Core Competency

A major focus in operations management is core competency - where to design and build a product, or provide a service.  If a product is going to be included in a final installation or assembly, then who does that task must also be considered.  Your company must always be asking, "Can we do it better here or would a subcontractor be better for our operation?" The obvious concerns about cost, schedule, and quality are easy ones to address when looking at a subcontractor.  Other considerations are:

• Has the subcontractor successfully performed on a contract the size of your project even with one of your competitiors?  Subcontractors are always looking for work and will tell you they can take on a bigger project - no problem.  But be wary if their facility looks small, understaffed, or too crowded with other work.   There may be no room for you.
• For U.S. products it's best to have a subcontrator building your part in the U.S. also.  Time zone differences alone are difficult to coordinate during normal work hours and this could be troublesome if a supplier is overseas.  Certainly conversations can happen 24/7, but supporting these often leads to employee dissatisfaction.  In addition there could be some language barriers to overcome with a subcontractor headquartered in a non-English speaking country.
• It's okay to split the design and manufacturing tasks but be careful.  A prime company and it's subcontractor must ensure the applicable software used for design, manufacture, ordering parts, etc. is compatible.  Especially for designs where non compatible versions must be sent through "translators" and can easily deliver "corrupt data" ouput incapable of being used.