So, your company has decided to outsource. You’ll need a team of folks to help manage this venture. Enter the program manager. (See, also: “When outsourcing is not the answer“)
Program management responsibilities inside the contract manufacturer can vary based on the type of products going into production and the industry in which manufacturing takes place.
Below are some general guidelines to help define some of the responsibilities of program management as a functional group within the contract manufacturer and, what makes a good program manager while interacting with the OEM customer.
Program management responsibilities within a contract manufacturer can be divided into internal efforts and external efforts.
Program management internal responsibilities make up roughly 70% of the program manager’s time — working and resolving OEM customer outsourcing program issues via facilitation with functional groups within the contract manufacturing facility.
Program management external responsibilities account for the remaining amount of the program manager’s time — understanding the OEM customer’s program needs and managing OEM customer’s perceptions and satisfaction.
The internal aspect of program management is commercial in nature and involves:
- profit and loss statements
- balance sheets
- cash flow statements
The external aspect of program management is focused on the OEM customer and primarily involves execution management and addressing some of the customer’s key questions:
- ‘What’ am I getting?
- ‘When’ am I getting it?
- ‘How much’ am I paying for it?
Effective vs. efficient program management
Program managers that do ‘everything’ may be efficient. However, an effective program manager does the ‘right’ things. (If the program manager is not doing what is important…it does not matter how efficient the program manager is)
Single point of contact
In most instances, all OEM outsourcing program information flow from the customer destined for the contract manufacturer should pass through contract manufacturing program management. Equally, all contract manufacturing information destined for the customer should pass through program management.
Program management is the only functional department that is allowed to commit to the customer. In short, program management’s role is to transform the OEM customer’s vision into an executable plan.
Program management responsibilities
While there are many other program management responsibilities, a few of these responsibilities include:
- Tracking changes in customer end-user demand volumes against contract manufacturer’s capabilities
- Forecast managementProgram managers help ensure any unusually ‘increased’ customer product demand quantities are billed-to, and collected-on, by the contract manufacturer (terms are usually agree on in advance and spelled out in the contract service agreement)
- Backlog management (program managers must ask questions)
- How large is the OEM customer’s production backlog?
- Why is the backlog there?
- How long will it take to build out?
- How much backlog does the customer want the contract manufacturer to hold indefinitely?
- Shipping managementProgram management must determine any reasons for production manufacturing shortfalls in quantity committed by month vs. production quantities actually shipped
- Are there OEM customer issues?
- What are the contract manufacturer’s internal issues?
- Revenue managementProgram management must help determine reasons for shortfalls in not meeting the contract manufacturer’s revenue targets for the month vs. actual revenues (questions: are there OEM customer issues? Internal contract manufacturing issues?)
- Program transfersProgram managers help transfer OEM product programs into the contract manufacturing location(s).
- Finance management and collectionProgram managers help ensure the customer is paying invoices on-time. When this does not occur, where appropriate, the program manager applies late charges. Program management is also intimately involved in the customer quote and contract manufacturing development and negotiations processes.
- ECO (engineering change order) management and collectionProgram managers also work with the ECO process to ensure all OEM customer change orders are properly implemented throughout the operations. This might involve tracking ECO quantities, implementation turnover time, and problems with implementation.
- NRE management and collectionProgram managers help manage and track non-recurring engineering (NRE) expenses and properly bill such to the OEM customer while ensuring NRE bills are paid for on time.
- Overtime management and collectionProgram managers ensure overtime labor, driven by customer demand, is paid for by the customer.
The role of program manager with program management also involves hosting and attending a number of meetings. These meetings can be daily, weekly, monthly, or quarterly in frequency. Meetings are often run by program management. Some may involve contract manufacturing functional group personnel only while some meetings require attendance and involvement of the OEM customer
Program manager desirable qualities and traits
Program managers should be able to communicate complex issues and help gain consensus through the various levels of organizations, whether internally or externally, in order to accomplish what needs be done.
Program managers should have experience working with OEM-contract manufacturing relationships. The program manager must understand OEM customer-related demands and have a keen sense for urgency.
Ability to read engineering schematics
Program managers should be able to read engineering drawings, technical documents, and schematics and, should be able to relate any important changes to engineering and other functional groups.
Materials and supply chain understanding
Program managers should understand how materials demand is driven; organized, and the systematic management of materials…relative to manufacturing. Understanding of supply chain manufacturing concepts; materials and enterprise resources planning, vendor-managed inventory (VMI) systems and, regional hub distributions is also important.
Conflict resolution capabilities
Program managers are the central focal point between the contract manufacturer and the OEM and program managers often find themselves as mediators, in between different functional groups. Program managers should be able to handle conflict. Understanding how to balance multiple customer demands, with multiple personalities, for multiple OEM customer programs can be complex and conflicts will surface.
‘How’ conflict is handled is extremely important to the health of the OEM and contract manufacturing relationship. And, with conflict comes criticism…program managers are most effective when they are able to not take criticism personally.