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A Guide to Contract Manufacturing
A Guide to Contract Manufacturing
Published: 2015/12/21
Channel: MaRS Entrepreneurship Programs
Explainer video contract manufacturing by Bückmann
Explainer video contract manufacturing by Bückmann
Published: 2017/05/02
Channel: Bückmann GmbH & Co. KG
Contract Manufacturing | Class 11 Business  International Business 1
Contract Manufacturing | Class 11 Business International Business 1
Published: 2017/10/04
Channel: Scholarslearning Classes
Seven Lessons from Manufacturing in China
Seven Lessons from Manufacturing in China
Published: 2015/12/21
Channel: MaRS Entrepreneurship Programs
How to find a contract manufacturing partner for your hardware startup
How to find a contract manufacturing partner for your hardware startup
Published: 2015/04/23
Channel: MaRS Entrepreneurship Programs
Why Apple Uses a Contract Manufacturing Model
Why Apple Uses a Contract Manufacturing Model
Published: 2016/05/31
Channel: The Motley Fool
Contract manufacturing - definition
Contract manufacturing - definition
Published: 2013/07/10
Channel: B2Bwhiteboard
MIXER: DESIGN, DEVELOPMENT & CONTRACT MANUFACTURING OF FRAGRANCES AND COSMETICS
MIXER: DESIGN, DEVELOPMENT & CONTRACT MANUFACTURING OF FRAGRANCES AND COSMETICS
Published: 2016/10/06
Channel: Mixer & Pack
ENGLEWOOD LAB, Contract Manufacturer Cosmetics & Skincare Product
ENGLEWOOD LAB, Contract Manufacturer Cosmetics & Skincare Product
Published: 2013/12/26
Channel: ENGLEWOOD LAB
Getting your own supplement line and the contract manufacturing company I use.
Getting your own supplement line and the contract manufacturing company I use.
Published: 2017/07/21
Channel: FishN Supps
Contract Manufacturing - How To Start
Contract Manufacturing - How To Start
Published: 2012/07/26
Channel: contechinternational
Contract Manufacturing Services
Contract Manufacturing Services
Published: 2010/12/13
Channel: Preco Inc.
Contract Manufacturing & Packaging Services (CMPS)
Contract Manufacturing & Packaging Services (CMPS)
Published: 2012/08/19
Channel: cmpsaustralia
How to find the right contract manufacturer for your brand!
How to find the right contract manufacturer for your brand!
Published: 2016/05/05
Channel: National Enzyme Co
Contract Manufacturing
Contract Manufacturing
Published: 2016/02/02
Channel: Centium Consulting Inc
Unimed - Contract manufacturer for medical needles since 1958
Unimed - Contract manufacturer for medical needles since 1958
Published: 2015/11/25
Channel: info Unimed
ASHA INDUSTRY - YOUR PARTNER IN CONTRACT MANUFACTURING
ASHA INDUSTRY - YOUR PARTNER IN CONTRACT MANUFACTURING
Published: 2017/09/04
Channel: ASHA INDUSTRY
Contract Manufacturer of Dietary Supplements -- NutraMed, Inc.
Contract Manufacturer of Dietary Supplements -- NutraMed, Inc.
Published: 2010/12/24
Channel: nutramedinc
Beverage School Winter 2015: Contract Manufacturing and Scaling Your Brand
Beverage School Winter 2015: Contract Manufacturing and Scaling Your Brand
Published: 2016/01/05
Channel: BevNET.com
Biddscombe International - Skin Care Private label and Contract Manufacturing
Biddscombe International - Skin Care Private label and Contract Manufacturing
Published: 2017/04/17
Channel: Legacy Tan
Contract Manufacturing
Contract Manufacturing
Published: 2015/06/08
Channel: NOVATION Industries
Contract Pharma Manufacturing & Packaging
Contract Pharma Manufacturing & Packaging
Published: 2014/04/25
Channel: WellSpring Pharma Services Inc.
Contract Manufacturing Video
Contract Manufacturing Video
Published: 2018/03/05
Channel: BEAWebmaster
Contract Manufacturing Price Model: Cost Plus
Contract Manufacturing Price Model: Cost Plus
Published: 2015/05/02
Channel: Optimum Design Associates
Outsourzia - Contract Manufacturing & Outsourcing Resources in Mexico
Outsourzia - Contract Manufacturing & Outsourcing Resources in Mexico
Published: 2015/07/16
Channel: Outsourzia Services
Third Party Contract Manufacturing, Third Party Pharma Manufacturing
Third Party Contract Manufacturing, Third Party Pharma Manufacturing
Published: 2017/01/17
Channel: NG HEALTHCARE
Contract Manufacturing Capabilities
Contract Manufacturing Capabilities
Published: 2017/10/04
Channel: Polyset Company
Contract Manufacturing & Assembly Services
Contract Manufacturing & Assembly Services
Published: 2015/09/16
Channel: Wisconsin Metal Parts, Inc.
3 Common Problems Between Pharmaceutical Companies and Contract Manufacturing Organizations (CMOs)
3 Common Problems Between Pharmaceutical Companies and Contract Manufacturing Organizations (CMOs)
Published: 2014/05/05
Channel: WellSpring Pharma Services Inc.
Universal Electronics - Reliable Contract Electronic Manufacturing in Wisconsin
Universal Electronics - Reliable Contract Electronic Manufacturing in Wisconsin
Published: 2016/06/17
Channel: UEIMedia
Medicap Laboratories Inc. - Nutraceutical Contract Manufacturer
