Just as important as finding the right manufacturing partner is defining a clear and suitable work split with them. The following guide will help you find a good solution.
Setting the Framework for Cooperation
To ensure a seamless procedure from the get-go, the new entrant should specify their exact requirements for the manufacturer in advance. These specifications are summarized in a product requirements document (PRD) and encompass the following key questions:
- What is the current status of the project?
- What the new entrant aiming to achieve?
- Which stakeholders do they have in mind?
- What are the (non-)functional requirements of the product?
- Which risks and constraints does the new entrant expect
and how do they plan to circumvent them?
- How do they intend to realize the project in terms of organization?
- In what scope does the new entrant intend to produce?
- How do they plan to pay the manufacturer?
This will allow the partner to then convert these points into technical specifications highlighting their intended roadmap for the industrialization process. All of this is necessary to establish a baseline for both parties from which they can further specify the key questions.
The General Work Split Between New Entrant and Manufacturing Partner
Determining the exact work split between both parties is largely dependent on the wishes of the new entrant and to what degree their chosen partner can fulfill them. Although the devil lies in the details, both parties’ roles can still de defined in a rudimentary manner.
The Manufacturing Partner
As the contract manufacturer already possesses both profound experience and the infrastructure necessary for industrializing a vehicle, they will also cover the technical aspects of the vehicle’s concept, development, and production phases.
Additionally, as an established player within the market, the partner will provide an environment containing all of the external partners needed to transform the new entrant’s idea into a functioning vehicle.
Operative Development, and Prototyping
Naturally, the industrialization process of the vehicle itself is covered by the production partner. In consultation with the new entrant, key deliverables and scheduling are determined and development of a testable prototype is conducted. Of course, testing the prototype is also included in the responsibilities of the production partner.
Serial Production of the Vehicle
After the developed prototype has met security and quality standards, the key challenges of the SOP have been addressed, the schedule has been defined, and all of the development targets have been fulfilled, the partner will also execute the production phase of the vehicle.
The supply network is arguably one of the more “gray” areas in terms of responsibilities. In general, organizing the necessary manufacturing tools and resources for the vehicle platform (and the vehicle as a whole) are the contract manufacturer’s responsibility.
However, building up the supply network of parts and components may also be handled by the new entrant. Ultimately, the exact areas of responsibility depend on the specific mode of cooperation the two partners agree upon.
Security Management and Quality Control
Security management encompasses ensuring that the vehicle meets the necessary driver’s security standards to the vehicle to be approved.
Quality control includes all further improvisation and adaptation processes necessary for the vehicle to not only meet the set quality standards of its target market, but also all of the requirements for guaranteeing full functionality of all the features envisioned by the new entrant as well as meeting the expectations of customers, the new entrant, and the production partner themselves.
The New Entrant
With the contract manufacturer handling the key vehicle production, the new entrant will be free to concentrate their efforts on establishing and developing their brand – marketing and sales strategies, public relations, branding, and so on. Of course, within the automotive process, there are still several tasks that the new entrant has to deal with:
The vehicle’s styling is still the responsibility of the new entrant, who will provide the visuals for their vehicle. There are certain aspects of design and styling that may require discussions and changes nonetheless, mostly regarding technical or legal guidelines.
The final part of the supply chain, the distribution network, has to be organized by the new entrant as well. This means that the new entrant must either establish a vendor network or set up the necessary sales infrastructure by themselves.
After-sales management is also part of the new entrant’s responsibility. This includes any tasks regarding insurance, maintenance, repair and rescue services, as well as keeping customer relations and brand loyalty at a positive level.
While the cooperation between the two partners should always stay on equal footing, the new entrant still retains their position as a customer. In other words, they will have the last say in any adaptations made to the vehicle itself or its development plan. The new entrant will also be responsible for keeping the project moving by serving as the main interface between all of the parties involved.
Communication Is Key
Allocating the general responsibilities of both parties is one step of ensuring a successful partnership. It is helpful to keep the contrast in the backgrounds and levels of experience between the two partners in mind. Most new entrants will need a bit of time to learn the inner workings and the “language” of the automotive industry. Having thorough discussions and communicating openly will avoid complications later down the line.