advantages-of-contract manufacturing

Advantages of Contract Manufacturing

Contract manufacturing is a kind of outsourcing product manufacturing service that happens between the hiring company and its manufacturer. The hiring company provides their manufacturing specification and requirement, the manufacturer produce the products according to agreed terms, usually they would sign a specific contract, which is also called contract manufacturing service.


There are many global top 500 companies that use contract manufacturing service, like Apple, Amazon, Microsoft, etc. You might wonder why those big companies could not set up their own manufacturing facility, instead of working with contract manufacturers. Yes, this is a good question, here below let’s have a review on advantages of contract manufacturing:

There are five core advantages while working with contract manufacturers:

      1. Energy Saving and Core Competition Building

It’s a common sense that you might need take lots of energy to boost a project from an idea into marketable products. You have to juggle marketing, product, interior team, social relationship, and competitors. And you may work 12 hours even longer from morning to night, especially when you are a startup, you have less team member and have to face many different job. At this time, working with contract manufacturing companies is your best choice to save your time and energy, so that you can focus on your energy on marketing.


       2. Minimize your investment

As we know, capital is important to any business whatever you are a big company or small business runner, and every one wants to maximize profit while using less capital.


Without working with contract manufacturer, you have to invest lots of money on manufacturing facility, operational workers, management staff, etc. For a start up or small business, it could be a large investment on building a manufacturing site. For example, it takes at least $50,000~$100,000 for a CNC machine, $15,000~$50,000 for an injection molding machine, $50,000~150,000 for a product assembly line. Meanwhile the labor cost in US or European is around $20~$30 per hour, it’s quite expensive for many industries.


By working with contract manufacturing companies, you can greatly save those money on building product manufacturing site, which lead your capital on marketing, product development, and customer relationship.


       3. Cut Down Your Business Risk


You might be aware of that any business exist potential risk, especially for some new project, as you might just have a brainstorm or idea, there are many unrealized risk existing your project. If you are going to manufacture your products in house by yourself. It could increase your risk on both capital and manufacturing expertise. And your business could break up if either of these two factors fails.

         4. You don’t have to be a manufacturing expert while working with contract manufacturer


Contract manufacturers have strong background and resource in the manufacturing filed, which could make your project easier and quicker. Meanwhile a comprehensive manufacturing knowledge an experience is critical to a new product.


Most of time, a product designer or business startup has less manufacturing resource or expertise compared to contract manufacturer. Do they need to learn and become an expert? Actually it’s not necessary, as the hiring company should head its direction on sales and competition, instead of being a manufacturing company, which could definitely create much different value in future. This is why we are saying “you don’t have to be a manufacturing expert”.


          5. Speed up your project progress


As professional contract manufacturers, they must have diverse kind of resource and expertise on manufacturing, and they can operate a manufacturing requirement quickly. For example, if you are going to manufacture an electronic products in Shenzhen China, starting from prototype to finished mass production, you can find ton of experienced manufacturers who can deal with prototype in 1~3 days, mold tooling in 15~20 days, and run a mass production in 10~15 days(take 2000 pcs ~5000 pcs for example). On the other hand, if you need to source any standard components, it just takes hours to get it(from local sourcing market).


If you are not familiar with a manufacturing process, working with contract manufacturing companies could be your first choice. Otherwise you could takes months or longer time to finish your project.