What is Contract Assembly?

Contract Assembly is the process of outsourcing the assembly portion of the manufacturing process to a third party company who specializes in assembly to simplify your supply chain.

The Benefits of Hiring a Third Party Company to Outsource your Contract Assembly:

  1. Lowering Operation Costs: Keep your overhead cost low. Can you imagine keeping up with customer requirements while not having to invest in the equipment, space and labor. Leave it to the third party companies that already have the resources available to take this off your hands. By outsourcing your contract assembly you lower your overhead costs which allows you to better price your products and makes you more attractive than competition. Lowering your overhead costs while maintaining revenue also allows you to increase your profit margins.

Researchers say “In a business that is performing well, an overhead percentage that does not exceed 35% of total revenue is considered favourable. However, In the U.S. the average overhead rate is 52%.”

  • Reducing Labor Expenses: Imagine not having to invest the time and money into hiring, training and managing employees. When you outsource your assembly needs this third party company will take care of the hiring, training and managing of employees. When customer requirements drop you don’t have to worry about managing employee’s hours or the bad rep of laying off employees. When customer’s requirements increase you don’t have to worry about hiring more employees or using unreliable temp services. Most of these third party companies will quote your assembly project by piece rate where as you pay an employee hourly, so you are getting the best bang for your buck by outsourcing your assembly needs and this usually results in faster turnaround times.

Researchers say “The average cost to hire an employee is $4,129 with around 42 days to fill the position and can take 8-26 weeks for an employee to achieve full productivity. The employers cost are anywhere from 1.25 to 1.4 times higher than the employees base pay”

  • Hire TheExperts: The days of having to find the right candidate for your assembly positions are over. These third party companies invest the time into hiring and training the right people to take care of your assemblies. This allows you to get back to focusing on your core competencies and your value add supplier will continue to focus on their core competencies, your assemblies!

What should I look for when outsourcing my contract assembly?

There are many contract assembly companies out there, do your research first.

  1. Do they have any certifications?There are many different certifications out there. ISO is a common certification in the manufacturing industry. ISO9001 is a Quality Management System used by organizations to demonstrate their ability to consistently provide products and services that meet customer and regulatory requirements and to demonstrate continuous improvement.
  • Do they have a good track record?You are looking for a Value Add Supplier that will be manage free. Do they have measurable’s to track their success and progress?
  • Do they offer any other services?The goal is to keep your supply chain simple. Find a supplier you canutilize other services they offer such as warehousing, fulfillment, contract packaging orcontract kitting.

What types of companies outsource their contract assembly?

  1. Large Corporations such as Office Furniture Manufacturers, Automotive Suppliers, Medical Device Manufacturers, Marine Manufacturers, Consumer Goods Manufacturers who struggle with finding talent to fill these value add services or are at facility capacity and do not have the space for these non-core competencies
  • Small Businesses such as startup companies, inventors, engineering and design firms who do not want to invest in the infrastructure and overhead.

How do I begin to outsource my assembly?

Contact Encore for a free quote!

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