At Focused on Machining, we know that all of our customers are constantly searching for ways to improve their costs without compromising on quality. One strategy we often suggest is to consider our contract manufacturing services.
Recently, for instance, we helped a large space and defense contractor achieve significant savings through a three-year manufacturing agreement. The process of agreeing to final terms required some give-and-take on both sides. Our partner was seeking lower prices, so we identified several areas where we could help them achieve savings if they could simplify the project for us in certain ways.
Ultimately, when we have a customer relationship built on trust, we can find terms that deliver value to everyone involved through problem-solving and flexibility on both sides. Find out more in this story about our latest contract manufacturing agreement, and learn how we can help set you up for success with your own long-term agreement.
The Basic Benefits of Contract Manufacturing Services
For buyers, there are several key advantages to contract manufacturing services:
Cost Savings
Cost savings through contract manufacturing stem from economies of scale. Setup expenses are distributed across more parts, tooling remains predictable and consistent, and precision machining operators become increasingly adept with each part.
Consistent Quality
When you partner with a manufacturer you trust for multiple years of production machining services, you’re able to rest easy—the same manufacturing process will deliver the same quality every time.
Reduced Administrative Work
Managing multiple suppliers for recurring parts requires constant attention to multiple purchase orders and follow-ups. Long-term agreements significantly streamline these processes.
Decreased Risk
Today’s economic environment includes concerns about tariffs and the potential for pricing volatility that accompanies economic uncertainty. By locking in prices today, you can insulate yourself from future disruptions.
Case Study: Creating a Mutually Beneficial Agreement
This year, a large space and defense contractor approached us requesting a quote for contract manufacturing services on a large package of stainless steel and aluminum parts. After seeing our initial proposal, they indicated they were interested in our services, but wanted to find ways to achieve lower pricing.
Because this was an established and trusted customer, we knew that we could collaborate to find those savings if they accommodated certain adjustments to the project’s structure. We identified incremental cost reductions in a variety of different ways, and to achieve their target price point, we negotiated several key arrangements:
Material Funding
Our customer had a large package requiring many thousands of pounds of material. By agreeing to pay for their materials upfront, our CNC machine shop reduced financial risk, allowing us to offer more competitive pricing.
Early Delivery
Our customer agreed to accept full delivery within a 12 to 18 month time frame, despite our three-year contract. Early delivery allows us the flexibility to optimize our production scheduling as needed, and that efficiency translates to savings for our customers.
Payment Terms
By agreeing to Net 15 payment terms, our customer further reduced our financial risk, enabling us to meet their target price point while maintaining our quality standards.
Building Your Customized Agreement
We successfully achieved our customer’s target price, resulting in a partnership that benefits both organizations. We’re excited about the collaboration and the value it creates for everyone involved.
These three elements represent just a few examples of how negotiation through collaboration can lead to the best outcome possible. However, all negotiations are unique, and the factors involved can vary—but as long as negotiations are built on trust and good faith, we’re always ready to develop solutions that meet everyone’s needs.
Whether you need contract manufacturing services or specialized projects involving aerospace machining for aluminum or tight tolerance machining, we’re ready to help. Request a quote today and let’s discuss how our Colorado CNC machine shop can support your next project.