What Is Contract Manufacturing?
Contract manufacturing is when one company agrees with another to produce components or products over a specific timeframe. This is outsourcing on a manufacturing level, and like outsourcing employees, it lets companies compete in areas that were previously unreachable.
It’s a business agreement where one company pays another to provide the necessary components to assemble finished goods, or even manufacture the product in its entirety. Contact manufacturers are third-party providers, and most only work as subcontractors or sell their products to other businesses.
Typically, a company in need of a contract manufacturer will reach out to one with a design and get a quote for the process, labor, tooling and materials. If the price of doing business is less than the costs of manufacturing, it’s good to go.
