What is Contract Assembly?

Assembly 2


There are a variety of strategies for outsourcing part or all of production to third party manufacturers, one of the most popular of which is contract assembly, or contract assembly manufacturing. Contract assembly refers to outsourcing the assembly process of a product to a third-party company or manufacturer that specializes in this service, and assembling a product from its constituent parts or sub-assemblies.

What is the difference between contract manufacturing and contract assembly?

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. Contract assembly is particularly common in industries like electronics, automotive, and aerospace, which often involve complex assembly procedures or specialized equipment

What are the Advantages of Contract Assembly?

Contract assembly provides an attractive solution for many companies seeking to outsource production operations. The significant advantages include cost-effectiveness, focus on core competencies, access to specialized expertise, flexibility, scalability, and faster time-to-market. This approach can also mitigate risks associated with production as the contractor manages quality standards and production deadlines.

Potential Disadvantages of Contract Assembly

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.

Steps Involved in Contract Assembly Manufacturing

The assembly of products through an external contract manufacturer follows a standardized sequence of steps. From initial planning to final shipment, the contract assembly process contains key phases that require 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, and the assembly process is planned.
  2. Sourcing Sub-suppliers and Components: The customer handles the sourcing of suppliers and components, and defines them for the 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 of components and raw materials, which are then consigned to the product assembly manufacturer for use in the customer’s production. This requires careful coordination and record-keeping on both sides
  4. Assembly Process: This involves putting together the various components and sub-assemblies to produce the final product.
  5. Quality Control and Testing: The assembled products undergo thorough testing and quality control to ensure they meet the set standards.
  6. Packaging and Shipping: The final products are packaged and shipped to the designated location. 

Contract Assembly Manufacturing Process Flow

Fig. 2: Contract Assembly Manufacturing Process Flow

What Industries use Contract Assembly

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 takes care of the assembly 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.

Selecting the Right Contract Assembly Company

It's essential to exercise due diligence when selecting a contract assembly company. We’ve written extensively on how to select the right contract manufacturer (link), but there are some additional factors to consider when evaluating a contract assembly manufacturer:

  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.


Choosing the Right Contract Assembly Company

Fig. 3: Choosing the Right Contract Assembly Company


Working with a Contract Assembly Provider

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

Get in Touch

We welcome you to explore our services and discover how our expertise can serve your assembly needs. By leveraging our contract assembly services, we aim to enhance your production efficiency, manage your costs effectively, and provide industry-specific expertise.

Tak a look at our other helpful articles or contact us via our form or email. We're ready to help you navigate the path to increased productivity and profitability.

Works Cited