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Subcontracting has become standard practice as many companies seek to focus on their key capabilities in the ever-ending goal to improve profits. Focusing on in-house design and handing off less profitable manufacturing to those who can profit on it has grown into a necessity for many companies. Subcontracting can make both the contractor and the contracted more profitable ? if it is handled right.

Cost is one of the driving factors in subcontracting. Why build the product in house if someone outside can build it faster, cheaper, and better? The problem is that companies often focus on the cheaper and ignore the faster and better.

Most subcontracting goes to commercial houses that specialize in building a specific line of product. Commercial houses that have grown into companies accepting anyone and everyone’s outsourcing business have no experience building YOUR product. If you simply hand them the specifications for your specific product to your subcontractor and walk away you are asking for them to give you bad product back. This is especially true if your product is complex or involves very specific processing knowledge to build. They may be able to build it cheaply, but who knows better how best to build your product than you do?

An essential part of subcontracting is keeping the lines of communication open. The location of the company subcontracted toiabe it two blocks down the road or on the opposite side of the planetiais irrelevant. Language may be more of a barrier in some cases than in others, true enough, but this can be worked around. There is no denying the fact that sending a picture of a problem piece to a design engineer in the United States may be able to get a problem resolved more quickly and with considerably less hassle than putting a design team on a plane and sending them to the site of the difficulty would be. This is true enough no matter what the product type is.

Supporting the smaller firm to improve their internal communications can improve them, to the benefit of the larger one. If the firm is still mired in paper, you can introduce simple levels of computerization into the office. The company I used to work for worked with many small machine shops that had only recently introduced e-mail. Buying them Microsoft Outlook and giving simple lessons can help reap more than adequate expense for the investment.

The standards that a company holds itself to are important. In some cases these may be simply internal requirements, in other cases there are industry standards such as ISO9000, Class 2 electronics, or mechanical tolerance measurements to thousandths of an inch that must be met. In rare cases a small operation may be able to successfully test these, but that is the exception rather than the rule. By helping to train the quality control staff of a small company, a larger company may still be able to subcontract to the smaller firm without worrying about quality loss. The smaller firm, on the other hand, has a staff with skills that can continue to be employed after this current subcontracting job is finished.

Inspection and testing facilities owned by subcontractors often have great demands placed on them by the contracting companies. To meet these demands, it is not unusual for a subcontractor to upgrade its testing facilities. Knowing what the larger companies already have for testing equipment, the subcontractor might choose to invest in a testing capability to which the larger company does not already have access. Because of the open lines of communication, the larger company should know of this new equipment as soon as it is available. This has the potential to benefit both companies. The company doing the subcontracting can quickly identify areas, even in in-house products, where the new capability can identify defects, thus improving their products. The subcontractor gets a very quick return on investment since the new equipment is put into use quickly.

Shared information, shared learning experiences, shared cost for equipment upgrades and shared opportunities can come with subcontracting if it is approached from the right point of view. Subcontracting is often looked at only from the point of view of improving the financial bottom line. With careful consideration, the whole manufacturing process and employee skill set can be improved. In the end, this will help the bottom line of both companies.