CONTRACT MANUFACTURING.

Contract Manufacturing



Contract Manufacturing.

Executive Summary

The main purpose of this paper is to understand public-sector contract manufacturing in US, to examine the linkage between contract manufacturing and the use of evaluation methodologies, and to identify issues that are critical to evaluating and managing contract manufacturing in public-sector organizations.

This paper will both provide a comprehensive description of current and past sector trends in contract manufacturing, and describe the challenges it poses to organizations before and after implementation of this new initiation. Organizations that are planning or are already in a contract manufacturing phase are required to implement changes carefully and assess their in-house capabilities prior to implementation of this venture. They also need to fully understand and apply the contract manufacturing investment evaluation and benefits realization processes. Several key issues for contract manufacturing will be identified in this study, like problems in evaluating, planning, and managing contract manufacturing, and human resource management during the transition phase. A few recommendations are then given to resolve the contract manufacturing issues that are impacting US organizations and their employees who are the backbone of our great nation. In addition, proven methodologies and a model are suggested with emphasis on how organizations can utilize them in the decision making process of choosing contract manufacturing, and then how to manage this initiation by following seven successful steps.

Introduction

Multinational corporations are utilizing contract manufacturing to drive down the cost of production through economies of scale. This allows hiring organization to obtain the needed parts or products without needing to own or operate a factory. However, this results in allowing corporations to transfer jobs to countries where workers earn low wages and have few or no protections at all. Contract Manufacturing is not something that can be considered overnight. It has become a major factor in today's competitive world to utilize advance technology by using cheap labor.

Managers in all organizations must now seek to achieve maximum competitiveness and performance improvements in all parts of business functions. However, contract manufacturing is just one possible solution to the competiveness problem and any possible solution must be compared to other options because all of these theoretical solutions fail more often in practice than in a proposal.

In order to stay ahead in a competitive business environment, organizations have to keep extending their customer base as far as possible or until they achieve a global market. The pressure of competition can be met by continuous expansion and thus by doing it this way it will reduce overall cost and increase revenue on global scale. However, the right amount of mix is dependent upon the type of organization. For manufacturing companies the quality of product and low cost is more important, while for service oriented companies, customer service and speed of performance is more important to stay ahead in the competitive market.

In the US business world, the performance of executives and senior managers are measured on a quarterly basis rather than longer term. Therefore, business executives who are under pressure to cut ...