• Introduction
• What Kind of Contract Assembly Services Are There?
• What Industries Use Contract Assembly?
• What is the Difference Between Contract Manufacturing and Contract Assembly?
• What are the Advantages of Contract Assembly?
• Potential Disadvantages of Contract Assembly
• Steps Involved in Contract Assembly Manufacturing
• How to Evaluate a Contract Assembly Supplier
• Working with a Contract Assembly Provider
• Get in Touch

There are a variety of strategies for outsourcing part or all of production to third party manufacturers; one of the most common of these is contract assembly, which can also be known as product assembly service or outsourced product assembly.

Contract assembly is a term used to describe when a customer outsources the assembly portion of manufacturing a product to a third-party company. The components to make the product will come from a different, or even many different suppliers and will usually be purchased and consigned by the customer, but the final assembly and testing is done by the contract assembly manufacturer. That manufacturer is generally one that specialized in assembling a product from its constituent parts or sub-assemblies.

Companies rely on contract assembly services in case they or their subcontractors lacks the resources, equipment, capabilities or infrastructure to handle the assembly process of the product or if a contract assembly company can provide a cost advantage vs handling the assembly in-house. For example, a customer may lack modern equipment required for the assembly process, or in the case of pharmaceutical or food manufacturing, the customer may lack a required certification to do the assembly / packing part of the process.

Sub-Assembly

Sub-assembly is when two or more components are combined to form a part which is itself a component of a larger product. Sub-assemblies are not sold as is to the end consumer – they will be later on assembled into a finished product. As an example, a hinge consists of two metal parts and a bolt to fit them together. This would later be assembled onto a door (the door would be the finished product).

Product Assembly

Product assembly involves the combination of two or more components or sub-assemblies to form a finished product. To follow the example above, the product assembly would be taking the hinge, the screws to attach it, a knob and a wood panel, and combining them into the finished product: a door ready for installation that you might buy off the shelf of your local hardware store.

Mechanical Assembly

This generally covers the assembly (by fasteners, rivets, glue or other methods) of mechanical components, normally metal or plastic components (so not including electronics or PCBAs) together to form a product or sub-assembly.

Electromechanical Assembly

This involves combining both mechanical and electrical components together to create an assembly or sub-assembly which uses electricity to perform a mechanical function.

Packaging Services

This is a common service where a manufacturer simply repacks components into finished packaging, attaching labels or otherwise getting a product ready for shipment to customer. Packaging assembly is often offered by 3PLs or warehouses as part of their services to e-Commerce sellers.

Kitting Services

Kitting services are a subset of packaging assembly, and entails a manufacturer packaging components from different suppliers into kits. This is often used for e-Commerce or subscription services.

Table 1: Summary of Assembly and Packaging Services

Contract assembly is used primarily for either higher volume products in consumer-facing industries, with the primary advantage being leveraging specialized assembly efficiency for high-volume projects, or for highly regulated industries such as aerospace or automotive, where customers can “rent” the assembly know-how and production capabilities of specialized suppliers.

Electronics Industry

In the electronics industry, contract assembly can be used to assemble complex electronic devices such as computers, smartphones, and other consumer electronics. Companies in this industry might outsource the assembly of these devices to a contract assembly provider who has the necessary expertise and equipment, while managing the complex supply chains and inventory involved in producing consumer electronics.

Many PCBA manufacturers essentially act as contract assembly providers, as they are handling the assembly process (SMT, soldering, DIP) using customer provided components. This allows another company to focus on designing innovative products while the contract assembly provider focuses on optimizing the assembly portion of the process.

Automotive and Aerospace Industries

In the automotive and aerospace industries, contract assembly can be used to assemble various components of vehicles and aircraft. This could include the assembly work of engines, transmissions, or even the entire vehicle or aircraft. One commonly outsourced component is the contract assembly of wire harnesses – a core component of automotive.

There’s a high degree of specialization, specialized equipment, domain knowledge in the production of these parts, and by purchasing the components and outsourcing the assembly to an outside supplier, large brands can harness their process know-how and capabilities while tightly control the supply chain on a component basis.

Medical Industry

In the medical industry, contract assembly can be used to assemble medical devices such as pacemakers, insulin pumps, and surgical instruments. Contract assembly providers in this industry often have to adhere to strict regulatory standards, ensuring that the assembled medical devices are safe and effective for use.

