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Full Service Contract Manufacturing ( "CM" )
Tailored toward rackmount product development and manufacturing
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If it takes 30min - 1hr to build your company's widgets, why does it costs $ 100 each or $500 each by the time it ships out the door to arrive at your Customer's receiving dock ?
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- Typically one assumes a entry level PC_Tech at $20/hr ( $ 40K/yr ) doing the assembly of your system and one usually forgets all the rest of the hidden and required overhead costs to build and ship the Company's widgets
- Everything above and beyond the "1hr or 1day of pc-assembly work", you or the inhouse staff didn't want to do, is the negotiable value added and overhead of the outside Contract Manufacturer
- Other common CM functions can include product management and inventory control, purchasing dept, chassis designs, new product development, pcb-design-assembly-and-testing
software duplication, hardware cloning, EMI/CE testing and assorted other engineeringm, product development and hardware manufacturing tasks
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| "Contract Manufacturer" ( CM ) Selection Criteria
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- What is the CM's primary business ?
- are they a typical pc-parts distributor providing CM services
- are they a typical mail order system house providing off the shelf systems
- are they a MS windows CM that's providing linux-based servers
- are they ISO-900x certified
- Terms, Conditions, Restrictions, Documentation Requirements and Deposits
- your typical CM will have a 25-page or 200-page "CM Agreement" of services they'll provide and lots of disclaimers and adjustments
- how long does it take to get a system out to the customer
- What happens when the CM misses their scheduled delivery deadlines
- What happens when you inject a special order or 100 units
- What happens when you are overstocked and want to skip next months build cycle of 100 systems
- Who pays for returned items and mistakes and carelessness
- it costs at least 4x ( in just hardware/assembly costs ) to rebuild and replace the 1 "bad" system excluding all other costs
- Custom Chassis/Product Development Costs
- Linux-1U.net/Costs
- New Product develop, design
- Staff meetings, concept costs, marketing costs
- Vendor Selections, prototype and production costs
- Costs of delayed and missed schedules
- testing, qa, qc, reliability, performance, repeatability, durability
- EMI/FCC/CE agency certification testing
- System deployement, updates and field service support costs
- Parts Dept, Purchasing Dept, Parts Ordering, Receiving
- Is the CM solely responsible for "vendor selection"
( you might not want to buy certain manufacturers parts from certain distributors/sources )
- Can the CM pre-pay for all of your parts you need to keep in inventory
- Can you buy a full pallet/batch of identically manufactured parts vs different batches of production ( it affects reliability and repeatability )
- Can the CM get the cpu/motherboards/disks/memory that other CMs can't get thru their sources
- You will need to keep enough inventory for building and shipping systems for at least 2x - 2.5x the longest lead time item
( 4 week lead time implies 8-10 weeks of inventory on the your shelf )
- You should always have at least 2 or 3 different second sources for the same part, especially for 2nd sources of things like "Intel CPUs"
- Warehousing, Parts Inventory Manangement
- if you have too much inventory, can you skip the next scheduled deliveries without penalties
- Who has access to the restricted areas
( certain items tend to disappear w/o a trace )
- is everything serialized and bar coded and tracked in inventory
- which distributor provided these set of parts
- which customers received "this batch" of parts
- What is the "kitting process"
( checking stuff out to build systems from the kit )
- When does the warranty/return policy expire
- you dont want to be holding 1000 pcs of something you cant use
- you dont want to be holding 1000 pcs of a bad batch of parts you didn't test yet
- What do you do with excess inventory of obsolete parts and obsolete systems
- Assembly
- The infamous, "it only takes 1hr to build stuff"
- if the $20/hr PC tech builds it wrong, do you get credit for building it 3x
- build the wrong system by accident (sometimes not by accident)
- Figure out what went wrong and undo the original system
- rebuild the real system the way it was supposed to be done
- Testing
- Testing should be 100% automated ...
humans tend to skip over problems due to repeatative boredom
- All test result details should be logged .. NOT just "ok, it passed"
- Automated tests for normal operations
- Automated tests for abnormal operations and non-standard cases
- There should be a test for each critical function of the widget
- There should be multiple tests for known problems
- All tests should be on the "test cdrom" to assure uniform testing, logging and compliance
- Debugging, QA and QC
- How long do they try to figure out what's wrong before they throw away (set aside) the non-working item/systems
- NEVER throw anything away .. double check the suspect bad parts
- get it into a repeatable failure mode
- do your best to find out why its bad
- Find out where you got the bad parts from
- Debugging should be done by yourself, NOT the CM
- What are the processes, proceedures for "QA" vs "QC"
- Packaging
- What packaging materials to use
- which foam to use, what shape
- which cardboard vendor to use
- what kind of cardboard to use
- what kind of indentifying marks
- corp logo
- FCC/CE logo
- weight, height, humidtity, temperature, this-side-up markings
- what kind of packaging tape to seal your widgets
- bulk or system shipping vs individual retail package shipping
- does the packaging/insulation/isolation pass the 500-lb gorrilla ( express mail service ) drop or throw test
- Shipping and Inventory back-tracking
- bar coded labels for shipping and tracking
- interface for updating "shipped status" back to the inventory control system
- what happens when the "express service" delivers to the wrong address
- what happens when the "express service" does NOT do "best effort" to deliver the customer
- do they "drop ship" for you
- Return Merchandise, RMA
- how do you confirm the reason for why they are returning the item BEFORE its returned
( it's usually just a user/operator error.. not the system )
- how long before the "bad system" is replaced by a new one
- how do they get a RMA number
- what happens if they send it back without a RMA number
- what happens when they ship it back to you priority next day 8am billable to you
- what happens when pieces are NOT returned or things have be swapped out and a different part is returned in its place
- when and why do you resend out returned system
- who does the customer call for a bad or broken system upon arrival
- who pays for shipping back to you and than back out to the customer
- who pays or the replacement system
- does the return item go back to QA/QC for failure analysis
- Warranty and Replacement Parts for Repair
- How long before you can get a warrantied replacement part
- Some manufacturers have a replacement part warranty,
so you have your replacement before you return the broken item
- Most manufacturers have some kind of warranty
- Chargebacks
- MasterCard/VISA/Amex have a chargeback system, who pays for those credit card charges on returned items
- What happens when you cancel your PO or skip a scheduled deliveries
- Field Service
- What is the turn around time from when the customer called with a problem
- 1-2 hr turn around
- 2-4 hr turn around
- 4-8 hr turn around
- 8-24 hr turn around
- how do you know what version they have
- how do you debug a system out in the field ( remember the "test cdrom" )
- how do you fix a system out in the field
- do you have spare parts for their system
- how much does it costs to hop on a plane tommorrow to fix a problem on the other side of the country/world
- Insurance
- what happens when your warehouse catches fire or a victim of major theft
- what happens when your delivery truck gets into a car accident
- what happens when the widgets was shipped, "signed for and received" but your customer never got it
- are you listed as co-insured on their liability and fire, comp insurance policies
- Salaries, management, meetings, status
- What happens to missed deliveries or non-functioning systems delivered to your customers
( your most expensive expense )
- salaries, management, status, vendor selections, inventory control adds significant costs to the entire contract manufacturing processes and proceedures
( these variable costs are the 2nd most expensive costs )
- is the CM's main office local to you
- do they have an office in the same cities as your major customers around the world
- Office Building and Other Overhead
- large fancy ( unoccupied ) office bldgs implies large flat monthly overhead costs
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