Managing Start-Ups: Outsourcing Your Manufacturing

I get asked all the time by entrepreneurs about how best to manage outsourced manufacturing arrangements. Here are a few tips to help you be more successful:

1. Hire the right in-house professionals--Often, companies outsource because they don't have the expertise to make the product. Fine, and you better have a team in-house that can manage outsourced operations or you are likely to be plagued with quality, delivery, and cost overruns. If you can't afford a full-time person, bring in an operations/engineering consultant to fill the void.
2. Use a local outsourcer initially--many of my calls with entrepreneurs start with the phrase, 'I want to outsource to China'. Great, perhaps in a few years when you understand your customer's needs and how to produce the actual product. Use a local outsourcer, if available. Perhaps a bit more expensive, but you will be able to learn how to manage the production process before you move it thousands of miles/many flying hours away.
3. Choose an outsourcer that can scale--too often, entrepreneurs choose a company that may be excellent at small batch operations, but cannot scale as production ramps. Nothing is more frustrating than to get a big order, only to have the outsourcer tell you that they can fit you into the schedule in two months.
4. Consider multiple suppliers--even if your outsourcer can scale, consider having more than one provider to avoid production issues, especially with a high growth start up. It may be more complex to manage and a bit more expensive, but beats missing sales opportunities.The same logic applies to parts and component supplier...more is better in a high growth world, and the lack of a two cent part from a single-source provider can shut down your production line.
5. Invest in in-house operations management technology--outsourcers usually can provide product design/production management technologies as part of their service, but web-based solutions are fairly inexpensive and assure that you have control over your own data.
6. Consider having an on-site manager at the outsourcer--having an employee spend part or full time at the outsourcer can help solve issues before they become problems.

There are many more pitfalls to watch out for, but these ought to help you get a good start on developing an effective outsourced manufacturing program for your start up.