products early on.
Advanced Skill Sets: Companies can benefit from the skills they may not possess, but the contract manufacturer does.
Contract Manufacturing Examples
Here are some examples of contract manufacturing companies that offer manufacturing services to other businesses and work on full-service outside manufacturing projects.
Example 1: Kimball Electronics Group
Kimball Electronics Group provides a comprehensive range of electronics manufacturing services, including engineering, prototyping, testing, electronic data interchange (EDI), new product introduction, and repair depot services. Soldering, assembly, reflow, de-paneling, flux application, inspection, screen printing, testing, and rework are all processes used in their manufacturing.
Example 2: Scapa Healthcare
Scapa Healthcare, headquartered in Knoxville, Tennessee, provides contract manufacturing services for medical and cosmetic products. Their portfolio of products includes sunscreen, silicone medical adhesives, and innovative materials. Additionally, the organization provides development, packaging, and logistics services.
Things to Consider While Selecting a Contract Manufacturing (CM) Partner
You need to know how to identify the ideal contract manufacturer for your business to accelerate production and produce high-quality items. Below, we've listed some of the most important things to keep in mind while looking for an outsourced manufacturing partner for your company.
Understanding a contract manufacturer's (CM) capabilities in terms of logistics and fulfillment is critical. Is your potential CM able to meet shifting product demands? How to use the CM's services? You may need one or more services from CM for your product, so always examine their capabilities or develop a list of their services and see which ones are valuable for you.
Knowledge or Prerequisite
A qualified, experienced, subject matter expert CM always correctly understands the requirements and delivers the services as per expectations and within the time frame specified in your production schedule. Always inquire about their qualifications or certificates in the places where your product will be manufactured.
Any contract manufacturing plan must have an agreement or compliance clause. Always inquire about the compliance procedure and thoroughly understand the terms and claws to avoid future issues.
Verify your possible contract manufacturer's personnel count. Is it easy to talk to them? Is labor skilled enough to meet the product's goals? It is critical for large-scale production and production, requiring swift responses. Any work force shortage might cause production delays.
Gear & Expertise
Check for machines and equipment as well as human labor in your possible CM. Many CM lease equipment to complete a project. So always check how the CM will organize the essential equipment for your project. Expertise in using the equipment is also necessary. Verify which machines were used and whether or not professionals were involved.
The CM's location is the main factor to check. Because the CM may have numerous plants, knowing which plant is assigned to your product is essential to knowing every aspect of its production. Also, the assembly location must allow you to visit and inspect the manufacturing between cycles.
Finding a reliable contract manufacturer with solid financial backing and market roots is essential to avoid market scams. However, you must also analyze and solve risk factors like equipment failure, supplier capacity, and unreasonable expectations.
Selection Myths of Contract Manufacturing Partner
Once you've produced a list of shortlisted contract manufacturing partners who meet all of the criteria described in the preceding heading, you can proceed by following the steps below to select the best contract manufacturing partner.
Look for Who is Willing to Invest in Your Business
Incorrect. The objective is to find a vendor prepared to manufacture at a loss. A contract manufacturer's strength is that they can stay competitive and make a profit for both parties.
Focus on Tier 1 CM Partners from the Market
This one is indeed not acceptable. Tier 1 is a financial phrase used to separate large corporations from smaller ones. You want a contract manufacturer who understands your business and your needs. Don't worry about the manufacturing partner's size.
Go Ahead with the One Who Offers the Best Services at the Lowest Price
Trying to get the cheapest quote isn't always the best idea. You should get a quote from your contract manufacturing partner, but the quote may not always reveal the complete story. Cost per unit frequently captures approximately 75% of total supply chain cost. Some contract manufacturers charge the OEM the remaining 25%. Consider the complete picture while selecting a CM partner.
Manufacturers use contract manufacturing to meet their commercial goals. Therefore, contract manufacturing is a win-win situation for both industrialists and contract manufacturers. Finding the proper contract manufacturing partner for your company is not straightforward, but our brief guide can help you identify the right manufacturing partner.
