What is Contract Manufacturing?

What is Contract Manufacturing?

It seems everyone has an idea for a product that they want to bring to market these days.  As a result, contract manufacturing has seen a boom in recent years. Despite having several names, the general industry term for farming out production to an outside firm is known as contract manufacturing. There are many benefits to using this, from not needing to invest in specific production equipment, to a reduction in labor costs.

Choosing a manufacturer means that the hiring firm can focus on what it does best, which is creating, marketing, and selling the products. The hiring firm will design and request a product to certain specifications, and then the contract manufacturer will produce that as requested. This has been done many times in the construction supply industry, where it’s both time and money expensive to invest in a manufacturing facility. By contracting out the manufacturing of the actual product, capital can be invested in expanding to different sales markets and increased revenues.

The Benefits of Contract Manufacturing
Most companies who choose to outsource production to a contract manufacturing firm do so for one of three reasons: ease, cost savings, and efficiency.  These are all important when trying to saturate a market with a specific product and contract manufacturing allows this to happen very quickly.

Ease: It’s difficult enough to create a new product, patent it, and then have to market and sell it. Using a contract manufacturer allows you to have your item produced easily, without the headaches of starting a manufacturing plant as well.

Cost Savings: Economies of scale is the biggest cost savings when producing new items. A manufacturer that is already producing similar items to your product will be able to add it to the production line with little additional cost, therefore lowering your cost of goods. There could also be taxation benefits, energy costs, and general labor savings to consider.

Efficiency: In the time it takes one company to design a product, figure out how to manufacture it, and train a labor force, their competitors could beat them to market by hiring a contract manufacturer. It’s simply more efficient to hire someone to create the product.

Benefits of Partnering with OrderMatic’s Contract Manufacturing Division

  • Highly reputable manufacturer with over 60 years in operation
  • Hybrid manufacturing (structural, mechanical, electrical) eliminates shopping around for multiple vendors
  • Able to handle both high volume contracting and unique custom jobs
  • 20+ year Project Management team

If you have a sound product that needs to be brought to market, leave the production up to the experts, and leverage contract manufacturing.