How to manage production outsourcing

Looking at the global manufacturing industry, it is difficult to find a manufacturing industry that produces all parts or raw materials and then processes or assembles them into products. With the continuous subdivision of industries or fields, the enhancement of specialization, the enrichment of products and the increase of development costs, enterprises are urged to find more effective methods. Outsourcing production is the result of correctly understanding this strategic change, and has gradually become a trend and fashion. The following is my knowledge about how to manage production outsourcing. Welcome to reading.

How to manage production outsourcing

The rationality and possibility of partial or total production outsourcing have been confirmed by practice. Different enterprises have adopted appropriate production outsourcing strategies according to their own characteristics, especially the rapid popularization in the semiconductor and electronic industries, which seems to give enterprises a brand-new sense of relaxation and open up ideas for the rapid expansion of many small and medium-sized high-tech enterprises, enabling them to grow rapidly. Generally speaking, production outsourcing is based on the following considerations: whether considering the scale of the enterprise, improving production efficiency, reducing production costs, and maintaining a reasonable return on capital investment, whether considering the requirements of the market for product listing cycle or large-scale production cycle, or considering responding to market demand quickly and building better business processes, outsourcing some or all production of enterprises can gain many benefits.

There is no doubt about the way of production outsourcing. The key lies in how enterprises manage production outsourcing. Because production outsourcing is far more complicated and difficult to grasp than the procurement of materials and spare parts, and because outsourcing has become an independent process, many basic data are no longer in the enterprise, which leads to a serious practical problem: how to regard production outsourcing as an independent process and still become a part of the overall process management of the enterprise, which will be the core of managing production outsourcing.

Due to the acceleration of market changes and many other reasons, more and more manufacturing enterprises adopt the make-to-order mode, which is more complicated and unpredictable than make to stock's mode. In addition, production outsourcing makes enterprises have to face the needs of customers together with contractors and strive to meet their needs. Customers (not end users) usually pay attention to the following aspects: product price, quantity, quality, delivery date and service. How to meet customers' expectations through effective production outsourcing management is the focus of this paper, because production outsourcing is not an end, but an effective means and resource utilization to better meet customers.

product price

Product price is directly or indirectly related to sales cost, design cost, raw material cost, manufacturing cost, transportation cost and management cost, and is related to the gross profit margin that enterprises need to achieve. If it is production outsourcing, enterprises are more concerned about the fluctuation of raw material costs. As for the contractor's manufacturing cost (or processing cost), enterprises and contractors will negotiate, but contractors often do not provide detailed production or processing costs. Enterprises should take measures in the following aspects to provide customers with competitive price advantages.

When selecting a contractor, we should not only pay attention to its equipment status and good technology, but also pay attention to the efficiency of its production management, so as to reduce the production or processing cost by selecting a good contractor.

For the procurement of materials related to production outsourcing, enterprises can adopt the mode of self-procurement or the mode that contractors are responsible for procurement. The former is in some trouble. Except for some core components, enterprises basically adopt the latter. The key is that the enterprise confirms the supplier and the purchase price, while the contractor is responsible for the purchase business. Enterprises need to pay close attention to the change of purchase price in time, so as to accurately grasp the fluctuation of direct cost and adjust sales strategy. In this way, enterprises need to share supplier information with contractors.

Because the design and sales of products are the responsibility of the enterprise itself, and these links can be well controlled within the enterprise, as for the transportation cost, if the products are transported by the enterprise itself, it is easier to calculate the freight, while if the products are transported directly from the contractor, it is difficult to settle with the standard rate, because the transportation methods are different, and the procedures such as customs declaration are different when transported to different regions, because the contractor is often responsible for the production of multiple enterprises. Many orders are processed together to save the contractor's cost, so it is difficult to calculate the actual freight of each batch of products to an enterprise separately, but after long-term cooperation, there is a relatively accurate calculation.

Production outsourcing means that enterprises can't pay attention to the manufacturing process and its changes at any time, such as the loss of raw materials and the use of alternative materials, which is also related to the product cost. If the contractor uses ERP system and provides some information about the production process to the enterprise, the enterprise can also be "controllable". Of course, the reputation of the contractor deserves attention first.

delivered quantity

In the process of pre-sale, the quantity and specifications of products required by customers are clearly required. If a contract is signed or an order is confirmed, the enterprise needs to deliver the corresponding products in time. Usually, the enterprise issues the production plan to the contractor, and the contractor arranges the production plan in his own way, and then provides the corresponding quantity and specifications of products according to the requirements of the enterprise. There seems to be no problem. How to manage the order if it changes in the production process? In the electronics and semiconductor industries, enterprises sign long-term contracts with contractors. In order to maintain long-term interests with customers, enterprises need to respond quickly to order changes to meet customer requirements, and strive to generate more orders, otherwise it will have chain side effects.

If the contractor produces some products from an order and the customer suddenly cancels the order, it will be very important for the enterprise to know the completed quantity at the first time and inform the contractor to stop producing the batch of products in time, otherwise it will directly increase the product inventory and occupy funds, and if these products need to be managed by the contractor, it will also increase the management cost, which will eventually be passed on to the enterprise cost; If the enterprise can directly grasp the relevant production information of the contractor, it can make adjustments immediately. On the one hand, it can be processed into products of other specifications to meet the needs of other customers quickly, and it can also be directly provided to other customers in need. This requires timely and accurate adjustment of all orders and production plans and transmission to the contractor in order to comprehensively consider reducing the losses caused by order cancellation;

If the customer adjusts the specifications of some orders and requires delivery according to the original delivery date, how should the enterprise face it? It is also necessary to comprehensively consider the material situation, the implementation of other orders, the completion situation and the process change. Although production is outsourced, the impact and results caused by changes in customer demand are borne by enterprises, so it is necessary to visualize the production outsourcing process and make timely decisions.

