BEP

How to avoid legal and financial risks in the business

First, you have to pick a company that has a good reputation. Now that can be hard to do when you don’t know companies in China, for example. But obviously these people will give you references when you go in to look at them. I think you need to check the references very heavily. Make sure that what these companies say they can do is indeed what they actually do.

I also think that the companies you might be dealing with have to have a very good financial backing. Because they’re going to investing up front in materials and such, you have to make sure they can handle it.

They should make sure that the materials are coming in and that there are no engineering problems—everything that’s required in a new product startup—and that they’re there and supporting you totally. And we’ve found that communication is extremely important. You need to set up these project teams, and you have to have continuous communication with that group.

The other place we’ve found potential pitfalls is with documentation. It’s really good if you can clean your documentation ahead of time. Have your manufacturing engineers go through whatever product you’re designing to go over to Asia with and verify the bill of material, and verify all of the prints. Perhaps they can actually build the product themselves, there on the shop floor to make sure that you can build it the way the prints say to build it. If not, fix it and then release it to Asia.

With the quality systems established at most contract manufacturers (that is, ISO, QSR compliance), regulatory challenges should not be a key factor today.

You must gain agreement on who is going to be responsible since there are significant legal and financial risks in the environment that we operate in. You are really talking about ongoing management of the product life cycle. The regulatory environment is constantly changing. You need to be sure your partner has the systems and capabilities in place to respond to those changes.

Finally, because most companies operate on a global basis, there is the influence of globalization, which ties into the regulatory side. In many instances, they enter the European market before the U.S. market. The documentation required for product registration and the technical files can be different for different countries, and they can change quite often. So the contract manufacturer has to stay abreast of the requirements and work closely with their client to ensure that they are compliant and avoid potential pitfalls.

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