What makes a good contract manufacturer?
The most significant contract manufacturing firms are more than just supply chain partners. They recognize and treat your items as if they were their own, are meticulous in their operations, and are concerned with quality and capital.
What differentiates contract manufacturing from outsourcing?
A contract is a legally binding arrangement. It involves two or more parties. For example, outsourcing is outsourcing some tasks to an outside organization under a contract agreed upon by both parties.
What's the difference between contract manufacturing and licensing?
Contract manufacturing only outsources production phases, while licensing is far more complex. In return for fees, a corporation sells the right to utilize its intellectual property to another company. Licenses are like franchises.
"name": "What makes a good contract manufacturer?",
"text": "The most significant contract manufacturing firms are more than just supply chain partners. They recognize and treat your items as if they were their own, are meticulous in their operations, and are concerned with quality and capital."
"name": "What differentiates contract manufacturing from outsourcing?",
"text": "A contract is a legally binding arrangement. It involves two or more parties. For example, outsourcing is outsourcing some tasks to an outside organization under a contract agreed upon by both parties."
"name": "What's the difference between contract manufacturing and licensing?",
"text": "Contract manufacturing only outsources production phases, while licensing is far more complex. In return for fees, a corporation sells the right to utilize its intellectual property to another company. Licenses are like franchises."
Article | April 21, 2022
Manufacturing ERP (enterprise resource planning) benefits organizations in multiple ways, as it simplifies decision-making for top management by utilizing data from smart dashboards and consolidated data. The requirements of manufacturing companies are extremely precise. These include elements like planning and management. Manufacturing ERP systems are designed to meet these requirements.
In other words, manufacturing ERP is a specialized form of an ERP system designed to streamline and automate all manufacturing processes. It applies the same ERP principles to manufacturing organizations to increase efficiency.
Numerous businesses have implemented or are planning to implement ERP systems in their manufacturing organizations. They are, however, constantly on the lookout for the best return on investment when it comes to manufacturing ERP software. In this article, we'll look at how to calculate the return on investment for manufacturing ERP solutions to help you get a better grasp of the investment viewpoint for manufacturing ERP.
How to Determine Manufacturing ERP ROI?
Organize Data for ROI
ERP evaluation, selection, and implementation require collecting a large amount of business data. Putting all of this information together can be a daunting task. Therefore, individuals from each department should provide objective feedback to help mitigate bias and ensure consistency.
Focus on People and Processes Rather than Technology
You can increase your ROI by mitigating the technical aspects of an ERP system. Get an understanding of how it will improve your processes and how much money you will save over time due to those improvements. Your return on investment will depend on how well you effectively manage business process reengineering and organizational change.
Invest Time and Effort in Your ERP Deployment
It is critical to set realistic expectations and forecast the ROI benefits. Estimate the project's time, cost, and effort by consulting an expert, preferably not the ERP vendor, as their estimates may not be entirely accurate for their benefit.
Predicting ERP Cost
Costs associated with ERP, such as licenses and hardware, are easily quantifiable. Apart from these fees, additional expenses must be addressed and evaluated. They include subscription fees for SaaS, consulting, maintenance, and user fees.
Consider the following questions:
How you will implement your solution: Cloud or On-Premise?
How many users are required?
What equipment do you require to operate your business?
What implementation and training requirements do you have?
Calculating these expenditures may take considerable time. Mentioned below is the list of costs that can be estimated prior to investing:
Out-of-the-box System Price
Many business owners believe that this ERP cost is straightforward to determine because it is based on the vendor's quote. That, however, depends upon the modules and deployment options required in your business.
License Fees – on Premise Vs. SAAS
On-premise ERP software runs on your company's servers. This incurs a one-time license charge. On-premise deployments need organizations to maintain their servers to assure software functionality both in the present and future. It is therefore important to factor in these costs. Licenses are “repurchased” every five years, which is another cost to consider.
