Manufacturing has traditionally involved outsourcing of everything from design to final assembled products.
OEM. In the classic outsourced manufacturing operation, the third party takes the customer’s specifications and then builds, packages and even ships (directly to the end-user) products bearing the brand name of the enterprise customer. This arrangement is called original equipment manufacturing (“OEM”) relationships.
Manufacturing Services. With the advent of technology-based goods, high-volume manufacturing services can be subcontracted to third parties that act as agent, not as independent producer, for branded products. In “manufacturing outsourcing,” the service provider provides supply chain management, skilled personnel and inventory management. The allocation of risks (including warranties, product recalls and other issues) is different from the OEM relationship. Manufacturing service providers thus can provide the full range of manufacturing services as a service, not as a product:
- Product Design
- Product Testing
- Supply chain development: hiring and management of subcontractors and suppliers
- Assembly upon demand
- Product packaging
- Logistics and shipping management
- Finance and accounting related to the manufacturing process.
Technology Control Services for Manufacturing Functions. Other outsourcers do not assume any responsibility for hiring suppliers, designing, assembling or manufacturing products or other direct manufacturing functions. However, they can organizations improve operational efficiencies, enhance responsiveness and collaborate with trading partners to better serve their end customers. They bring to the manufacturing sector a comprehensive understanding of the business and technology drivers of the manufacturing process. Such IT-based manufacturing services providers include:
- Supply Chain Management
- Warehouse and Yard Management
- Waste Management
- Transportation Management
- Portals for suppliers, customers and service providers
- ERP solutions.