In each of these examples, the contract assembly provider would work closely with the company to understand their specific assembly requirements. They would then use their expertise and equipment to assemble the product to the company's specifications. This could involve assembling the product from its constituent parts, testing the assembled product to ensure it meets quality standards, and packaging the product for shipment.

While contract manufacturing entails outsourcing the entire manufacturing process, including sourcing materials, manufacturing components, and assembly, contract assembly is limited to the assembly process only, with components generally consigned by the customer.

The contract assembler is not manufacturing any components, or purchasing parts and organizing the supply chain, they are simply in charge of combining the provided components into a finished product or sub-assembly.

Fig. 1: Assembly Lines at Komaspec

Contract assembly provides an attractive solution for many companies seeking to outsource production operations. The significant advantages include:

1. Improved Cost-Effectiveness

Contract assembly can help to reduce costs and add value to customers in several ways:

• Lower Operational Costs – the purchasing and maintenance of specialized equipment, storage space, production space, and all of the other ongoing expenses that are involved with these are the responsibility of the contract manufacturer.
• Lower Capital Expenses – it is not realistic for most SMEs and startups to invest in all of the equipment needed for sophisticated or even relatively simple assembly processes (assembly lines, press fit machines, ultrasonic welding, Go No Gos and assembly jigs, etc.). A qualified assembly provider will have most or all of any equipment needed, substantially lowering any needed capital investment for new product manufacturing.
• Lower Labor Costs – the manufacturer is the party involved in the hiring, training and retention of skilled labor. Because they can spread this cost over many projects and customers, their labor force costs are generally lower than companies recruiting and training enough personnel to handle the assembly internally.

2. Technical Expertise

Contract manufacturers have extensive experience in operations, design for assembly, quality control and other aspects already baked into their organization.

There is no need for customers to find, hire, train and retain those skilled employees or to employee external experts to the same degree as would be needed if assembly was handled by themselves. This type of out of the box expertise is invaluable to SMEs and startups that would struggle to build it internally in a quick enough time frame or at a reasonable cost.

3. Flexible and Scalable Production

If the contract manufacturer has sufficient capacity, scaling up or down can be as simple as turning on or off another assembly line and shifting workers to or from another project. This gives much greater speed to ramp, as there is no need to spend time renting new facilities, purchasing equipment or training – additional production capacity can be available very quickly.

4. Improved Quality

When partnering with an experienced contract assembly company, businesses can reap the benefits of already-purchased and well-maintained equipment without the hassle or expense. Utilizing a manufacturing partner who has technical insight, expertise, and experience using the right machinery and technology will result in higher-quality products, faster production time, and ultimately a smoother and more profitable production process.

Table 2: Comparison of In-House vs. External Assembly Advantages

Despite the numerous benefits, contract assembly manufacturing has some potential drawbacks. When you outsource, you relinquish control over aspects like quality, deadlines, and sometimes intellectual property. However, these risks can be mitigated by having clear contracts that outline expectations, high-quality standards, deadlines, and intellectual property rights.

• Degraded In-house Expertise – if the assembly process is completely outsourced, then in-house expertise of how to make the product will either not develop (if it didn’t exist), or degrade over time, leaving customers reliant on 3^rd
• Production & Quality Control – outsourcing product assembly means giving up some control over how production and quality is run. While customers can certainly make requirements, they will want to select a contract assembly provider who has an acceptable level of organization, or those requirements won’t be put into place.
• Timelines & Schedules – since the production is done by a third party, there will need to be discussion and compromise over timelines if orders aren’t placed or material don’t arrive in a timely fashion. Customers will have to “get in line” in case of capacity bottlenecks. This is why it’s important to evaluate the supplier’s excess capacity and flexibility.
• IP Risk – transferring assembly requires transferring some knowledge and IP to the supplier. That said, generally, the risks are much lower than full contract manufacturing, as only a portion of the overall production process is being given to any given supplier.

From the initial planning stage to when the final shipment is sent, the contract assembly process contains certain key phases. The most important thing at most stages is close coordination between the customer and assembly partner.