Cloud ERP SaaS is hosted remotely on a third-party server and is accessible online. You must pay a monthly subscription fee until you stop using the system. Updates to the ERP system are free.
Consultancy Costs and Vendor Implementation Fees
A consultant's price must be considered if you hire one. To minimize future troubles and costs, it is vital to identify the actions and timeframes they will accomplish.
ERP consultants provide implementation services such as data migration, project management, and system customization. Some consultants charge extra for these services, so be careful to ask how their pricing operates.
Your servers and machines should meet the vendor's minimal requirements. You may need to update your equipment to support the ERP deployment, which will affect your ROI calculations.
Maintenance expenses should include IT labor, extra server expenditures, and other departmental charges. Also, the ERP vendor may charge an annual maintenance fee to upgrade to new technology.
Training your employees on the new ERP system is critical to its efficiency. Training takes time and money. It will depend on how many employees need to be trained, how difficult the processes are to learn, and whether you need to engage extra trainers or managers to help speed up new production processes.
The budget should never be exceeded; otherwise, the ROI will suffer.
A manufacturing ERP system is an integral part of any modern manufacturing organization. It helps your business in multiple ways to accelerate operations and business processes. Always conduct a thorough analysis of why you are looking out for ERP solutions and how they will help your businesses in becoming more productive than it is now.
The ROI for manufacturing ERP is calculated by comparing the anticipated cost of ERP to the expected benefits (direct and indirect cost savings) of installing the ERP system. ROI is computed by adding the predicted ERP returns and dividing by the ERP TCO (Total Cost of Ownership); the resulting quotient is the ERP ROI.
What is ERP used for in production?
Manufacturing ERP is a centralized approach to managing production and payroll activities. ERP improves operational efficiency by providing unprecedented visibility, coordination, and management across a company's many activities.
What are the types of ERP?
There are three main types of ERP systems, each with varying deployment models. ERP systems can be cloud-based, on-premises, or hybrid.
How long does it take for an ERP investment to pay off?
A typical project can take between 12 and 24 months to complete, depending on the scope and complexity of the work.
Article | February 22, 2022
The integration of cutting-edge technologies into the manufacturing industry has transformed the whole economy and accelerated the pace of all operations. Cloud computing for manufacturing is a type of technology that enables businesses to gain visibility, scalability, mobility, security, and improved collaboration, among other benefits. Seeing the benefits, many small and large players in the manufacturing business have embraced cloud computing.
“Cloud computing is not only the future of computing, but the present and the entire past of computing.”
– Larry Ellison, co-founder, executive chairman, CTO, and former CEO of Oracle Corporation.
According to IDC research, the manufacturing industry is the biggest player in cloud computing solutions, with an estimated spending of $19 billion. Additionally, Market Research Future projects that the cloud manufacturing market will reach a value of USD 121.72 billion by 2026. As a result, we may predict that manufacturing cloud computing has a long way to go in the industry.
In this article, we will look at some of the key cloud manufacturing applications and case studies of three US-based manufacturing businesses that used manufacturing cloud software ERP.
Applications for Manufacturing Cloud Computing
Cloud technology's comprehensive nature makes it an ideal solution for the challenges of marketing campaigns. Manufacturers leverage cloud-based applications to help them plan, execute, and manage marketing initiatives. Manufacturers can also look at production and sales data to see how well their campaign is working.
Product Planning and Development
Product planning and development are closely linked in manufacturing. Manufacturers can get their businesses ready for full production by integrating product planning and development information with supply chain data and communications. Comprehensive integration enables products to move a lot faster from notion to engineering, from prototype to small-scale production, and eventually to full-scale production and shipping.
Production and Stock Tracking
Once production begins, cloud technology may assist in the manufacturing and stock management of products. Businesses can use enterprise resource planning (ERP) software to match production levels to available inventory and sales. Pricing quotations, order intake, and client requests can all be managed using the ERP software. Using a standard product to keep an eye on these things reduces the time it takes to get an order.
