What Does Full-Service Contract Manufacturing Mean Anyway?

Full-service contract manufacturers are like a combination of a traditional contract manufacturer and a third-party logistics provider (3PL). By integrating procurement, assembly and distribution, contract manufacturers like RIS offer actual “one-stop shopping” to OEMs, which frees them from the other costs associated with keeping these functions in-house, like capital investment and personnel.

Besides cost savings, the other significant advantage of partnering with a full-service contract manufacturer is the much shorter lead times made possible by keeping all these processes under one roof.

At RIS, we have an extensive supplier network which we have already vetted that we utilize to source new parts for our customers’ products, negotiate lower prices on existing components and obtain shorter lead times.

Contract manufacturers also spare the OEMs they work with the overhead cost of activities like supplier review and qualification, first article inspection, ongoing material resource planning (MRP), conflict minerals compliance management and RoHS compliance management.

Once those parts arrive, the individual components need to be parceled out from inventory bins with the exact components & quantities of each and then placed into kits for use on the assembly line. Again, accuracy is critical here because an incorrect pull ticket, or an incorrect reading of a pull ticket, can bottleneck downstream production and wreak havoc with inventory management.

Full-service contract manufacturers have the benefit of having the whole production process take place in the same facility, which enables rare mishaps like these to be quickly caught and speedily rectified, resulting in less supply chain disruption and less risk to delivery dates.

Since full-service contract manufacturers also offer their services a la carte, combined in a convenient bundle, they can provide complete product assembly in addition to the more standard production of subassemblies, just like other contract manufacturers. The full-service variety, however, can pass along the cost savings of eliminating the costs of transporting material from the kitting area to the assembly floor and from the assembly floor to the distribution warehouse.

At RIS, we specialize in printed circuit board assembly, so our customers can always rest assured that we’re investing in the best, top-of-the-line surface mount technology (SMT).

By combining climate-controlled warehousing space with dropship capabilities, cross-docking and blind shipments, full-service contract manufacturers complete their turnkey outsourcing offerings. In addition, by handling the fulfillment of eCommerce, direct-to-consumer and retail orders, these firms provide OEMs with a critical capability at a scalable capacity and a competitive cost.

There are many aspects of contract manufacturing that OEMs can benefit from economically, including diagnostic equipment, floor space and technical personnel. Examples of some of these services are issuing and managing return material authorizations (RMAs), repair and maintenance operations performed on the returned products and extraction of still usable components & subassemblies from scrapped units.

Although reverse logistics is technically a product and customer support function, it requires the same skills, facilities and tools as manufacturing does, making it natural for full-service contract manufacturers to add this to their list of services.

Basically: Full Service = Fullest Value

For OEMs looking to free up resources and save money, contract manufacturers present a compelling value proposition when offering the above services individually. By consolidating all these workflows into a turnkey operation, full-service contract manufacturers enable their OEM customers to remain lean, nimble, focused and profitable.