What is Contract Manufacturing? Definition and Applications for Your Product
The contract manufacturing definition is straightforward: it is when one company hires another to produce a product. What is decidedly less clear is how to apply this to your unique project. As with most things in life, even the simplest definitions can quickly branch out into complexities that threaten to trip you up. However, you can gain a firmer grasp on what contract manufacturing can provide for you by reviewing the answers to some commonly asked questions.
Is Contract Manufacturing Considered a Form of Outsourcing?
Since contract manufacturing involves one party reaching out to a manufacturing company to produce an item to spec, the answer to this is yes. The process starts when a business has created and tested a product to the satisfaction of its internal stakeholders and investors. They then reach out to a manufacturer that offers contract production services, ideally doing so exclusively, using the design specifications to produce the items.
Contract manufacturers can offer many attractive aspects not available to do-it-yourself or on-demand manufacturers. Discounts on materials, the ability to provide rapid prototypes to assist your final testing, and design assistance are all beneficial elements offered by an ideal contract manufacturer. These benefits gain steam when a localized manufacturer is chosen, which makes communications and distribution easier, and adds the “buy local” marketing aspect.
What Additional Attributes Should a Contract Manufacturer Possess?
Signing a contract with a manufacturer makes them an important business partner and a driving element of success for your project. It makes sense then to dive deeper into all that this partner provides to your project—and to understand their demonstrated success with similar projects—before signing. After all, this is a relationship that you will need to continuously monitor and manage to assure your customers and investors that only high-quality versions of your products make it to market.
With that in mind, here are several important items to keep in mind while selecting your manufacturing partner:
- They should be a stable presence in the marketplace, including a high-value reputation and possessing sound financials.
- The production facility must be well-managed and organized with an emphasis on safety and cleanliness.
- Their quality standards must align to ISO certifications.
- They must have the ability to quickly adapt production runs to align with customer demands.
Additionally, it is important to note the quoted costs by your manufacturing partner and to ensure that overruns or hidden costs cannot be added to the original estimate. This allows you to maintain consistency in the prices you quote customers and limits unexpected financial liabilities down the road.
Why Should I Use Contract Manufacturing for My Project?
The reasons for choosing to utilize the benefits of contract manufacturing will vary from project to project. However, several of the core advantages will be consistent regardless of application. Lowering of expenses is one, due to the competitive nature of manufacturing, and the obvious financial gain of not having to build or operate your own manufacturing facility. This removes much of the financial burden of maintaining ISO certifications or skilled staff.
Contract manufacturing allows your team to remain focused on the evolution of your project and its marketing. The ability to harness a U.S.-based manufacturing partner will limit cost points that international production could lead to, as well as minimize the effects of trade and distribution issues. A U.S.-based partner will present you with a quality assurance that better aligns with the features of your design.
Are There Any Drawbacks to Taking this Route?
There are several examples that can quickly fill the cons column when weighing the advantages of partnering with a contract manufacturer. But instead of listing the most common ones here, take note: the biggest drawbacks of outsourcing production, such as loss of control over quality or volume, can all be mitigated during your search. Refining your search process will instantly re-mediate almost all potential drawbacks, except for one potentially important area: your public relations.
One of the biggest drawbacks to outsourcing manufacturing is the potential of your brand as being perceived as a contributor to job displacement. Avoiding this hot-button topic can be minimized by choosing a local manufacturing partner that has a vested interest in fueling the business success of U.S.-based businesses, as well as those operating in the immediate geographic area. Staying local during your partner selection process will be a marketing point to be proud of.
Can This Contract Manufacturing Definition Suit Your Project?
The most accurate statement to make about the definition of contract manufacturing is that it can be molded and adapted to almost any project. This makes it necessary for you to know exactly what you need to bring your project from the drawing table to the customer. But sometimes filling in all of the gaps can be especially challenging. Thankfully, there is a local contract manufacturer that can lend guidance in each area to help get your project off to a running start.