Industry

Contract Manufacturing

Contract manufacturing – also known as “external production” or “extended workbench” – refers to a company that offers the production of components as an external manufacturer. A contract is drawn up between a company and the manufacturing company, specifying how many products are to be manufactured and within what timeframe.

This can include services such as CNC milling or assembly work, such as sub-assembly, where you send all finished sub-assemblies for assembly.

Contract manufacturing is a sensible activity and is primarily used by companies that do not have their own production capacities or whose capacities are completely exhausted.

Using contract manufacturing therefore has the advantage that you can flexibly expand your capacity and spend less on salaries, etc. There are also no fixed costs for new machinery or other equipment, and you can expect orders to be processed quickly.

AvERP in contract manufacturing

We offer an open-source ERP system for contract manufacturing. In addition to the standard modules of AvERP for sales (including CRM), purchasing, manufacturing and assembly, warehouse management, production planning, employee management and time tracking, and complaint handling, we offer optimized processes for contract manufacturing, including… u.a. folgender Module (natürlich auch komplett kostenlos erhältlich):

Rough and detailed planning
Offer management with tiered pricing
Rough production planning
Detailed production planning (planning board)
MES, recording of production times and finished quantities per work step.
Parallel operations
Interfaces to numerous machines to read real data
Measurement data acquisition (including cpk)
Comprehensive quality management (CAQ)
Test and measurement equipment management
8D reports

What characterizes contract manufacturing?

The typical workday in contract manufacturing is characterized primarily by:

rather limited order volume
high price pressure from foreign and domestic competition
High number of requests with a low conversion rate
precise information on delivery dates with short lead times
small production runs and ever-decreasing follow-up orders

Especially in economic crisis situations like the Corona pandemic, traditional procurement processes reveal massive disadvantages such as supplier dependencies, cut-off supply routes and delivery bottlenecks.

To be successful in this industry, one needs to possess many skills and pay attention to several things.

For example, it is important to ensure that the preliminary costing can be implemented quickly and easily, or that the creation and follow-up of offers can be approached systematically.

Delivery dates should also be calculated systematically (based on current capacities).

As a contract manufacturer, you also need to be informed about machine utilization and order progress at all times. Production plans must be created systematically, and documents or drawings for specific items must be easily assigned.

The license-free ERP system for small and medium-sized enterprises.

How does ERP software help contract manufacturers?

All these problems and requirements can be solved with the help of an ERP system.

For example, processing times can be estimated or calculated down to the second using unit time calculations. This calculation can then be directly incorporated into the quotation.

The exact delivery time can also be specified via an ERP system. A preliminary simulation can estimate whether the delivery time requested by the customer can actually be met.

In contract manufacturing, production must adhere to specific (predetermined) prices. Therefore, for a company that needs to think like an entrepreneur, it’s crucial to analyze profitability. This can be easily done with an ERP system.

Drawing numbers, article numbers and other data can also be managed in an ERP solution for contract manufacturing.

For contract manufacturers, it is also crucial to be able to value their products during inventory, as these remain their property (even when not in storage). Therefore, an inventory management system for contract manufacturing should also be capable of accurately mapping complex material flows and external services.

Frequently asked questions

Why are ERP systems important for contract manufacturing?

In contract manufacturing, efficient order processing, accurate cost calculations, and precise resource planning are of paramount importance. An ERP system enables companies to optimize their production processes, utilize material and labor resources effectively, meet delivery deadlines, and ensure complete transparency throughout the entire order processing chain.

How can an ERP system make contract manufacturing more efficient?

An ERP system can make contract manufacturing more efficient by optimizing resource utilization, improving order processing, and increasing transparency. Through precise planning of materials and labor resources, as well as better communication with customers and suppliers, companies can optimize their production processes and reduce costs.

How long does it take to implement an ERP system in contract manufacturing?

Die Implementierungsdauer eines ERP-Systems in der Lohnfertigung kann je nach Unternehmensgröße, Komplexität der Geschäftsprozesse und Anpassungen variieren. In der Regel dauert die Implementierung mehrere Monate bis hin zu einem Jahr. Es ist wichtig, realistische Zeitpläne festzulegen und die erforderlichen Ressourcen für eine erfolgreiche Implementierung einzuplanen.