This whitepaper looks at five areas to audit in evaluating potential contract manufacturing partners.
Original equipment manufacturers (OEMs) are increasingly looking at regional sourcing strategies designed to decrease the non value-added costs that can occur when working at a distance. Students of Taiichi Ohno’s seven wastes can easily see that many of these costs track directly to one of the seven wastes. Overproduction, excess transport, excess inventory, work-in-process (WIP) in wait state and excess motion are typical wastes found in outsourcing strategies that prioritize lowest labor cost over lowest total cost. Placing production closer to the end market can eliminate much of this waste. However, in some cases a lower labor cost strategy also makes sense when combined with a focused attempt to minimize non valued-added activity and concomitant waste. Mexico offers an excellent combination of a low cost labor market and logistics simplicity. This whitepaper looks at five areas to audit in evaluating potential contract manufacturing partners.