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11 Steps for Selecting a Contract Manufacturer

Selecting the right Contract Manufacturer (CM) is the most important manufacturing decision you’ll make. It is critical to your success and you get one opportunity to do it right.  Here’s an overview of how to approach the request for quote process.

1) Ask for recommendations

Talk with companies in your trusted network who have manufacturing experience to see what factories they have had a good experience with in the past.

2) Make a list

Use the information you get from your conversations with peers to generate a differentiated list of 5-10 CMs.

3) Create an RFQ

The Request for Quote package (RFQ) provides the CM with sufficient info to understand the product and provide a quote for the cost of goods sold (COGS), tooling, schedule, etc.  There is always a balancing act, as you don’t want to provide so much info that your IP is overly exposed.

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4) Provide the right details in your RFQ

Overview (Word Doc)

  • Team overview
  • Funding
  • Product description
  • Status
  • Pending work
  • Factory selection criteria

BOM (Excel Doc)

  • Canonical format
  • Transparent and Formula Driven
  • Separate Std, Special and Consigned Margins
  • Include all costs to Ex-Factory
  • Fill in the blanks format

Schedule

  • Ganttt chart (Cloud)
  • Fill in the blanks format

5) Narrow down your list

Select around 3 to 5 factories based on your product category.

6) Get NDAs in place and release the RFQ

7) Visit each factory

The best time to visit is roughly one week after sending the RFQ. They have had a chance to review the documents and create questions.

8) Talk to references

Ask the CMs for intros to their customers to reference check.

9) Create a CM Decision Matrix

Base your decision matrix on the following categories:

  • Margins (Std, Special, Consigned)
  • Labor
  • Pareto of the top 5 most expensive components
  • Schedule
  • Fit criteria

10) Negotiate with the finalists

Narrow your list down to the top 2 to 3 CMs and negotiate the biggest line items.

11) Select the winner

After picking a CM, be sure to leave the others on good terms.

And with that, you are officially on the road to pre-production!

 

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