19 Questions You Need to Ask Your Contract Manufacturer
You’ve had the same U.S. or Canadian contract manufacturer for a while. They’ve come through for you in the past. You’ve got a good working relationship. Communication channels are decent. There are no crossed wires. Any problems get dealt with in a timely manner before they become real issues. Production lead times are acceptable, as are delivery lead times. Quality is consistently excellent. You’re pleased with their customer service. Everything seems to be running smoothly, like a well oiled machine. Everyone is happy. Or so it seems.
Then you hear the words you don’t want to hear: “We’re transitioning our manufacturing to Mexico.”
Your relationship is about to get a whole lot more complex. Clearly your contract manufacturer is chasing lower operating costs south of the border, but are their savings going to translate into lower costs for you? You should expect to see at least a 10 percent reduction in costs. And, assuming those savings are in the cards, what about the hidden costs? Transitioning operations to Mexico might make sound business sense to your contract manufacturer, but is it right for you?
Whether this relationship has sunk, or whether it’s worth braving the stormy seas ahead, depends on you arming yourself with as much information as possible.
We’ve compiled a series of questions you’ll need to ask of your contract manufacturer to correctly assess if the pain of a transition to Mexico is worth the gain to you.
- What is the exact schedule of my part as it transitions to Mexico?
- When will my U.S./Canadian line shut down and restart in Mexico? How much overlap is there?
- Will there be U.S./Canadian manufacturing staff present in Mexico during the transition?
- Will the same production equipment be used?
- What is going to happen with production tooling? Will it be duplicated? If so, who will ensure that tooling replicas will form, fit and function the same?
- If production tooling is transitioned, what is the contingency for lost or damaged tooling? Who pays for loss and damage?
- If I own some tooling, how is asset management being transitioned?
- Who is on the transition team? How many people are exclusively assigned to me?
- How much safety/buffer stock will be accumulated to protect my deliveries?
- Will safety/buffer stock be warehoused in Mexico or the U.S./Canada? If in Mexico, how can I be assured of its safety and timeliness of delivery?
- How can I be assured that the same process controls are employed in Mexico?
- If the Work Instructions are in Spanish, how is translation being handled? Who will verify that the Spanish language version is the same as the English?
- If the Work Instructions remain in English, how can I be assured of the language competency of the Mexican labour?
- How many of the Mexican management are fluent in English? How many of the direct labour?
- What is the labour turnover of the facility in Mexico? How can I be assured of labour stability?
- What is the process for visiting the Mexican facility? How will I be granted access?
- Will production lead time be affected?
- Will delivery lead time be affected?
- What are the projected cost savings for undertaking this transition? What cost savings can I expect to see?
Is there light at the end of the transition tunnel, or has the relationship with your contract manufacturer run its course? Only you can answer that question by carefully weighing the pros and cons of transitioning contract manufacturing to Mexico, and how it relates to your business.
Is it a win-win situation for everyone involved, or is it your pain versus their gain?