Why Contract Manufacturing Companies Are Thriving

In tough economic times designers of products will do everything that they can in order to cut down on costs. for many designers this means that the attractions of contract manufacturing companies become almost irresistible. Those who not only design but also develop formulas for certain products also make use of contract manufacturing companies in order to cut down on costs.

The contract manufacturer will study the product or products then revert to the client with a cost based on a variety of inputs. these inputs can include labor, the cost of tooling up for the job, any specialized skills that may be required (especially if those skills have to be hired in) as well as the materials that are required to complete the job. In some cases there may be other costs involved such as legal fees and insurance.

In some instances the client may not require a complete product but will only require a certain portion of the manufacturing process to be outsourced to the contract manufacturer.

The advantages of this sort of outsourcing are myriad. 

Firstly there are cost savings in terms of investment in plant and specialized machinery. There are also savings to be had as far as the human resources are concerned. The client company will not have to invest in training or have a dedicated human resources department. they will also save on the fees due to recruiters who are usually required to find employees to provide skills during the manufacturing process. 

In addition the contract manufacture will in all probability be able to source raw materials at a significantly lower cost than the  client would be able to. The contract manufacturer - especially where they specialize in a particular field will have long standing relationships with suppliers that will lead to these cost savings which can then be passed on to the client.  

The fact that the contract manufacture has a wide range of clients means that each of those clients enjoys savings due to economies of scale. Plants work full time and the fact that there is no downtime allows the contract manufacturer to pass savings due to economies of scale directly to the client.

Contract manufacturers are also able to keep a close watch for any quality problems that may occur during the manufacturing process. Skilled personnel can pick up these problems early - something that the designers and developers of the product may not have sufficient experience to be able to do.

But there can be downsides to using a contract manufacturing business. The client must trust that the lack of direct control that they have over the manufacturing process will not affect the quality of the final product. of course handing over intellectual property which is used during the manufacturing process has its own set of risks which should not be underestimated.

The key to a successful client / outsourced manufacturing concern relationship must be based on trust. this is the reason that so many of these relationships are long term.