Turning to Contract Manufacturing as an Engineering Startup

Startups can be an exhilarating ride.

If you enjoy designing new projects and helming new ideas, working at a startup can seem like a dream job come to life. There’s no bureaucracy to bog you down, no inflated egos in three piece suits to hamstring your creativity.

Agility is the name of the game. Creative solutions flow in by the hour: a hundred ways to rethink everyday problems, a thousand ways to implement product plans.

Eventually, hopefully, a single vision for a hardware solution is agreed upon, and now you’re ready to put your paper napkin idea into action.

Then it hits you. You’re not Tony Stark with the next big idea for an arc reactor; you’re a startup company with limited experience and limited manufacturing resources. Your company doesn’t have a high-end machine shop loaded with 5-axis CNC machines and the latest automated inspection equipment. Your office probably doesn’t even have an inexpensive 3-D printer yet.

Well. Damn.

Some harsh truth: without knowing how to navigate your way to a good manufacturer, your startup will be dead in the water before the year is out.

Fortunately, there are five basic steps I’ve outlined below to help you out.

5 THINGS TO CONSIDER WITH CONTRACT MANUFACTURERS

Because the contract manufacturer chosen by an engineering startup will play such a major role in a product’s development and time to market, there are a few key points to consider:

1. Determine what manufacturing processes to contract out

You can outsource every part of a project, but there’s a tradeoff: much of the vision will be lost when giving up control of production in all aspects.

Let’s say you’re building a small box with electronics inside. It turns out, your startup has a small mill that is able to make the housings out of aluminum, and you’ve successfully designed the PCB. Yay.

For a case like this, two examples of processes best suited for contract manufacturing would be anodizing and PCB fabrication. Sure, either of these processes could be done in-house with the right equipment, but are you prepared for the steep and often punishing learning curve of getting all the steps perfect?

And, more importantly, can you afford the costs of making mistakes? Because they will happen. I promise you.

Bottom line: picking a reliable CM for processes that might be out of your scope can save you time and money, but can also afford you the ability to make production fixes and get other expertise opinions.

Moreover, everything a startup saves in manufacturing costs through this planning can then be allocated to other useful places such as sales and marketing efforts.

2. Select a manufacturer based on their capabilities

While most CM’s are capable of fulfilling numerous needs, it’s okay to be selective based on your project requirements. Specialists are usually worth the extra effort, but sometimes you just get a better deal with more comprehensive manufacturers.

For example, you wouldn’t ask a machine shop to make your PCB just because they offer a suspiciously juicy discount, right? In this case, the distinction between the two processes should outweigh the benefit of saving some cash.

A less obvious example: are you better off sending these components to a CM that can make PCBs and anodize parts, or should you select CM’s that specialize in each?

A manufacturer’s specialization in a process typically indicates a higher level of quality provided. On the other hand, a broader spectrum of services will probably mean a lower overall cost of production. It’s up to you to decide which is more pertinent to your current project.

Like with any service a startup must rely upon, any and all production capabilities of  potential contract manufacturers should be vigorously researched and discussed before negotiation.

Just as startups frequently lack the machinery they need for production, not every manufacturing firm is equipped for every task. Directly getting in touch with contract manufacturers is a great way to see if they can supply what startups need in regards to project specifics.

3. Define the logistics of getting the product made

The number of resources (in this case we consider it CMs) included in a project will absolutely affect logistics. This means shipping costs, packaging, time spent moving products, and waiting for the components to arrive.

Keep in mind that if two separate CM’s are chosen, there will now be at least twice as many components to keep track of. If the idea is to get these components completed at a low price and as quickly as possible, then reviewing the roadmap and preparing for potential hindrances can be crucial when considering the logistics that affect production.

Account for the time that it will take for the CM to receive parts, set up the production lines, proceed with services provided, and package and return parts. There are many other factors and steps involved so consider adding additional allowance of time and funds, especially if staging production for prototype approval.

A method to deter any surprises here is to create a highly detailed roadmap for the project through collaboration with each CM. They know their own abilities best and will be able to help build a realistic overview for the flow of the project.

The CM will be happy to help with this to build a strong relationship. If they cannot provide this information, it might be a good idea to get a second opinion from another CM.

4. Properly communicate the requirements of the contract

Mistakes are bound to happen. You’re a startup, if you aren’t making mistakes you aren’t learning. But when said mistakes can be easily avoided, things get ugly. Fast.

To avoid the descent of order from unraveling your team, don’t leave results up to chance.

A good idea when a product goes into production is to order a small trial run. A respectable CM should be more than willing to perform a prototype run (for quality control) before proceeding with full production. Nobody likes wasting time or materials.

Take the extra diligence to fully define the steps and specifications in your contracts.

This document should be heavily scrutinized and cover every aspect of the work relationship. This includes the manufacturing project’s agreed upon quality conditions, the volume of units to be produced and purchased, price per unit development, the lead time in which everything must be completed by, and so on.

Of course, things do change unexpectedly, and manufacturing processes will sometimes sway from their original course. Such is life.

Still, contracts help ensure both parties involved will experience as few unpleasant surprises and sudden direction shifts as possible.

5. Anticipate changes to product design during the manufacturing process

A new product requires a hefty amount of R&D. Even in the early development phase, the research is not done. The requirements of production needs may dictate changes of the overall product.

No matter how prepared your startup is and how smoothly things may flow, turning to a CM is guaranteed to be a learning experience in the same way developing your product has been.

Whether you’re trying to implement a last minute design upgrade, or manufacturability dictates a design revision, it’s more than likely there will be at least a couple minor component modifications during the manufacturing stage.

While nobody hopes for the manufacturing process to go off course, the chance that they will must be accounted for.

This is something for engineering startups to work out with their contract manufacturers early in their relationship. Otherwise, both parties risk a stalled project and a potential legal upset if any disagreements on product development changes should arise.

AND REMEMBER, THEY’RE PEOPLE TOO

When a manufacturing order goes smoothly, and your hardware product arrives on time and within budget, everybody wins.

Preparation is key. CMs are people too, and their experience with you matters for future contracts. Building strong relationships is crucial in this business, and potential partners appreciate working with startups that are organized and communicative.

Cementing positive CM relationships early on will also set you apart from the plethora of clueless amateurs that flood TechCrunch Disrupt every year. Network orchestrators like Surcle specialize in facilitating relationships between CMs and startups, saving you time and headaches when shopping around for the right fit.

Looking for a CM within fifteen miles of your company? Check.

Do you prefer a CM that provides umbrella services under one roof? Check.

Have a low budget, and want expert negotiators on your end of the table? Check and check.

Navigating the waters on your own can be frustrating, time-consuming, and (worst of all) depleting on your resources. Surcle’s goal is to alleviate you of the burden of locating ideal CMs, leaving you more time to focus on managing your internal resources.

With over 1,800 contract manufacturers within the network, leveraging Surcle can give your startup the edge needed to bring your product to market. Faster.

For inquiries about our CM network, or any other services Surcle offers within the hardware development ecosystem, contact us today!

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