From Contract Manufacturing to Original Equipment Design and Manufacturing: A Case Study of Tharsus

Production has been traditionally outsourced in order to cut costs and satisfy time-to-market challenges, but recently more sophisticated value-added activities such as new product development are also being outsourced. In an effort to better support business clients, some outsourcing providers are evolving from a Contract Manufacturing (CM) model to an Original Equipment Design and Manufacturing (OEDM) model, where an external contractor takes the responsibility for manufacturing, designing, prototyping, parts procurement and other functions. In order to address gaps in the literature and a lack of academic understanding of the OEDM model, we present a case study and describe the results of interviews that uncover how and why the OEDM model works. We describe the evolution of a contract manufacturer to an OEDM service provider and show that the OEDM model is highly valued by businesses seeking to collaborate with partners that can provide holistic design, prototyping and manufacturing services in-house. We conclude that for companies seeking to outsource, the OEDM model can reduce costs and time, increase flexibility, and enable tighter control over the whole process, as well as enable more holistic service provision than the traditional CM model.