Manufacturers rarely maintain the same level of production throughout the year for all products. They can use cloud-based tools to keep track of when to modify production to meet changing market demands. These software solutions ensure that manufacturers have the necessary raw materials on hand by making communication easier across the supply chain. This helps them easily adjust their orders to accommodate future productivity levels.
Three Case Studies of Cloud Computing in Manufacturing
Ralco Industries Leveraged Cloud to Cut Its Inventory by 15%
Ralco Industries is a producer and supplier of automotive components that specializes in precision-welded assembly and prototypes. To overcome the challenges of their business growth, the industrialists moved to manufacturing software cloud ERP and saved some money in the process. There was a lot of inefficiency, quality issues, excessive expediting prices, and wasted time due to inaccurate inventory and many unconnected systems in the past. Moving to a single integrated cloud ERP software system helped Ralco cut inventory on hand by 15%, scrap by more than 60%. It helped Ralco save money on premium freight by more than 20% and save almost $100 on each purchase order that was processed.
Avon Gear Improved Inventory Accuracy and Grew by 20% Yearly
Avon Gear Company, a maker of precision-machined components and subassemblies for heavy industrial equipment, was looking for an ERP system that would integrate data across the organization. The company chose a cloud-based manufacturing ERP to manage and record production activity, inventory status changes, receiving, shipping, and other plant-floor data. Consequently, Avon Gear's inventory accuracy has increased, and the company's growth rate has gone up by an average of 20% each year.
Wolverine Improved First-pass Quality by 15-20% Using Cloud
An automobile brake system technology firm, Wolverine Advanced Materials, found that its manual methods were not sustainable, especially when it came to supporting fast development. To grow and embrace lean manufacturing, the firm chose cloud ERP, which enabled it to properly assess cost and profitability by part. Using manufacturing cloud software, ERP, the company's factory floor workers can see all client orders and conveniently categorize them by material so that they can better manage their schedules. This has resulted in increased production and cost savings for Wolverine. Also, overtime was cut by 60%, while first-pass quality increased by 15% to 20%.
For manufacturers, cloud computing is a game changer. Manufacturing companies must deal with a lot of different sites and supply chains, which requires the use of large, complex database applications.
The Cloud computing for manufacturing is expediting industrial operations and overall business decisions in the manufacturing industry. Cloud computing enables industrial organizations to improve visibility across large fleets of facilities. It also contributes to standardization by synchronizing and supplying data for new forms of analytics. Supply chain management becomes more effective and product development gets easier with cloud computing. So, instead of debating whether to use cloud computing, take action and use cloud computing in your business.
What is cloud computing in manufacturing industry?
Cloud computing refers to the on-demand provision of IT resources over the internet. Instead of buying, running, and maintaining physical data centers and servers, you can use a cloud service. This approach would help you get computing power, storage, and databases when you need them, rather than buying and running your own.
How does cloud computing help the manufacturing industry?
Cloud-based solutions are more rapidly deployed than traditional systems, which enables firms to stay current with new innovations. Also, they are easier to change and grow, and they have the potential to make resellers more likely to use them.
Why cloud computing vital to modern manufacturing?
Cloud computing impacts all aspects of manufacturing. It enables manufacturers to see and control all manufacturing data and take informed production decisions. This is the reason why it is vital to modern manufacturing.
Article | November 23, 2021
Having recently returned from Uganda, had the pleasure of being introduced by Bernard Munyanziza of Nziza Hospitality to Gilbert Atuhire. He is the Managing Director at Value Addition Microfinance Ltd. which provides micro loans to producers and manufacturers.
Atuhire is an attorney by training, however his ability to articulate the core values of Lean Six Sigma and continuous process improvement were abundantly clear. The Kampala, Uganda offices are located on Parliamentary Avenue and Dewinton Rise. This central location allows direct access to industrial projects.