Contract Manufacturers

 

Xmultiple's Engineering Department


A contract manufacturer ("CM") is a manufacturer that contracts with a firm for components or products. It is a form of outsourcing.

There are many benefits to contract manufacturing. Some of the benefits are listed below.

Cost Savings V 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 China, to benefit from the low cost of labor.

Mutual Benefit to Contract Site V A contract between the manufacturer and the company its producing for may last several years. The manufacturer will know that it will have a steady flow of business until then.

Advanced Skills V 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.

Quality V Contract Manufacturers are likely to have their own methods of qualitycontrol in place that helps them to detect counterfeit or damaged materials early.

Focus V Companies can focus on their core competencies better if they can hand off base production to an outside company.

Economies of Scale V 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.

 

Contract Manufacturers Lists

 

 

Is this answer helpful?

 

Back to Search Knowledge Base

Back to Discussion Forum

Back to Frequently Asked Question

Glossary of Terms