Outsourcing: Measuring Performance

The most obvious variables to measure are Quality (of product), Cost and Delivery. A few other areas to consider are Responsiveness to requests and changes, Quality of service level provided and ‘friendliness or attitude’ to your company.

Quality can be measured in many different ways and at different points throughout the process. Incoming inspection and FPY (first pass yield) are 2 important areas to measure. Depending upon what level of engagement you have with your contract manufacturer, they will need this feedback as soon as possible to perform process improvements and improve their quality on the next shipments. Ways to measure defects can be by lot quantity, sample quantity, per unit etc. Start out by monitoring everything (or as much as possible with the resources you have) and ease back as you see a long-term trend in overall improvement. You can use simple pareto charting techniques to illustrate your defect types and percentages and rank highest to lowest. A simple email with failure data works if you are really constrained for time and resources. Just make sure you receive feedback on what the outsource provider will do to improve the process.

Delivery is typically quantified in terms of how many days late by agreement or by PO (purchase order). A shipment could be made to meet the agreement but not enough units may have been shipped to satisfy your requirement so include what constitutes a minimum quantity as applicable. Monitor how products arrived in terms of packaging and any damage that resulted due to improper handling or packaging. Keep in mind that if you are consigning kits to the CM, the delivery clock does not start until the kit is ‘complete and clear’ meaning all shortages are filled and all CM questions have been answered.

When fully engaged with a CM and doing complete turnkey manufacturing, demand quarterly cost improvement goals and monitor this very closely. Typically though when in the startup mode, the costs that are most pertinent are the assembly costs, testing costs, tooling charges and expedite costs (if needed). Have the CM break down all costs to see what rates are used and to understand where the majority of costs are. Remember the golden word ‘WHY’ and ask why the cost is too high if you feel it is unreasonable. Do not be afraid to do this. Everything is negotiable. Some outsource poviders even expect this.

How long does it take for someone (typically your CM program manager) to get back to you concerning your email, phone call or fax? If time is of the essence and it takes hours for someone to respond back to you, then I would be having a serious talk first with the program manager and if that does not work out, talk to his/her supervisor. You need timely responses to your inquiries so do not settle for anything less. If the communication is of a critical nature, I will usually make a phone call followed up by an email that asks for written confirmation of the request. I would also ‘CC’ the parties most directly impacted at the CM on this email. I would expect a CM to contact me first and ask questions as necessary.

Quality of service and ‘attitude’ are important because if attitude is not good then quality of service may suffer as well. You can help strengthen your business partnership with your CM counterpart by going out to lunch for example and just ‘getting away from the office’. Build up that relationship so that this person cares about your business and will do everything possible to help you in time of need. Make your outsource provider counterpart feel like he/she is part of your team because they actually are in many respects.

You will want to rate your CM performance in a variety of other areas as it is important for them to get your feedback on areas that may need improvement (as well as areas that the CM performs well). This formal rating can be done anywhere from quarterly to annually depending upon the situation and relationship. Here's a sample Performance Survey form to help guide you in this area. View Performance Survey

Just as general rule of thumb, a CM that asks a lot of questions is interested in trying to perform well and providing the necessary service that you need. Return to Outsourcing