By Marissa Fayer, President, Fayer Consulting
Managing the relationship with your contract manufacturing (CM) partner is essential for both parties’ success. Supplier relationship management (SRM) is reliant on one word: Trust. The idiom “trust is a two-way street” is most pertinent within an OEM and CM relationship. Both sides must trust each other to achieve short and long-term success.
The previous article in this series discussed how to identify and pursue CMs with the characteristics best suited to your business. Here, we will discuss how manage the relationships with your selected partners, and a few industry best practices related to supplier relationship management.
First and foremost, OEM and CM relationships must be considered a partnership, rather than a simple operational transaction. Both sides must be “in it” for the long haul and understand that, while the relationship might have growing pains on both sides, the partnership should be mutually beneficial.
The best practice that trumps all other important factors is trust, and an OEM’s trust of its selected CM is the most important factor within this relationship. The CM was chosen from among several competitors during the initial selection process, indicating that it was chosen for a reason. A CM makes its living solely through manufacturing; that seems obvious, but one must consider that CMs don’t worry about next-generation products, acceptance in the marketplace, marketing tactics, investor reports, or high-level FDA reporting. They manufacture for a living… trust them to do their job. CMs and OEMs should be vested in each other for the long-term value, not simply the short-term fix.
Here are some of the best ways to manage that relationship:
- Coordinate oversight — Managerial diligence keeps both sides honest and the communication open. Quarterly business reviews (QBRs) should review the high-level trends, the rolling one-year plan, and any special information/trends/news related to the business as a whole or the market in which the device is used. Monthly metrics reviews should be jointly conducted by the quality and production teams to review specific deliverables, detailed metrics, and review trends.
- Share information — When business partners work together, all relevant information should be shared. Neither side can, or should have to, read each other’s minds, especially in the beginning of the relationship when full trust has yet be established. Information changes over time, as does each company’s internal decisions and politics. To ensure a long-term, mutually beneficial relationship, this information must be shared when appropriate, and sooner always is better than later.
- Strategize on joint cost-downs — As discussed in the previous article in this series, cost-downs are and will continue to be a prevailing theme driving OEMs’ directives to their CMs. Cost-downs are a shared responsibility within the partnership, but the majority of the burden is on the CM. Thus, OEMs must be receptive to suggestions regarding product design, material, or process changes that could reduce costs without affecting quality. The sharing of information and knowledge is critical to this process, as it is mutually beneficial for both sides to achieve their cost-down goals.
- Build peer-to-peer relationships — Relationships are forged through working together and sharing ideas. Camaraderie should be built at each of the functional levels, and occur either remotely or in person. In a world of virtual workplaces, human relationships are the differentiator between us and robots. Issues can be resolved more humanely and more quickly within a trusted relationship, benefiting both businesses.
- Understand the process — The OEM should understand how the product was manufactured in the past. If they don’t, they should at least understand that it will take time to re-engineer the product, which costs extra time and money if done improperly. If the OEM understands the process, the information should be transferred openly, with nothing omitted. Additionally, CMs must educate their clients on the method behind their transfer process, to ensure that all deliverables are met and each stage is completed successfully with the agreed-upon results.
- Acknowledge that initial production and ramp-up requirements take time — Recognition that production cannot reach 100 percent capacity on day one is key to the initial relationship management. Production ramp-up and efficiency occurs on a learning curve, which generally happens faster at a CM than in-house at an OEM — remember, CMs manufacture for a living. Furthermore, key subject matter experts from the OEM should be open to attending pre-production builds and qualification builds, establishing early the transfer of knowledge and priming each project launched for success.
- Let each side do their job — Both the OEM and the CM are experts in what they do, a scenario that is even more prevalent in this age of consolidation. The good ones are here to stay and are making a significant market impact, so let each one manage what they are good at: Allow the CMs to manage the process and the supply chain, and to make suggestions for growth and efficiency. This allows greater oversight and easier management of the process, especially related to cost and product delivery time.
The prevailing theme behind managing successful partner relationships, throughout this article and in general, is trust. Trust that you chose the right partner to grow your business, and then trust them to do their job. If the CM is successful, the OEM is successful, and vice versa. We live in a world with increasing demand for high-quality products and processes, and working together with a partner is a cost-effective and mutually beneficial method that allows both sides to excel in what they deliver.
The next article in this series will discuss how to scale up your offshore facility for more effective and engaged employees. Future articles will discuss how to give back to the community in which you and your partners work.
About The Author
Marissa Fayer is president of Fayer Consulting, a global consulting business helping small to midsize medical device companies reduce their costs and increase their profits. The firm specializes in manufacturing relocations, project management, high performing team development, and optimization of operations. Marissa Fayer has been working in the medical device industry for over 15 years with a focus on offshore operations and project management for complex multistage integration and implementation projects. Reach her at email@example.com and on Twitter @MKFayer.