Concerns: Outsourced Manufacturing for New Products

Concerns: Outsourced Manufacturing for New Products
Proficient Sourcing recommends potential suppliers to buyers interested in improving their supply chains.  On occasion we have been contacted to help source the manufacture of some or all of a new product.
This starts a chain of events where problems lurk at every turn.  Most of the new products fail; very few result in home runs.  Yet, the possibility exists to attract the job shop willing to take a chance.  There are some in our network, available for both metal and plastic needs.
There are suppliers who look forward to these opportunities, obviously with appropriate scrutiny.  We are certain most buyers do not enjoy such supplier searches, as it will probably consume lots of time and effort just to get started, let alone manage the ongoing project.
This is a very difficult circumstance for both sides.  The prospective supplier knows that in many cases there will be initial design changes, alterations in volume and ship dates for rollout, ultimate quantity foreseen by when, and all manner of potential changes to whatever the circumstances are for the initial relationship investigation.
And all that means revenue is on the distant horizon if at all.
Of interest, we have experienced some concern about the role of Proficient Sourcing in these matters.  Our role is to gather sufficient information to determine appropriate candidates, who we then contact to determine interest.  Over these conversations we will arrange for some compensation from the shop for those where we are not already in some agreement.
Once the shop or shops approve the “opportunity” they are connected to the buyer and assume the primary communication role.  We strongly believe buyers want to deal directly with the supplier rather than some middleman.  The shop also needs detailed technical information, so our role is to stay connected for problem solving, but out of the main conversations.  At the appropriate time the shop will quote the work; we are not involved in their pricing determination at all.  But we retain contact with both sides throughout the relationship as a helper wherever needed.
The potential supplier probably knows suppliers will have concerns about startup situations, and so what does the buyer expect the supplier candidate to do?  The supplier needs to protect against the investment of time and effort for changing requirements, not to mention the obvious likelihood of failure or disappointing results at any point.
If you are a buyer in this situation, we strongly recommend you and the supplier candidates thoroughly discuss start up experiences on both sides.  The buyer should be very confident there will be a smooth communication link with the supplier, because it will be needed often to discuss the changing circumstances almost certain to exist.
In any case, be very certain you, the buyer, have confidence in the supplier’s ability to achieve needed quantities (high and low), tolerances, and quality desired.  Get adequate evidence of this beforehand.  If you satisfy these things, your startup is likely to proceed without limitations from that supplier.
Whenever possible we strongly recommend the buyer, or buying entity’s representative, visit the prospective supplier.  There are a great many things an observant visitor can learn from such a visit.  Above all, the visitor and shop will get a very good feel for whether or not the relationship will work.
We have some experience helping buyers find suppliers for a new product startups.  So far the suppliers we have sourced have worked out well in time.  But if there is one consistent thing in the initial discussions it is optimism that this new product will be a big winner.  Needless to say, this has not been justified in all cases.  You can expect some skepticism on the part of potential suppliers, so be prepared deal with it.

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