Signing The Contract

If you have done your homework and are ready to outsource your manufacturing, then the next step is signing the contract.

While the act of actually signing on the dotted line just takes a couple of seconds, there is a lot of work that needs to go into getting the contract ready. The contract is essentially the one document that will govern the entire relationship for many years to come and therefore should always contain the following points – regardless of who you outsource with:

  • Quality Specifications – make sure that the contract is very clear in defining / quantifying what critical specifications exist for your product so that there is absolutely no doubt regarding whether a part passes inspection or not. This is the most important part of the entire contract!
  • Volume Expectations – pricing is always based on volume – the more you produce the lower the price. That being said it is of paramount importance that your outsourcing contract contains a realistic forecast of your future volumes – be wary of any outsource provider who does address volume expectations in their contract.
  • Who Provides What – being that every manufacturing operation is unique, it is impossible to have a rigid contract that adequately spells out who will be responsible for what. You should always make sure that you are actively involved in the contract drafting process and fully understand where your responsibilities end and the outsource supplier’s responsibilities begin.
  • Clarity – if an outsource supplier’s contract is unclear, it is probably on purpose. Make absolutely sure that you are dealing with an outsource company that speaks your language so that you fully understand what you are getting into before signing the contract.

When it comes to contracts, the old cliche “an ounce of prevention is better then a pound of cure” definitely holds true. It is imperative that you have a clear and detailed contract with an established US based company that you can trust.