Navigating Factory Transitions: Key Risks, Benefits, and Expert Tips

Q&A with Operations Experts Wayne Miller & Michael Keer

Switching factories or contract manufacturers can be one of the most impactful and challenging decisions a company makes. Whether it’s for cost savings, improved capabilities, or risk mitigation, making a move is never as simple as it seems. It requires strategic planning, thorough documentation, and a deep understanding of the risks involved.

To better understand these challenges, we spoke with Wayne Miller, an expert in new product development and manufacturing, and Michael Keer, Founder of Product Realization Group, who has helped dozens of companies scale production successfully.

Q: Why do companies switch factories?

Wayne Miller: Companies are always sensitive about changing factories. But one of the biggest reasons to move is competition. When a new factory is vying for your business, they will offer better pricing, better service, or more favorable terms—things your existing manufacturer may not be willing to provide unless they feel pressure.

You don’t always end up switching. Sometimes you just go through the process to negotiate better terms with your current factory. But either way, it is critical to evaluate multiple contract manufacturers so there is competition. It forces them to sharpen their pencil.

Michael Keer: That is true, but I wouldn’t underestimate how much effort it takes to make a move. If you are switching, you basically need to double your resources for a while. Suddenly, instead of managing one factory, you are managing two. You need double the materials, double the oversight, and double the coordination. It is a massive undertaking.

Q: What are the hidden risks and costs of switching factories?

Michael Keer: One thing people do not think about is intellectual property (IP) ownership. You might assume all the production knowledge belongs to you—but does it?

I remember a case where a company tried to move to a new manufacturer, only to discover that their current supplier had developed all the product testing processes. When the company said, “We’re moving,” the factory responded, “That’s fine, but the test is ours. If you want it, it will cost you $600,000.”

You do not realize what you are getting into until you dig deep. There might be critical testing software, design tweaks, or sourcing decisions your factory made that you do not have control over. Then suddenly, you are in a bind.

Wayne Miller: That is exactly right. I am working with a company right now that thought they could just move production over to a new contract manufacturer. Turns out, they did not have clear specifications for all their parts because the original factory had handled procurement.

For example, their product had a camera assembly—it worked fine, but when they tried to move to a new manufacturer, they had no documentation on where that camera came from. Now they are scrambling to find a new source for a component that was already integrated and working.

The other issue is documentation. Over time, factories make small tweaks to the process—maybe they adjust a soldering temperature, maybe they swap a component. But if those changes are not documented, you could end up transferring an outdated design to the new factory and suddenly facing major production issues.

Michael Keer: That is why PLM (Product Lifecycle Management) systems are so important. If you have been relying on “tribal knowledge” at your factory, those undocumented tweaks could come back to haunt you.

Companies that do not have their designs, BOMs (Bills of Materials), and testing procedures locked down will struggle massively during a transition.

Q: How do tariffs and geopolitics affect factory transitions?

Michael Keer: Another thing people overlook is tariffs. Just because you move final assembly to a different country does not mean you are avoiding tariffs.

If you are still buying subassemblies or raw materials from China—or any country with a tariff—you are still paying those fees. Companies think, “Oh, if we move final assembly to Mexico, we dodge the tariffs.” But that is not how it works. If your core materials are still coming from China, those tariffs stay in place.

Wayne Miller: And the way tariffs are defined is not always clear. Sometimes you need lawyers or trade experts to help classify your components properly so you are not paying unnecessary fees.

Beyond tariffs, companies are also looking at supply chain resilience. That is where you see the “China Plus One” strategy— instead of moving everything out of China, companies are adding factories in other regions, such as Vietnam, Mexico, or India, so they are not fully dependent on one country.

Q: What are the smartest strategies for managing a factory transition?

Wayne Miller: One of the best strategies I have seen is not necessarily moving factories, but adding capacity.

We have a customer whose product is taking off, and they needed more production capacity. Instead of shifting completely, they added a second manufacturing site. That way, if one factory underperforms, they have a backup.

And here is the interesting part: once the original factory saw that there was competition, they improved dramatically. Suddenly, quality got better, deliveries became more reliable. A little pressure can be a great motivator.

Michael Keer: That is a great point. Another strategy is tooling relocation. If your product has a lot of custom molds or enclosures, you might not need to start from scratch.

Instead of building new tooling, you can develop it in Asia and then move it to a U.S. or European facility. That way, you keep production close while still leveraging lower-cost development.

Q: What is the biggest mistake companies make during a factory transition?

Wayne Miller: If you take nothing else away from this conversation, remember this: you need people on the ground during a transition.

You cannot just ship your documentation and expect things to go smoothly. You need a team at the factory, solving problems in real-time.

I have seen companies try to manage a transition remotely, and it is a disaster. Issues pop up, and suddenly your product launch is delayed by six months or more.

Michael Keer: And it is not just supply chain people. You need engineers on-site too.

Once you start moving production, you often discover design flaws, component inconsistencies, or unexpected dependencies. If you do not have engineering support there, you are in trouble.

Final Thoughts: Is It Worth It?

Moving a factory or contract manufacturer can be a game-changer, but it is not without risks. Companies that succeed in these transitions plan thoroughly, document everything, and have strong oversight during the process.

Before making a move, consider these key questions:

• Do we fully own our IP and testing processes?
• Are all our BOMs and design files up to date?
• Do we have the resources to run two factories temporarily?
• Are we prepared for hidden tariffs or sourcing challenges?
• Do we have a team on-site to troubleshoot issues?

A well-planned transition can result in cost savings, better quality, and greater flexibility—but only if done right.

Want Expert Guidance?

If you’re planning a factory move and want expert advice, contact us.