Using Contract Assemblers and Manufactures (CM)
Sunday, September 21, 2014
If your business is like many others and has decided that outsourcing your assembly and manufacturing is a more cost effective quality way to build the products you have designed and created, you know that managing your bills of materials and material costs becomes an important but difficult process. Issues and challenges almost always comes down to data. Who is responsible for inputting of data. Data that keeps track of inventory levels both finished goods and raw materials. Data that lets us know if our customers have received their orders and in many cases the serial numbers and or lots that they now own.
AscentERP can not input the data for you, but we have designed and worked with three unique scenarios that can help you manage your outsourced manufacturing.
Scenario #1, customer supplies the CM with raw material: Your company has a CM who provides labor and logistics. Our customer creates a BOM for the finished good, along with estimated labor time and rates. When demand comes in for the finished good, the AscentERP Master Planner will suggest a production work order. Once accepted, Master Planner tells our customer to purchase materials (for the FG) and to create a PO for the fee that the CM charges. (assembly labor PLUS any materials that the CM uses in the assembly).
The default drop ship location for purchased items, is the CM. When the CM receives the material, the CM notifies our customer that the material has arrived, causing our customer to perform the PO receipt. When the CM tells our customer that the manufacturing process is complete, our customer then “receives” the PO for the assembly labor and completes the PWO. From that point, the CM either transfers the material to our customer or will ship the finished product directly to our customer.
Scenario #2, the CM is responsible for purchasing and maintaining stock on raw material: Our customer will always manage the BOM’s and the revisions to the BOM’s. Our customer will share the current default BOM with the CM, however, the CM is responsible for procuring the raw material and maintaining the proper amount of stock to meet our customers end product demand. With this scenario, our customer simply cuts a PO to the CM, telling them how many finished goods to produce and where to ship them. Like scenario #1, its up to the CM to confirm the order was shipped as designed and our customer will need to receive the PO and pack and invoice their customer.
Scenario #3, the hybrid: Scenario #3 is a combination of Scenario #1 and #2. All clients have the responsibility of maintaining the BOM’s, invoicing the customer and customer success. Many customers have a raw material item or items that are the secret sauce. High value, proprietary and the linchpin to making a successful finished good. In this scenario, our customer will maintain control of this item or items. They will procure the high value product and drop ship directly to the CM. The CM however, will have the responsibility of managing the procurement and inventory of the commodity items.
How should all of this inputting of data be managed? How do you the customer reduce double entry and eliminate mistakes? How can we get the CM to move away from e mail and fax?
Simple, implement Salesforce and AscentERP Partner Community licenses. Partner licenses have ⅔ the cost of full Salesforce and AscentERP license. You can also have easy finite control over the amount of data and the type of data you share with your CM. Your only challenge is convincing your CM to log in and grab their PO’s, PWO’s but more importantly, report all the details surrounding the shipments that have been done on your behalf. By making your CM part of your extended organization, you will produce faster more accurate deliveries to your customers and you will eliminate input error causing sales and more important, profits to grow.
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