Tips from Contract Manufacturers for Entrepreneurs
Prep work you can do to increase your chances of signing a deal
Getting ready to go to market with your brilliant idea is exciting. One of the most important steps in your new venture is finding a contract manufacturer who can make your product well. By doing some homework ahead of time, you can boost your chances of securing a signed deal with someone who’s right for you. Check out this advice we’ve gathered from our manufacturing partners.
What to consider, what to ask
- Climate consciousness—What environmental/sustainability compliance do you require? If you’re an entrepreneur in climate technology, you may want to work with partners who have the same earth-friendly priorities as you. For instance, contract manufacturers with whom Scale for ClimateTech communicates in Upstate New York typically source more than 90 percent of their energy from renewable resources—from hydroelectric to nuclear power.
- Stage of development—Are you at the concept phase? Prototype? Alpha or Beta build? Make sure your potential contract manufacturer has the capability to see you through based on what stage of development you’re in. If you’re pretty far along in product development, that means you’ve already figured out a lot of your processes and requirements—as well as your Intellectual Property (IP). Are you ready for production, or do you need support with software or hardware design? Some contract manufacturers welcome early ideas that need some help being developed—and talking to them may garner free advice and lower costs down the road.
- Patent status—Is your product patented? Can it be? Contract manufacturers will be looking for something new and unique to produce. That means it’s patentable. Similarly, do you have a Non-Disclosure Agreement (NDA) ready for your partners to sign to protect your IP?
- Supply chains—What kind of issues could come up in your production related to supply chains? In recent years, supply chains have struggled and contract manufacturers will be thinking about potential snags.
- Future outlook—What’s the difference between your short-term and long-term goals? This could have an impact on whether or not a contract manufacturer considers working with. For instance, if you anticipate reaching a much higher volume within a few years, they might be more interested than if you envision remaining at a lower-volume production. Talk to contract manufacturers about their capabilities in terms of scale. Some businesses work at such high volume that they might not consider a customer who only needs low-volume support. Look for one who can meet your volume needs—and offer you the attention you deserve.
- Money—Do you have adequate funding to keep your startup costs fueled for production? Contract manufacturers will want to make sure they understand the risks of doing business with you early.
Know your production process
Be prepared to describe the key aspects of producing your product, including materials and parameters, so potential partners can assess if you might be a good fit. See more about the Critical Documents you should have prepared before you talk to a contract manufacturer. Here are some best practices for two of those documents.
- Bill of Material (BOM) best practices—One of the critical documents you’ll need to prepare when shopping for a contract manufacturer is your Bill of Materials, or BOM. As you build that document, there are some important things to keep in mind:
- Does your BOM include custom-made parts as well as those purchased from suppliers?
- How much of the raw materials involved in production will be lost to waste?
- Is your ultimate unit cost economically feasible for your manufacturer?
- What are the total costs in your BOM?
- What is the most expensive part of your BOM? How can you drive down costs for this part?
- Bill of Process (BOP) best practices—Similarly, your Bill of Process, or BOP, is a critical document to share with potential contract manufacturers, and there are some key considerations to help your BOP shine.
- Make sure it includes the same list of materials as your BOM
- Design your BOP to track precisely with the product itself
- Follow best practices around Design for Assembly, or DFA, to minimize costs like labor and material handling, as well as assembly time
- The materials, equipement, and labor requirements described in your BOP help estimate the cost for each step in assembly. What’s the most expensive step in that assembly?
- What is the total cost of all of the steps in assembly?
- As with your BOM, is the unit cost for assembly ecnonomically feasible for a contract manufacturer?
The more you prepare before approaching contract manufacturers, the better your shot at finding the right one—and getting a “yes” from them.