Subcontracting production

The standard requires that where specified in the contract the supplier s customer or his/her representative shall be afforded the right to verify at the subcontractor premises and the supplier s premises that subcontracted product conforms to specified requirements. 

Ensure that all subcontracted production activities meet the same standards as internal operations and that their operations are treated as an extension of the contracting company. 

Medium and minor players will typically have an exploitable intellectual property base from which they are developing or seeking to establish themselves chiral compounds are often the only products offered. However, as potential commercial suppliers at scale, they will be dependent on subcontracted production, including alliances with larger companies with available production capacity or significant capital investment. Examples are Synthon Corporation, which makes C4 synthons from carbohydrate raw materials, and Oxford Asymmetry, which exploits S. Davies work and patents and is in alliance with Cambrex. Customers will need to assess the adequacy of financial arrangements and/or the suitability of the chosen production partner. 

The principal must periodically inspect the subcontracted production during manufacture and/or packaging of the product. 

Vendor support to validation—A common practice in BPC production is the subcontracting of certain chemical steps to outside suppliers. As is the case with subcontracted production for dosage forms, the owner of the NDA or DMF maintains responsibility for the validation of the process and must secure the cooperation of the subcontractor in the performance of any supportive qualification/validation activities. Agreement to this arrangement should be a precondition to the awarding of the contract to the supplier. 

Note that in the solution, the cost per unit to subcontract product B is 20 (i.e., 93 — 73), while the cost of outsourcing product A is 15 per unit. Why is it optimal for the company to outsource product B instead of product A It is clear that product B uses more bottleneck resources, i.e., the capacity of machine X, than product A. In other words, the make-buy decision now requires identifying the internal bottleneck resource and then finding the best way to minimize cost using the internal resource. The linear programming tool enables this bottleneck resource to be identified and generates the optimal make-buy decision. 

Capacity constraints. In each period, the amount produced cannot exceed the available capacity. This set of constraints limits the total production by the total internally available capacity (which is determined based on the available labor hours, regular or overtime). Subcontracted production is not included in this constraint because the constraint is limited to production within the plant. As each worker can produce 40 units per month on regular time (four hours per unit as specified in Table 8-3) and one unit for every four hours of overtime, we have the following ... 

Period Hired Laklofr Workforce Overtime Inventory Stockout Subcontract Production Demand Overtime... 

Period it Hired it Laid off Workforce Overtime imrentorv Stockout Subcontract Production Demand... 

Period Hired Laid off Workforce Overtime iryventory Stockout Subcontract Production Demand Price... 

In volume-based tailored sourcing, the predictable part of a product s demand is produced at an efficient facility, whereas the uncertain portion is produced at a flexible facility. Benetton provides an example of volume-based tailored sourcing. Benetton required retailers to commit to about 65 percent of their orders about seven months before the start of the sales season. Benetton subcontracted production of this portion without uncertainty to low-cost sources that had long lead times of several months. For the other 35 percent, Benetton allowed retailers to commit orders much closer to or even after the start of the selling season. All uncertainty was concentrated in this portion of the order. Benetton produced this portion of the order in a plant it owned that was very flexible. Production at the Benetton plant was more expensive than production by the subcontractor. However, the plant could produce with a lead time of weeks, whereas subcontractors had a lead time of several months. A combination of the two sources allowed Benetton to reduce its inventories while incurring a high cost of production for only a fraction of its d and. This allowed it to increase profits. 

Acceptance criteria are the requirements which, if met, will deem the product acceptable. Every requirement should be stated in such a way that it can be verified. Characteristics should be specified in measurable terms with tolerances or min/max limits. These limits should be such that will ensure that all production versions will perform to the product specification and that such limits are well within the limits to which the design has been tested (see also Part 2 Chapter 2 under Identifying verification requirements). Where there are common standards for certain features, these may be contained in a standards manual. Where this method is used it is still necessary to reference the standards in the particular specifications to ensure that the producers are always given full instructions. Some organizations omit common standards from their specifications. This makes it difficult to specify different standards or to subcontract the manufacture of the product without handing over proprietary information. 

Notwithstanding the guidance given below under Evaluation and selection of subcontractors, this requirement does not relieve you of the responsibility for ensuring the quality of subcontracted parts, materials, and services. Therefore, it would be unwise to place orders on a customer-specified subcontractor without first going through your evaluation and selection process. You can obviously take some short cuts but don t make assumptions. The customer will not be sympathetic when you are late on delivery or your price escalates. If you find a subcontractor that can meet all your product/service requirements at a lower price you can submit details to your customer for approval. 

It is important that you inform the subcontractor through the contract of how the product or service will be accepted. Will it be as a result of receipt inspection at the specified destination or as a result of acceptance tests witnessed on site by your authorized representative These details need to be specified at the tendering stage so that the subcontractor can make provision in the quotation to support any of your activities on site. If you have invoked ISO 9001 in the subcontract, you are protected by clause 4.6.4.2. If you have not, you need to specify a similar provision in your subcontract, otherwise you may lose the right to reject the product later. There is no requirement for you to document your proposal to verify product at the subcontractor s premises but such a plan would indeed be a useful section in any quality plan that you produced. (See also Control of subcontractors in this chapter.)... 

In production you need to ensure that only those personnel, equipment, materials, and facilities that were qualified are employed in the process, otherwise you will invalidate the qualification and inject uncertainty into the results. If subcontracting special processes you need to ensure that the subcontractor only employs qualified personnel and has qualified process equipment and facilities (see Part 2 Chapters 6 and 18). 

This requirement poses something of a dilemma when purchasing subcontract labor because it cannot be treated the same as product. You still need to ensure, however, that the labor conforms with your requirements before use. Such checks will include verification that the personnel provided have the requisite qualifications, skills, and knowledge and they are who they say they are. These checks can be made on the documentary evidence provided, such as certificates, but you will probably wish to monitor their performance because it is the effort you have purchased, not the people. You will not be able to verify whether they are entirely suitable until you have evaluated their performance. Subcontract labor could be classified as product released prior to verification being performed and so you need to keep records of the personnel and their performance during the tenure of the contract. 

Quality control examinations shall include the requirements of the construction organization s Quality System Program for materials, products, components, workmanship, quality documents, procedures and personnel qualifications, construction, and subcontract services. 

Halvorson, T. G., Terbot, C. E. and Wisz, M. W. (1996). Hydrogen Production and Fuelling System Infrastructure for PEM Fuel Cell-Powered Vehicles. Final report, prepared for the Ford Motor Company, Dearborn, MI, USA, under Ford Subcontract No. 47-2-R31157 Direct Hydrogen Fuelled Proton Exchange Membrane (PEM) Fuel Cell System for Transportation Applications . 

The preliminary cost analysis was conducted with the help of Mr. Peter Chan of Chiaphua Industries Ltd. Table 12.8-2 compares the cost of subcontracting the manufacture of plastic and metal appliance components versus manufacturing in-house for a production volume of 1000 units per month. All calculated costs are below the US 100 limit. A cost saving of twenty percent was forecasted assuming that the facility will be built and operated in China where the land and labor costs are cheaper. 

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