One of the most important business processes for a product company is manufacturing, and the biggest dilemma is deciding whether to build an in-house factory setup or procure from outside.
Contract manufacturing services enable organisations to outsource a part or the entire production process. Depending on the nature of the arrangement, the two most popular modes of contract manufacturing are:
a) Component manufacturing: Original equipment manufacturer (OEM) or product creator outsources a part of the product to a producer specialising in that specific component. It’s commonly used in the automobile industry.
b) Private label manufacturing: In this format, a value-added reseller (VAR) hires an Original Design Manufacturer (ODM) to conceptualise and oversee the production of the desired product.
Benefits of contract manufacturing:
The key benefits of contract manufacturing are:
a) Reduced costs: You can save significantly on fixed as well as operating costs, such as land for factory setup, buying and maintaining equipment, wages of factory workers, etc. by outsourcing the entire or part of the production process.
b) Faster turnaround time: By engaging a specialist, you can expect to hit the market quicker than managing the entire production process in-house.
c) Adoption of advanced technology: Reap the benefits of partnering with specialised contract manufacturing companies who stay abreast with the latest technological development in their field.
d) Focus on other functionalities: You can deploy key resources in finance, marketing, HR, and other important aspects of your business.
e) Global footprint: Contract manufacturing is the ticket to your global expansion plans.
The market scenario:
Estimated at $2 trillion in 2018, the global contract manufacturing market has steadily grown at a CAGR of 6.6% and is expected to touch $2.7 trillion by 2023.
Industry Experts Pvt. Ltd. is your arm that helps you reach a good partner for contract manufacturing.