To be sure that all parties involved in a contract manufacturing partnership are on the same proverbial page, opening lines of communication and discussing potential operating models upfront is critical. Having an understanding of the appropriate working model for the relationship will help each step in the process get underway in the most efficient way possible. But deciding on this operating model often is a divisive topic among companies and even those within one organization.

In analyzing the contract manufacturing relationship, Chicago-based A.T. Kearney Inc. has set forth some guidelines to make this decision-making process more finite. According to A.T. Kearney, there are three "fundamentally different" contract-manufacturing models: "contract-led," "controlled" and "coordinated." Each approach considers the inherent risk characteristics of a project and the sophistication of the contractor's capabilities. When considered in relation to each other, the two primary factors indicate the following, according to A.T. Kearney:

Products with more predictable demand profiles, fewer changes or long life cycles typically require less focus — a contract-led relationship is a strong option. A contract-led model is the most straightforward approach.

When a project needs to be more tightly managed and integrated into the supply chain, a controlled approach where the contract manufacturer is closely supervised throughout the process works best. A few disadvantages here, however, are the limitations set on fully exploiting a contract manufacturer's capabilities, retaining risk and leaving inventory on the balance sheet.

When a relationship cannot justify the investment of a controlled approach, a coordinated approach is appropriate. This scenario most resembles a partnership, with the relationship structured around goals that most intensely utilize each party's competencies.