Probable, you have realized there are 100s of contract manufacturing companies with https://www.innomanufacturing.com/ being one of them. But, there is this million dollar question that seems to confuse many people, “when is the right time to seek contract manufacturing services?” You might have realized, the big boys like Microsoft, GMC, Apple, Samsung, Google and many others do also hire contract manufacturers. If you seem not to understand why and when to go for CMs; below is the explanation you need.

Seek contract manufacturing services while starting up a business under a strict budget

There are few instances when investors or newbie investors start their business with the full needed budget set aside. At times, many opt to get their business going and see it grow to a self-sustaining company. If you are starting your manufacturing business under a tight budget, it would be wise if you get into a contract manufacturing agreement with an already established CM company. Working with a contract manufacturer will help cut down manufacturing cost and employees’ wages until your business cash flow gets healthy.

Use Contract Manufacturing Services When Unveiling a New Product Brand

Contract Manufacturer Capabilities An experienced contract manufacturer can help with small packaging efforts for large chemical producers. Contract manufacturers are geared for flexibility and provide quick turnarounds while employing lower cost structures. There are myriad strategic benefits to using a contract manufacturer. By outsourcing manufacturing, a supplement marketing firm does not have to worry about the great financial burden of acquiring and maintaining a plant, equipment and personnel, or the increasingly active government regulations and the general 'headache' that is intertwined with a manufacturing plant. These organizations allow pharmaceutical companies to outsource some aspects of their business, freeing up valuable time to focus on drug discovery and drug marketing. Pharma IQ compiled a list of the top ten Contract manufacturing organizations (CMOs) in drug discovery for 2018. The piece got us thinking. Contract And Custom Chemical Manufacturer – InChem Saves You Money, Time And Risk Contract chemical manufacturing at InChem begins with an assessment of your needs as a customer. In some cases customers come to InChem with their own formulas and processes which they want us to follow. Contract Manufacturing Essential Wholesale & Labs, located in the Pacific Northwest, is a premium skin and hair care manufacturer. We have a well-equipped lab with experienced formulators and aestheticians, ready to work with you to create custom products that inspire you and your customers.

When planning to venture into new product brand manufacturing, no investor is 100% sure that his or her product will make it in the competitive market. Honestly, the establishment of a new product brand is accompanied by trial and error attempt in efforts to make that product relevant to customers. If you are a veteran or a newbie in the manufacturing industry, but you’re not ready to invest your money and time in trial and error manufacturing, outsourced manufacturing companies are the way to go. All you will need to do is choosing an experienced and reputable company with the right machinery.

Contract Manufacturing Services are Essential Will undergoing financial Crisis

In business, not all days are good. Sometimes your company might be passing over the severe financial crisis. In such times, you better seek contract manufacturing servicesto help you cut down manufacturing cost and save manufacturing time for other services, e.g. advertisements. You can opt to seek the help of a contract manufacturer until when your company will get back on to its financial feet.

Contract Manufacturing Services Can Fast Track Your Product Quality Improvement

Regardless of your product types, there are several types of contract manufacturing companies out there. Remember, most of the big contract manufacturers have worked with several clients. With their immense experience under their belts, if you hire them, there is no way you will suffer, trying different formulas to improve your products. These companies already understand what is needed of them to produce a quality product. Hire them, and they will save you the trial and error time and money.

Use Contract Manufacturing Services when product Demand is Unpredictable

In business, you must accept there are times of high tides and low tides. Sometimes, your product will be on high demand and other times the demand will decrease. In connection to that, contract manufacturing can help you save compared to when you’re manufacturing the products by yourself. Thus, during low demand seasons, consider hiring contract manufacturing companies, and you will cut some manufacturing cost.

Conclusion

Although you have realized contract manufacturing Servicescan be of great help; not all companies are worth hiring. Take your time and study every company to know which one fits your needed manufacturing quality, the scale of production and one the one you can relate well with.

Is It Time To Use A Contract Manufacturer For A

A contract manufacturer ('CM') is a manufacturer that contracts with a firm for components or products (in which case it is a turnkey supplier). It is a form of outsourcing. A contract manufacturer performing packaging operations is called copacker or a contract packager. Brand name companies focus on product innovation, design and sales, while the manufacturing takes place in independent factories (the turnkey suppliers).^[1]

Most turnkey suppliers specialize in simply manufacturing physical products, but some are also able to handle a significant part of the design and customization process if needed. Some turnkey suppliers specialize in one base component (ex. memory chips) or a base process (e.g. plastic molding).^[1]

Is It Time To Use A Contract Manufacturers

Business model[edit]

In a contract manufacturing business model, the hiring firm approaches the contract manufacturer with a design or formula. The contract manufacturer will quote the parts based on processes, labor, tooling, and material costs. Typically a hiring firm will request quotes from multiple CMs. After the bidding process is complete, the hiring firm will select a source, and then, for the agreed-upon price, the CM acts as the hiring firm's factory, producing and shipping units of the design on behalf of the hiring firm.

Job production is, in essence, manufacturing on a contract basis, and thus it forms a subset of the larger field of contract manufacturing. But the latter field also includes, in addition to jobbing, a higher level of outsourcing in which a product-line-owning company entrusts its entire production to a contractor, rather than just outsourcing parts of it.

Industries that use the practice[edit]

Many industries use this process, especially the aerospace, defense, computer, semiconductor, energy, medical, food manufacturing, personal care, packaging, and automotive fields. Some types of contract manufacturing include CNC machining, complex assembly, aluminum die casting, grinding, broaching, gears, and forging. The pharmaceutical industry uses this process with CMs called contract manufacturing organizations. In the semiconductor industry, this practice is called the foundry model. Contract manufacturing is specially prevalent in the electronics industry.