Medicap Laboratories Inc. - Nutraceutical Contract Manufacturer
Published: 2017/01/05
Channel: Rahul Rajpura
Dynamic Blending Contract Manufacturer
Dynamic Blending Contract Manufacturer
Published: 2016/04/02
Channel: Dynamic Blending Specialists
Best contract manufacturing company in india
Best contract manufacturing company in india
Published: 2017/01/16
Channel: Syndy Pharma
Introduction to Contract Manufacturing - DragonInnovation.com
Introduction to Contract Manufacturing - DragonInnovation.com
Published: 2013/11/05
Channel: Dragon Innovation
About RK Manufacturing - Medical Device Contract Manufacturer
About RK Manufacturing - Medical Device Contract Manufacturer
Published: 2017/09/19
Channel: RK Manufacturing Corporation
Contract Manufacturing
Contract Manufacturing
Published: 2012/04/18
Channel: IQS Directory
DM Pharma - Formulation Exporters and Contract Manufacturer
DM Pharma - Formulation Exporters and Contract Manufacturer
Published: 2015/07/23
Channel: DM Pharma
PureNSM.com Supplement Contract Manufacturing
PureNSM.com Supplement Contract Manufacturing
Published: 2015/11/25
Channel: Nutritional Supplement Manufacturers, INC.
zeonlifesciences - Contract manufacturer, third party manufacturer
zeonlifesciences - Contract manufacturer, third party manufacturer
Published: 2012/11/07
Channel: zeonlifescience
Microtronix Electronic Contract Manufacturing 2015
Microtronix Electronic Contract Manufacturing 2015
Published: 2015/12/17
Channel: Microtronix Manufacturing
Spinnaker Contract Manufacturing
Spinnaker Contract Manufacturing
Published: 2016/09/02
Channel: Spinnaker Contract Manufacturing, INC.
SMC Manufacturing Services: A Principles-based Electronics Contract Manufacturer.
SMC Manufacturing Services: A Principles-based Electronics Contract Manufacturer.
Published: 2014/02/27
Channel: SMC Manufacturing Services
SKINCARE Formulation Lab & Custom Contract Manufacturer - G.S. Cosmeceutical 2/3
SKINCARE Formulation Lab & Custom Contract Manufacturer - G.S. Cosmeceutical 2/3
Published: 2013/06/20
Channel: GSCosmeceutical
Deerland Enzymes - Contract Manufacturing
Deerland Enzymes - Contract Manufacturing
Published: 2013/03/25
Channel: Deerland Enzymes and Probiotics
Medicap Laboratories Inc - Nutraceutical Contract Manufacturer
Medicap Laboratories Inc - Nutraceutical Contract Manufacturer
Published: 2017/01/05
Channel: Rahul Rajpura
Searching for
Searching for 'White Label' Contract Manufacturers
Published: 2017/11/30
Channel: Straight 2 Licensing With AmyJo
plastic injection molding contract manufacturing
plastic injection molding contract manufacturing
Published: 2016/12/12
Channel: SincoPlastics.com
Artesan Pharma contract manufacturer
Artesan Pharma contract manufacturer
Published: 2015/10/12
Channel: Artesan Pharma
Benefits of Contract Manufacturing Services from Umendra Exports
Benefits of Contract Manufacturing Services from Umendra Exports
Published: 2018/07/14
Channel: Best Products & Services Information
MSK PLAST Leading Contract Manufacturer of Plastic
MSK PLAST Leading Contract Manufacturer of Plastic
Published: 2017/11/29
Channel: MSK Plast
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WIKIPEDIA ARTICLE

From Wikipedia, the free encyclopedia
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A contract manufacturer ("CM") is a manufacturer that contracts with a firm for components or products. It is a form of outsourcing. A contract manufacturer performing packaging operations is called copacker or a contract packager.

Business model[edit]

An advertisement for contract manufacturing services, in Popular Mechanics, 1905.

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 use this process with CMs called Contract manufacturing organizations.

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.[1]
  • 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.[1]
  • 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.[2]
  • 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.[2]
  • 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.[2]

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.[2] 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. Hence, Foxconn is a contract manufacturer, and Apple benefits from a lower cost of manufacturing devices.[3] 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]

References[edit]

  1. ^ a b [1], Knowdell, Jenny. "The Benefits and Disadvantages of Contract Manufacturing." IQS Newsroom. Industrial Quick Search, Inc, 16 April 2010. Web. 21 Feb 2011.
  2. ^ a b c d Cohen, Soshanah, and Joseph Roussel. Strategic Supply Chain Management: The Five Disciplines for Top Performance. United States: The McGraw-Hill Companies, Inc, 2005. 316. Print.
  3. ^ Watch your iPad being made at the Foxconn factory in China | Mail Online. Dailymail.co.uk (2012-04-12). Retrieved on 2013-09-18.
  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]

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