If the customer needs to increase the delivery quantity of the product on the basis of the original order, or temporarily insert the order, this is a scene that the enterprise hopes and worries about. If the enterprise does not grasp the information of the contractor or several contractors in time, even if it agrees to the customer's requirements, it will not be able to deliver the corresponding number of products at that time, which is also very embarrassing, at least "breaking faith with customers." Although the production is outsourced, if the contractor's production capacity and planning arrangement are grasped in time, although the enterprise's own production plan cannot be the same as the contractor's production plan, it can reduce many losses as an early forecast, because sometimes it is a loss for an enterprise to accept an order but fail to complete it.

Regarding the completion of product quantity and the handling of accidents, it is difficult to meet the requirements by relying on traditional information transmission channels. It is not difficult to solve this problem if the informatization construction of enterprises and contractors is relatively complete, or the application of ERP is basically in place. The contractor only needs to feed relevant information back to the enterprise's information system in time and simulate ERP within the enterprise. In fact, it can generally reflect the implementation of the contractor's production plan and other circumstances. Many of the following principles are basically similar. "Managing a factory without a factory" has become a reality. For many enterprises, it seems that everything will be all right as long as the demand is provided to the contractor, which is very irrational.

product quality

It is inconceivable that the product will lose its quality assurance. As the contractor is a professional manufacturer, there must be quite standardized and strict operating procedures and methods for product quality management. For some products, random inspection is enough, but for some products, all products must be inspected and there are professional equipment and procedures, such as chip products. The direct production time of the product is only tens of minutes, but it has to go through several inspections, and the serial number of each product corresponds to the inspection results. Now there is a question: How can the contractor's product quality control and test results become product quality assurance? If there is a quality problem, how can the enterprise track the batch?

As long as the contractor is familiar with the use and procedures of product testing equipment, he can make a commitment to the final delivery of products, which is also the commitment of enterprises to customers. This is often the overall test of processing technology and material quality, but the tracking of batch and serial number of products and the traceability of materials and components (parts) are the key and difficult points of production outsourcing management. Although the enterprise will outsource the production, it still needs to incorporate the contractor's production process information into the enterprise's own ERP system. As for how to incorporate, there are many solutions, which are not described in detail here, so that we can clearly know the corresponding relationship between product batches and material batches, know the whereabouts of products, and know the corresponding relationship between specific customers and products and core materials, which is very important for enterprises. If any batch of products have problems, enterprises can quickly track these customers and make a commitment to replace or repair products as soon as possible, so as to minimize the losses of customers and maintain the company's good reputation. At the same time, according to the traceability of materials, we can find out the batch, source and time of materials, as well as related work orders and personnel, and then analyze the specific reasons. If it's the supplier's problem, we can make compensation. If it is the contractor's production and processing problem, we can also negotiate to bear the loss. In short, we will analyze the cause and effect of this information. If enterprises do not master this information, they will be helpless and suffer losses in vain when encountering similar problems. More importantly, it will make customers lose confidence, which will be enormous.

Product delivery date

"The delivery time required by customers is getting shorter and shorter", which is the complaint of many enterprises. For enterprises that outsource production, the initiative seems to be in the hands of contractors, but it is still controllable to take some measures.

After the product design cycle is completed, the design plan (BOM) will be transformed into the production plan (BOM) as soon as possible. Professional contractors are better in this respect, and enterprises need not worry too much;

Enterprises sometimes provide core materials, or contractors are responsible for the procurement of all materials. Shortening the procurement lead time is an important part of the whole lead time. On the one hand, enterprises run their own MRP to give guidance and suggestions to customers' procurement, on the other hand, they help contractors negotiate with suppliers to change the procurement methods appropriately. For materials with long procurement cycle, suppliers can adopt "consignment" mode, which can effectively control the delivery time.

Before confirming the order, the enterprise can know the production plan and implementation status of the contractor relatively accurately according to the information feedback and information sharing results of the contractor, so that the order can be reasonably decomposed according to multiple deliveries and provided to customers, which not only ensures the delivery time, but also relieves the possible production pressure of the contractor and ensures the product quality;

The transportation cycle is usually a factor affecting the delivery date. If the contractor delivers the goods directly, in order to save costs, "LCL" may be adopted, but the transportation cycle is often artificially extended. Enterprises can coordinate with other aspects from the adjustment of rates, do their best to ensure timely delivery, and choose different logistics partners (air transport, railway, mail, automobile, sea transportation, etc.). ) according to different regions and different situations;

Enterprises often reach an agreement with contractors, either the whole production line belongs to the enterprise exclusively or according to the production time, and there is no formula in these aspects.

service

Services are divided into pre-sales service, in-sales service and after-sales service. In short, the more active, timely and accurate the information in the whole process, the better the efficiency and effect of the service will be!

The evaluation of manufacturing industry is no longer based on scale as before, but on rapid response, core competitiveness, professional level, profitability, etc. Especially when the world-class manufacturing industry fully considers higher management requirements and the coordination of the whole supply chain, and makes full use of virtual manufacturing to achieve higher profit returns, it has taken production outsourcing as a strategic layout. The management process of outsourcing and the mode of information sharing have been fully considered, but domestic enterprises still have the misunderstanding of "discussing heroes by scale". I hope that the rough discussion of production outsourcing management can produce value for enterprises to achieve breakthrough development and change.