| INDUSTRY RESEARCH The contract research and contract manufacturing industry is complex and rapidly changing. In addition, there are many factors involved in whether a contract service provider will meet the specific needs of a company. These go well beyond technology, capacity, and cost as evidenced by considerable differences in customer satisfaction among contract manufacturers large and small. PO uses a variety of information sources to research the worldwide contract manufacturing industry and to stay current on latest developments. We maintain annual directories of contract manufacturers for key regions worldwide. We subscribe to a number of monthly industry publications including regional market newsletters. We also subscribe to an on-line news screening and retrieval service that monitors major news and business publications for latest developments. Our affiliations and information network continue to expand. Much first-hand knowledge is gained from on-going engagement due-diligence work. We supplement this by periodically conferencing with high profile companies well-experienced with outsourcing to review their selection and relationship management methods, with contract manufacturers and equipment vendors to benchmark conversion cost economics and review new processes, and with other knowledgeable industry sources. DUE-DILIGENCE We identify the right contract manufacturers for our clients using industry research, experience and extensive due-diligence. We take the time to conduct targeted on-site fact finding and analysis with contract manufacturers and selectively with their customers, vendors and other sources. This tactic, while more time-intensive, provides important insight into strengths, weaknesses and overall compatibility. It also provides a solid base for recommendations, rather than relying on polished presentations and plant tours, which sometimes are not true representations of the services delivered. When conducting due-diligence with contract manufacturers, we focus on business processes and operating factors that are proven to be the best predictors of performance, i.e., the ability to consistently meet commitments and the on-going, changing needs of our clients. Auditing operating processes is done selectively to validate performance data, relevancy and reliability of information systems. These include order entry procedures, inventory and supplier management practices, production and quality control systems, and customer returns.
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