What Is a Contract Manufacturer?

Contract Manufacturing (Contract Manufacturing) refers to a form of cooperation in which an enterprise signs a contract with another manufacturer and the manufacturer produces the product, and the enterprise is responsible for product sales. The contract manufacturing model is conducive to increasing the utilization of existing resources on a larger scale, promoting the refinement of the industrial chain, and facilitating the professionalization and scale of the industrial chain.

Contract manufacturing

There are several different types of contract manufacturing:

1. The two parties to the cooperation produce different parts respectively, and then one or both parties assemble a complete product to sell in the country where one or both parties are located.

2. Provided by one party

Using contract manufacturing, the company transfers all or part of the production work and responsibility to the other party to the contract, so that it can focus on marketing, so it is an effective way to expand the international market. The advantage of this model is that enterprises that implement contract manufacturing can export not only intangible assets such as technology or trademarks, but also production factors such as labor services and management, as well as some capital.

This model also has the following disadvantages: first, because contract manufacturing involves the import and export of parts or production equipment, it may be affected by trade barriers; second, it is possible to cultivate partners into potential competitors; third, it is possible Loss of control over the production process of the product; Fourth, the company's marketing activities may not be carried out as planned due to the delayed delivery of the other party.