Contract Manufacturing Sector Profile

Contract manufacturing is a new class of companies that provide third-party manufacturing capability. The contract models also includes firms that supply manufacturing servcies, such as product design, engineering, shipping, and repairs.

Many companies use a contract manufacturing ‘service’ company to manage the array of different contractors.

Contract & Outsource Manufacturers

Contract manufacturing is a common model used in trades such as clothing and electronics. Contract outsourcing is a massive global industry including all aspects of manufacturing: design, production, supply chain management, test, order fulfilment services and customer support.

Clothing

CMT services are provided to clothing manufactures across the world, from low cost clothing to those of high status brands.

Electronics

Electronic manufacturing services contracted by original equipment manufacturers [OEMs] provide a competitive advantage. The synchronization between OEMs and EMS provides additional cost savings and service enhancements resulting in increased competitive market cost pressures and better management tools.

Global Outsourcing

Low labor costs in developing countries is now supported by quality control infrastructures, allowing them to manufacture with reliable quality. Transportation and communication systems are more robust than in the past, and because their systems are often built on newer technologies, they have capability not available in local markets and higher skilled labor.

Outsourcing Considerations

Factors OEMs must consider when outsourcing manufacturing include:

• Business and/or risk management
• Long-term relationships
• Communication - is critical to the success of outsourcing is communication between all levels at the OEM and the contract partner
• Cost reduction and improved asset utilization
• Managing the outsourcing cycle - assess, design, implement, and improve
• Quality control
• Agility and/or flexibility
• Timeliness and delivery assurance
• Technology advancement
• Vertical integration leveraged from the service provider
• Global footprint

Also See: Technology Used in Contract Manufacturing

Next: Business Solutions To Manufacturing Issues

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