What is in this article?:
Introducing a new product into manufacturing is never an easy task, especially when using an outsourced supplier’s manufacturing. To help ensure a successful launch:
- Complete the design and documentation
- Get your approved vendor list in order
- Develop a test plan
- Define your relationship with your supplier in writing
Introducing a new product into manufacturing is never an easy task. Introducing that product into an outsourced supplier’s manufacturing adds another level of complexity. As a consultant, I am often asked to help clients get ready to launch new products, particularly if they have failed in the past. One of my recent clients – a start up in clean tech that I’ll call Example Energy – offers a case study of what’s needed before you are ready to launch at an outsourced supplier.
The first time I walked through the Example Energy factory, I was surprised to see two things. The first was all the in-house processes: plastics molding, electronics and cable assembly, machining, chemical formulation. Here was a low volume startup investing their limited capital in commonly available manufacturing capacity that was not core to their competence or differentiation. What were they thinking?
The second thing I saw was huge racks of inventory, most of it obsolete. When I asked about it, I found much of the inventory had been returned from a contract manufacturer they had tried to engage. The product had never worked right and the supplier relationship fell apart. Now the story started to add up: They had tried to move some of their manufacturing outside and it was a complete failure. They were stuck with inventory and forced to try to do much of their own work because their product was not ready to be moved.
The CFO of Example Energy was, naturally, eager to solve the problem. He knew that using outsourced manufacturing would help them manage working capital and provide access to capacity, technology and manufacturing locations that a startup could never build on its own. “We are working on our next generation product,” he told me. “Can we start transferring to an outsourced manufacturer again?”
“Steve?!?” I said, because that was his name, and because my tone of bewilderment warranted three punctuation marks. “Did you learn from last time? Let me explain what went wrong, and what you still need to do to be ready…”
Can I see Your Papers? Complete the Design and Documentation. Example Energy’s biggest mistake was trying to launch a product with a design that wasn’t fully baked. Design tweaks were still being made. Documentation was not fully released. Product performance was not fully proven. Example Energy had a mistaken belief that the outsourced manufacturer would easily roll with the changes and even fill in some of the blanks.
“When you outsource manufacturing,” I told Steve, “you have to know what you are asking them to build. The supplier can’t build an idea or an expectation. The supplier builds to your specifications.”
“Look,” said Steve, “we’re still a startup. We need suppliers that can help us develop the product so it can ramp up. The contract manufacturer’s own slideware said they offer product design, DFM, prototyping and NPI services. Can’t we give them a preliminary design to start working on?”