Purpose, benefits, and risks[edit]

There are many benefits as well as risks to contract manufacturing. Companies are finding many reasons why they should outsource their production to other companies. However, production outside of the company has many risks attached. Companies must first identify their core competencies before deciding about contract manufacturers. A company's competencies are what make them competitive in the marketplace. If a company allows another company to take control of them, it loses that advantage.

When deciding about contract manufacture, the company should weigh the benefits and associated risks. For small companies, contract manufacturing may not be a good business strategy. For large companies that are trying to extend into new markets, contract manufacturing may be a good choice.

Benefits[edit]

• Cost savings – Companies save on their cost of capital because they do not have to pay for a facility and the equipment needed for production. They can also save on labor costs such as wages, training and benefits. Some companies may look to contract manufacture in low-cost countries, such as India, to benefit from the low cost of labor.^[2]
• Mutual benefit to contract site – A contract between the manufacturer and the company it’s producing for may last several years. The manufacturer will know that it will have a steady flow of business until then.^[2]
• Advanced skills – Companies can take advantage of skills that they may not possess, but the contract manufacturer does. The contract manufacturer is likely to have relationships formed with raw material suppliers or methods of efficiency within their production.^[3]
• Quality – Contract manufacturers are likely to have their own methods of quality control in place that helps them to detect counterfeit or damaged materials early.
• Focus – Companies can focus on their core competencies better if they can hand off base production to an outside company.^[3]
• Economies of scale – Contract manufacturers have multiple customers that they produce for. Because they are servicing multiple customers, they can offer reduced costs in acquiring raw materials by benefiting from economies of scale. The more units there are in one shipment, the less expensive the price per unit will be.^[3]

Risks[edit]

• Lack of Control – When a company signs the contract allowing another company to produce their product, they lose a significant amount of control over that product. They can only suggest strategies to the contract manufacturer; they cannot force them to implement them.
• Relationships - It is imperative that the company forms a good relationship with its contract manufacturer. The company must keep in mind that the manufacturer has other customers. They cannot force them to produce their product before a competitor’s. Most companies mitigate this risk by working cohesively with the manufacturer and awarding good performance with additional business.
• Quality concerns – When entering into a contract, companies must make sure that the manufacturer’s standards are congruent with their own. They should evaluate the methods in which they test products to make sure they are of good quality. The company has to rely on the contract manufacturer for having good suppliers that also meet these standards.
• Intellectual property loss – When entering into a contract, a company is divulging their formulas or technologies. This is why it is important that a company not give out any of its core competencies to contract manufacturers. It is very easy for an employee to download such information from a computer and steal it.
• Outsourcing risks – Although outsourcing to low-cost countries has become very popular, it does bring along risks such as language barriers, cultural differences and long lead times.^[3] This could make the management of contract manufacturers more difficult, expensive and time-consuming.
• Capacity constraints – If a company does not make up a large portion of the contract manufacturer’s business, they may find that they are de-prioritized over other companies during high production periods. Thus, they may not obtain the product they need when they need it.
• Loss of flexibility and responsiveness – Without direct control over the manufacturing facility, the company will lose some of its ability to respond to disruptions in the supply chain. It may also hurt their ability to respond to demand fluctuations, risking their customer service levels.
• Pricing – This addition of a second company and second profit margin to be achieved, adds in cost to the product. The impact is seen either in a higher selling price to the customer or in a reduced profit margin for the company.

Protectionism[edit]

In an international context, establishing a foreign subsidiary as a contract manufacturer can have favorable tax benefits for the parent company, allowing them to reduce overall tax liabilities and increase profits, depending upon the activities of the contract manufacturer. This is a form of true protectionism.

The iPad and iPhone, which are products of Apple Inc., are manufactured in China by Foxconn. Some devices may also be manufactured by Pegatron.^[4] Apple may move some fraction of iPhone assembly into the United States in the near future.^[5]

See also[edit]

• Subcontractor (SUB)
• Interactive Contract Manufacturing (ICM)
• Electronic Contract Manufacturing (ECM)
• Electronics Manufacturing Services (EMS)
• Original Design Manufacturer (ODM)
• Joint Design Manufacturing (JDM)
• Contract Manufacturing Organization (CMO)
• Private Label or Parts List (PL)
• Bill of materials (BOM)

Is It Time To Use A Contract Manufacturer Cost

References[edit]

1. ^ ^abVind, Ingeborg; Fold, Niels (January 2007). 'Multi-level Modularity vs. Hierarchy: Global Production Networks in Singapore's Electronics Industry'. Geografisk Tidsskrift-Danish Journal of Geography. 107 (1): 69–83. doi:10.1080/00167223.2007.10801376. ISSN0016-7223.
2. ^ ^ab[1], Knowdell, Jenny. 'The Benefits and Disadvantages of Contract Manufacturing.' IQS Newsroom. Industrial Quick Search, Inc, 16 April 2010. Web. 21 Feb 2011.
3. ^ ^abcdCohen, Soshanah, and Joseph Roussel. Strategic Supply Chain Management: The Five Disciplines for Top Performance. United States: The McGraw-Hill Companies, Inc, 2005. 316. Print.
4. ^'Inside One of the World's Most Secretive iPhone Factories'. Bloomberg. April 24, 2016. Retrieved 23 December 2016.
5. ^'Apple is exploring moving iPhone production to the US: Report'. CNBC. 18 Nov 2016. Retrieved 23 December 2016.

External links[edit]

Is It Time To Use A Contract Manufacturer Agreement