Contract Manufacturing: Advantages and Disadvantages

More and more companies are deciding to use contract manufacturing to reduce costs or increase process quality and efficiency. Delegating the implementation of individual production stages to external entities has not only advantages but also some disadvantages. Before you outsource contract manufacturing, make sure you fully understand both the advantages and disadvantages of contract manufacturing.

Outsourced production can only be part of a larger whole produced by the company or the complete product itself. Industries that commonly use contract manufacturing include defense, pharmaceuticals, computers and peripherals, cars, and mobile devices. In this article, however, we will focus on the contract manufacturing of electronics. This market was worth 430 billion USD in 2015, and the number is continually growing.

Advantages of contract manufacturing

USE OF EXPERT KNOWLEDGE

When hiring a contract manufacturer, you don’t need to be an expert on every aspect of your product. As CMs create products for many unconventional industries, and they have valuable, in-depth knowledge of electronics development. Experienced contract manufacturers fill significant knowledge gaps so that you can bring even niche and innovative design solutions to the market.

SAVINGS

The contracting company will save you a lot of money because you don’t have to invest in expensive production machines. You also don’t have to spend large amounts of money on employee salaries. The cooperation with CM also allows you to manage the budget accordingly. It is unlikely that you will encounter unexpected costs or delays in production. CM knows how much the process should cost and how long each step should take because they have many years of experience in this field.

EVERYTHING IN ONE PLACE

As the contract manufacturer will completely take over the production process, you will be able to unlock new opportunities for your business. Experienced CMs can produce the entire product from PCBA to box build. They will take care of the product design for production, material procurement, the production process itself, assembly, packaging, and shipping. Keeping the entire process under one roof reduces costs and complexity. You no longer have to juggle between vendors, which, by the way, also helps you avoid unexpected costs.

SCALABILITY

The contract producer has the option to purchase input materials in large quantities and at attractive prices. Also, CM often negotiates competitive material prices, thus keeping costs down even as the production increases. Thanks to this approach, it is possible to increase or decrease production at any time without incurring huge expenses. Small businesses that find it difficult to scale the production due to limited resources will benefit in particular.

Disadvantages of contract manufacturing

YOU CAN’T HAVE EVERYTHING UNDER CONTROL

The manufacturer controls the entire production process from start to finish. As a result, you will have to depend entirely on the manufacturer’s decisions. The challenge is to find a CM you can trust.

A HIGH-QUALITY CM IS DIFFICULT TO FIND

Choosing a contract manufacturer requires great care, knowledge, and a committed team. Rather than a vending machine that delivers products based on simple inputs like project drawings and financing, working with a CM company is based on a long-term, multi-faceted collaboration.

Without proper market and vendor analysis, you might end up outsourcing to the wrong company. A low-quality contract producer can easily pretend to be a high-quality, reliable partner. Therefore, you should conduct comprehensive research. Unreliable suppliers can delay processes and deliver defective end products. Besides, many contract vendors focus on one type of service, and they do not offer end-to-end solutions. That is a burning problem as it makes the manufacturing process more complex and error-prone.

DISCLOSURE OF IMPORTANT INFORMATION

Establishing cooperation with the wrong CM is associated with the risk of losing intellectual property. It is easy for those who work in the manufacturing facility to steal and use your formula or design. Sure, you can file a lawsuit, but the costs associated with delaying production may be too high for you to afford. You will waste time and money and, in the worst-case scenario, may even have to close the business.

Are you ready to launch your products but don’t have a production facility?

In that case, you should seriously consider contract manufacturing. The most important thing is to find a professional CM you can trust. The best contract manufacturers will guide you through each stage of production. With an experienced manufacturing company by your side, you can solve some of the industry’s most pressing challenges and become a market leader.

For more information, see: https://asselems.com/

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