
This article will cover the management of a contract manufacturer (CM) value stream from the perspective of a company that has outsourced the manufacturing of its product. A typical CM model is most likely “turn-key” such that the “Company” purchases the only finished goods from the CM.
Part/component purchases are a shared responsibility between the company and CM. Company-controlled suppliers have negotiated pricing and purchased orders may be placed by the company or the CM for long-lead and specialty items.
Ultimately, the liability for part/component inventory rests on the company. For this reason, minimizing inventory, maximizing inventory turns, and value stream flexibility are some major objectives of managing a CM.