The main reason a company partners with a contract manufacturer is to increase throughput without increasing their own footprint. And if you can increase your throughput, you can increase opportunities to sell more and grow your revenue; this is especially true if you don’t have to expand your manufacturing facility, technological capabilities, or workforce to do so.
Industry-leading companies found that great contract manufacturers provide services that that boost two key areas:
- Efficiency: services related to lead time, available resources, expertise, engineering, and development to full production launch.
- Cost effectiveness: services that impact costs including design for manufacturability, parts substitutions, supply chain management, and labor
These factors also drive startups and small-to-midsize companies partner with contract manufacturers
Advantages of Contract Manufacturing
Capital Investment Savings
Partnering with a contract manufacturer with the space, equipment, and technology necessary to build your product means your company doesn’t have to invest in upgrading those aspects of your business in order to increase capacity and throughput.
Capacity also includes your workforce – how many people would you need to add to your workforce to increase throughput by 10%? A contract manufacturing partner will already have the workforce necessary to build the additional products so you don’t have to be responsible for salaries, wages, and other benefits.
Different contract manufacturers specialize in building different products, which typically require unique processes and materials. Since contract manufacturers each have extensive experience with certain products, they can introduce you to new methods and materials that can reduce your costs while maintaining the quality and integrity of your product.
Supply Chain Management
Using a contract manufacturer to build your product typically means you’ll transfer supply chain management for that product to your partner. This can free up crucial resources you can redeploy to other vital areas such as sales, marketing and distribution. You order one part number from your contract manufacturer, and they handle the rest of the procurement. Because they typically specialize in a certain expertise, your contract manufacturing partner will also have relationships with raw materials suppliers and have developed processes to efficiently replenish parts at the lowest cost.
A true contract manufacturing partner will have quality control systems in place, that they use throughout their production process. Measures taken to identify and eliminate potential quality issues throughout the manufacturing process significantly reduce the risk of delivering defective products.
Engineering and Expertise
Instead of trying to find experts to hire, companies can make up for their lack of knowledge in some areas by hiring the right contract manufacturer. Find a partner that has the best understanding of how to optimize your product by decreasing complexity, removing unnecessary materials, and leveraging the best processes to manufacture it.
Improve Development and Transition to Production
Having a contract manufacturer on your team to collaborate with on development will ensure a functional design that’s designed for manufacturability, increasing efficiencies and cost effectiveness. Bringing a partner in on the ground level also leads to a smooth transition into production, as opposed to the alternative of delaying production to re-engineer poorly designed parts.
The top priority for product developers is speed. Partnering with a contract manufacturer that has experience in your field will provide you with the right solutions, faster turnaround, better engineering, high-quality prototypes and a smooth transition to production.