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Subcontracting: What You Can Do To Do It Right |
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Written by Franta Shinsky
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Thursday, 25 September 2008 08:32 |
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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.
by FrantaShinsky
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.
There are many factors involved in subcontracting, three of which are cost, speed, and quality. Many businesses tend to focus on the bottom line, making cost the driving factor, which is not necessarily a surprise in todayas economy, but the fact is that ignoring the other two can lead a business into jeopardy.
There are companies available that can be subcontracted for almost all product lines. The downside to this, of course, is that these companies have made their business by accepting work from anyone who would subcontract to themiatheir knowledge of one companyas individual product is all but nonexistent. While there may be a complete set of specifications available, it is very unlikely that a company will be able to simply hand them off and expect anything of use to be delivered in return, especially if the product has any sort of complexity. The company hiring the subcontractor might be doing it because it is cheaper for the subcontractor to build the product than to do it themselves, but the fact that it is cheaper in no way means that the product will be better.
Communication is essential. This is true of no matter where your subcontractor is located. Of course, if you subcontract your manufacturing to countries where English is not the primary language, communication can become an even greater problem that exists simply across the corporate divide. It doesnt matter if the subcontractor is down the street or down the globe. A digital camera with a picture of the problem sent to the design engineer in the U.S. with the right answer can solve it faster than flying an engineering team down to the maquiladora. Nor does your particular product type change the basic principle.
Supporting the smaller firm to improve their internal communications can improve them, to the benefit of the larger one. If the firm is still mired in paper, you can introduce simple levels of computerization into the office. The company I used to work for worked with many small machine shops that had only recently introduced e-mail. Buying them Microsoft Outlook and giving simple lessons can help reap more than adequate expense for the investment.
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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