When I interviewed executives at Mayville Engineering Co., a seven-plant, 1,000-employee behemoth of a contract fabricator, I could tell the CEO Bob Kamphuis was proudest of one statistic. The company delivered on time over 99 percent of the time.

On time delivery of quality parts lies at the heart of contract manufacturing. Since the recession I’ve seen more shops take on the manufacturing of entire products, not just parts. Some already downsized OEMs decided essentially to get out of the manufacturing business. One executive I spoke with talked about how his now much smaller company still designs and sells machines, but outsources nearly all of manufacturing to local suppliers.

This makes sense, he said, because product line manufacturers need to follow the market--and the market may demand an entirely new product made of different materials, requiring different manufacturing processes. Outsourcing nearby, as opposed to overseas, means shops respond quicker.  (Besides, inflation and economic uncertainty in Asia has made the labor cost difference less of an issue.)

Companies now think: Why invest in the people and equipment to make things when you have a reliable network of contract manufacturers close at hand?  The key word is “reliable.” If that executive couldn’t find contract fabricators who could deliver quality parts on time, his company probably would be very different today.
(more...)