The main steps involved in contract assembly manufacturing include:

1. Design and Planning: This is the initial phase, where product designs are analyzed and refined. The assembly process also needs to be carefully planned at this stage.
2. Sourcing Components and Sub-Suppliers: The customer handles the sourcing of components and parts for use in assembly. Where sub-suppliers are used, they need to be clearly designated. All part and component sources need to be clearly defined for the entire project. This is a key difference between contract assembly and contract manufacturing.
3. Consigning Materials and Components: The customer is responsible for arranging the purchase and delivery of components and raw materials to the contract product assembler. This requires careful coordination and record-keeping on both sides.
4. Assembly Process: This stage is handled by the sub-contractor and is when the various components and sub-assemblies are assembled to produce the final product.
5. Quality Control and Testing: The assembled products/components must undergo thorough testing and quality control to ensure they meet any pre-agreed standard requirements.
6. Packaging and Shipping: The final products are packaged and shipped to the designated location.

Fig. 2: A Flow Diagram of the Contract Assembly Manufacturing Process

It's essential to exercise due diligence when selecting a contract assembly company. The first step of the process is a search process which will throw up potential candidates, then an RFQ process to receive quotes based on your product, your assembly requirements and any other specifications.

Once you have the suppliers short-listed, the next step is to evaluate which are a good fit for your product and your expected needs. We’ve written extensively on how to select the right contract manufacturer, but there are some additional factors to consider when evaluating a contract assembly manufacturer:

1. Know-How - does the supplier have the know-how in place to assemble your product? Do they have experience with a similar product?
2. Infrastructure – does the supplier have the needed equipment to assemble your products? Do they have modern automation or tools to increase assembly speed and decrease cost? Do they have the right facilities and warehousing space that your project needs?
3. Total Cost – which is not to say “price;” customers need to take into consideration the total cost of the supplier’s offering – how far to transport parts from their components suppliers? What is their yield rate during assembly? Can they help provide additional services that would save you money or time?
4. Value-Added Services – beyond just assembly, what other capabilities does the contract manufacturer have for logistics and fulfillment? Can they provide warehousing, re-packaging and kitting services?
5. Capacity – does the supplier have the existing capacity, or can they quickly add it, in order to handle your project? If you have very large volumes, or very seasonal products, this is even more critical.
6. Flexibility – how much lead time is required for orders? Can the supplier be flexible with minimum order quantities or shifting delivery date?

Steps:

1. List Potential Companies: Research online, check industry directories, or get recommendations from peers to compile a list of potential companies that align with your manufacturing needs. Depending on the product type, you may want to look for suppliers with experience and the right equipment / setup in your specific industry or product type. This is especially true for complex processes like cable assembly, high-volume consumer electronics, etc.
2. Evaluate Potential Companies: Create an evaluation sheet based on key criteria like experience, quality management systems, certifications, capacity, equipment, and pricing.
3. Understand Their Operations: Visit the company’s website and read about their history, capabilities, and services. Additionally, research online reviews and forums for insights into customer experiences with the company.
4. Check References: Ask the company for references and contact them to inquire about their experience with the company.
5. Ask Key Questions: Query the potential contract assembly companies regarding their certifications, track record, and any additional services they offer.

Fig. 3: Choosing the Right Contract Assembly Company

When working with a contract assembly manufacturer, because the supplier is only in charge of the assembly process, there needs to be a clear definition of expectations, division of responsibilities. The assembly provider is not a turnkey supplier, so ongoing support and monitoring is crucial to making the process work efficiently and in-time. Clearly communicate your quality requirements and expectations and define any needed testing.

1. Ensure that quality standards and business terms are defined in the manufacturing contract.
2. Ongoing coordination is required to ensure inventory of consigned parts is sufficient and on-time
3. Monitor performance and part yield and provide feedback as necessary. Part yield is going to be critical to the overall cost of the outsourced assembly – if it’s too high, no savings will be realized.
4. customer is providing all parts – must monitor product yield and inventory to ensure no disruption to production
5. Must establish a clear and documented assembly process.
6. Must provide clear documentation and BOM for consigned components

The right assembly service provider can offer a range of services for mechanical and electro-mechanical product assembly, with a high level of consistent quality, and help to simplify, debug and generally improve the assembly process through detailed design for manufacturing assembly (DFMA) feedback and technical support.

Please reach out to our sales team to discover how our extensive expertise can help you with your assembly needs. By leveraging our contract assembly services, we aim to enhance your production efficiency