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How Third-Party Manufacturing Enables Zero Risk Business

The manufacturing industry is witnessing one of the most turbulent times in history, thanks to the impact of Covid-19. And it will last. Organisations are struggling to endure volatility in the supply chain and inventory.

So, is there any silver lining in these times? There is. The brightest light at the end of the tunnel comes from the contract manufacturing industry.

Contract or third-party manufacturers are helping brands play a positive-sum game. How? They cater to every manufacturing pain point, starting from R&D, product development, and rapid production of existing offerings.

As a result, many businesses have benefited just by cashing in pent-up demand for the last two years. In this article, you will see what the least applied methods to make third-party manufacturing zero-risk are.

Why Is Modern Contract Manufacturing Safer than Ever?

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It is a no-brainer, modern-day contract manufacturing is better positioned than ever for a safe and effective business. After reeling from the pandemic setbacks, contract manufacturing will play an increasingly crucial role, offering enterprises a cost-effective, secure, and scalable alternative.

But let’s address the elephant in the room: despite all the positives, why are many brands reluctant to work with any CM? 

The most plausible explanation is, brands fear potential mishandling of their intellectual properties. In addition, they fear a third-party manufacturer might destroy their brand equity by supplying sub-par products.

Of course, all the fears are legit, but let’s assure you, contract manufacturing is no longer a gamble. Yes, you DO risk a significant portion of your business (brand equity, IPs, and Direct Control) when outsourcing manufacturing to third-party entities. But let’s tell you, why is that not a risk?

Organisations turned to contract manufacturers during the pandemic to help them satisfy variable demand, react to new possibilities, and keep their operations running.

As the world heads back to normalcy, getting back to the efficiency of the pre-pandemic level is still a challenge, especially for small to medium-sized enterprises. Let’s take a look at two significant ways how contract manufacturing is helping companies face post-pandemic challenges: 

1. Stable Workforce 

The disruption caused by Covid-19 will continue to affect the labour market. As a result, employees are likely to miss work in regular succession. That’s when CMs can provide you with a stable workforce with a higher degree of flexibility.

Running operations with Covid-19 protocols is an additional burden, which directly increases the cost of production. In times when the consumer demand is highly unpredictable, you can exterminate all the potential staffing challenges working with contract manufacturers.

2. Scalability in Times of Uncertainty

It is given that the times are not feasible for taking adventurous risks. However, as an organisation, you have to keep capitalising on emerging opportunities and scale your business.

Services of contract manufacturing allow you to scale at minimal risk. With CM, you can scale up or scale down production at your convenience, aligning with the market’s response.

Besides the benefits mentioned above, you can also take advantage of CMs expertise and high-end manufacturing infrastructure. And make way for new opportunities within your organisation.

Methods of Risk Mitigation for Contract Manufacturing 

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Now that you have an idea about why modern contract manufacturing is a safe bet, have a look at the successful methods of risk mitigation:

Enterprise Assessment 

Your journey should start with enterprise assessment. Comprehensive assessment of the health and performance of a contract manufacturing partner is a prerequisite for every brand outsourcing manufacturing.

Unless you know where your potential partner stands (in a segment as crucial as manufacturing,) you cannot narrow down your options. You have to do it for every organisation in consideration.

Health checks are essential. The best way to perform these health checks is to have a short and crisp checklist. Filtering your potential manufacturing partner through the following assessments places you in a great position to make the right call. The checklist we recommend is as follows, tick it in the order you want:

  • Go through the financial standings of the company
  • Have a detailed review of their past clients, reach out to them and ask for their experiences with the manufacturer
  • Understand the technology extended enterprise is using
  • Collect quality information from your sources
  • Try to understand the integrity of the company with in-person meetings

Centralisation of Risk Management 

This method of risk mitigation is for when you are already in a partnership with a CM. In this stage, you should direct all your efforts towards the centralisation of risk management.

Third-party risk management is easier under centralised supervision. Dispersed responsibility leads to passing the ownership back to one another in the team.

Have a dedicated team that looks after third-party operations; and prepares a stable communication channel. State clear objectives to the team give them full ownership of the role.

Also, when you have to make changes to the team responsible for coordination with third parties, don’t make blanket changes. Dramatic changes in executive leadership disturb the flow of communication, and some CMs might take advantage of the same.

Performance Monitoring 

The exercise of auditing past numbers of an extended organisation is good. But once you are already in partnership with a contract manufacturer, you should base auditing and monitoring on performance.

The team looking after third-party risk management should come with the mechanism of performance tracking and incident tracking. And further, supplement the data with the actual value your organisation is receiving from the partnership.

The activity mentioned above will cut the clutter and present an accurate picture of the health of the partnership with your CM. As actionable points, Identify the loopholes, and go to the negotiating table with your CM and state your objectives clearly.

How can Oakter help?

The three-tier third-party risk management strategy discussed above is good enough to do zero-risk profitable business with contract manufacturing if implemented well.

If you’re looking to enter a sustainable, zero-risk innovative electronic business, Oakter can help. The company produces quality Smart home devices, along with products of network infrastructure.

Oakter has experience working with electronics giants like Sony, Schneider, and many more. The company takes pride in offering quality at globally competitive prices. To learn more about the company’s services, click here.

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