Contract Manufacturing- Redefining the Manufacturing Landscape
12 Jul 2022
Manufacturing is an integral part of a product-centric business. However, not every entrepreneur has the wherewithal to proficiently run a production unit. While self-owned manufacturing facilities have their advantages, they also come with a host of challenges that can derail you from your overall business objective.
is the answer to your production needs. A contract manufacturer is the one who undertakes to produce parts of your product that can be assembled at the assembling facility or delivers market-ready finished products to the warehouse or directly to the selling outlet.
Types of contract manufacturing
In this arrangement, the buying company outsources the entire manufacturing responsibility to a third-party contract manufacturer. The contractor then produces the entire product based on the design and technical specifications given by the client.
Some companies may like to produce parts of the product themselves and outsource some components. Alternatively, they may engage different manufacturers for different components based on their expertise. The final product is then assembled at the parent company’s assembling unit.
Even general contractors who undertake large projects need to outsource certain parts to another contractor for the production of smaller components. Subcontracting also happens in the case of labour supply for manpower-intensive projects.
This is similar to private-label contracting. Nevertheless, in this model, the contracting firm acts as a consultant for designing and related best practises for the final outcome. It’s ideal for companies with low production know-how but looking for a fast turnaround time.
Contract manufacturing opportunities
Within the mechanical and machinery products industry: Individual component manufacturing is common in the HVAC industry. The automotive sector also engages in contract manufacturing for specific parts.
Pharmaceutical industry: Not just the production of certain medicines but even compliance management is often outsourced to a competent third party in the pharmaceutical industry.
Marketing industry: Marketing/ advertising agencies often outsource certain aspects of their business like videography and editing, etc to another company specialising in that particular field.
Present market scenario
The global Contract Manufacturing Organization (CMO) market was valued at $92 billion in 2018. At a CAGR of 9.4%, it’s expected to cross the $185 billion mark by 2026.
The Indian market is expected to grow at a CAGR of 13.3% in the period 2021-2026.
As India powers its way to becoming a manufacturing destination and consequently boosting contract manufacturing,
with a wide network of contract manufacturers is able to provide all relevant assistance for contract manufacturing requirements across a variety of select industry verticals.
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