The primary reason a company engages a contract manufacturer is to provide value-added services that the hiring company can’t effectively deliver on its own.
This includes world-leading companies such as Apple, Boeing, Nike, Adidas and John Deere, as well as small and midsize startups with specialty products. Leading contract manufacturers provide services that primarily focus on two critical areas:
- Efficiency: Areas related to lead time, available resources, skill sets, engineering, and development to full production launch
- Economically: Areas that impact costs, including design for manufacturability, production tooling and lines, raw materials, labor, and logistics
These are the two driving factors behind the utilization of contract manufacturing by the most successful startups and the largest technology companies in the world. Below, I have illustrated some key reasons contract manufacturers can add value to your business.
1. Investment savings
Outsourcing your product to a contract manufacturer unties you from operational and maintenance costs of machines and equipment. Another benefit is your company is that you're not responsible for salaries, wages and other benefits for the operators. Companies also find it beneficial to outsource production to countries with lower wages.
2. Product savings
Contract manufacturers specialize in products with unique processes and materials. With extensive experience and know-how, capable contract manufacturers introduce new methods and materials that can reduce your costs without jeopardizing the quality of your product.
3. IP confidentiality and protection
Dealing with a contract manufacturer that has IP protection protocols in place reduces the risk of your IP leaking. Having one centralized and vertically integrated contract manufacturer that controls product design, tooling, production and supply chain reduces the chance of your IP ending up in the wrong hands.
4. Allocation of resources
Using a contract manufacturer to manage your supply chain and build your product can free up crucial resources that can otherwise be redeployed to other vital areas such as sales, marketing and distribution. Attempting to manage a large number of vendors, arrange production and plan logistics consumes scarce resources necessary for the core strengths of your company. Furthermore, doing this from a location halfway around the world is extremely inefficient, adding variable costs and creating a less-than-ideal process.
5. Shorter lead time
Hiring an experienced contract manufacturer brings expertise and a supply chain network that provides you with the shortest possible lead times. In most cases, the contract manufacturer specializes in specific materials and processes, and they have built relationships with raw material suppliers and have developed methods that efficiently replenish parts when necessary.
Leading contract manufacturers have quality control systems in place to use throughout your production process. These aren't experimental programs, but proven quality systems meant to ensure the highest quality through the entire manufacturing process. This happens by systematically identifying and eliminating quality issues as early as possible in your production process.
7. Advanced skill sets
Companies can compensate for their lack of knowledge and skills in this area by hiring the right contract manufacturer. Many contract manufacturers have established relationships with raw material suppliers and have more in-depth understanding of the production lines needed to improve the total value of your product.
Today's contract manufacturers are taking new steps to provide additional value through product development services. With their manufacturing knowledge, leading contract manufacturers are also targeting new product development to shorten and improve the development process in terms of speed, efficiency, quality and costs.
The top priority for those developing products 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.
10. Improved transition from development to production
Studies show that over 30% of contract manufacturers receive requests for parts that aren't manufacturable, and less than 10% report receiving parts that can be effectively manufactured. Working with a contract manufacturer to support product development will ensure that 100% of your parts and component be made appropriately at a competitive price. This leads to a smooth transition into production instead of delaying production to re-engineer poorly designed parts.
Leading contract manufacturers have the best knowledge of materials and processes used to effectively manufacture certain products. They also have the best understanding of how to optimize the product by decreasing complexity, reducing unnecessary materials and leveraging the best processes necessary to produce it. Having a contract manufacturer on your team to collaborate with on development will ensure a functional design that's guaranteed to be made efficiently and economically.
Changing to a simple and smarter solution
A partnership with a contract manufacturer can have significant advantages that improve the production efficiency and costing of your product. In finding the right manufacturing partner, you can better utilize limited resources, leverage their expertise and focus your efforts on your core competencies. Furthermore, partnering with a CM firm that offers development services, you can shorten your development window and expedite your product launch.