Contract manufacturers (CM) operate outside of the limelight as an extension of a contracting company. As a form of outsourcing, this type of manufacturer enters into an arrangement with another manufacturing firm to coordinate production on-behalf of their client. At their core, a contract manufacturer is a for-hire firm that will provide a set amount of product for a set fee. They can handle all aspects of getting a product produced and shipped based on your specifications.
Hiring a CM is an option for companies, and they can choose to operate autonomously with their chosen manufacturer; however, there are multiple, invaluable benefits that a CM can bring to the table. What can a contract manufacturer do for you? The short answer to that question is: “They will save you time, money, and stress”.
Reduced Costs and Improved Focus
It would make sense for a startup to partner with a CM because of the lack of experience solving complex manufacturing problems that would arise within the product. A startup also would not have the leverage to negotiate prices and favors to get their product made cheaper, better, and faster. The CM accomplishes these feats simply by having relationships with manufacturing companies. For instance, if the CM gives a plastic injection facility 60% of their plastic injection orders, the CM will usually have the ability to negotiate a deal so that they keep producing parts at a certain quality for a good price and keep getting business. This is not something most startups and established companies have the capability to do.
Additionally, by hiring a CM, a company would not have to pay for additional maintenance costs of manufacturing machines and equipment. This along with not having to maintain an inventory of raw materials and supplies since that will be the responsibility of the CM to handle. Not to mention, there are hidden details in manufacturing a hardware product, including the electronics, plans for retail, and “landed production costs.”
While larger established companies have more leverage because of their size, it doesn’t always translate to better pricing or faster production. Large companies would benefit much in the same ways a startup would, just on a larger scale. The reduced part cost a CM can provide would be better when on a larger scale. The experienced management team at the factories would reduce timelines and improve communication.
There is more to choosing a contract manufacturer than the price. Chances are, you would be able to go to Alibaba and get someone to give you a really low quote, but what would you get for that low price? You really don’t know, and to find out you will probably be spending a lot of company time and company money to arrive at an answer.
A lower price does not always mean lower quality. A contract manufacturer can have the leverage and volume to have products produced at a low cost while maintaining quality.
Define and Inform
The benefit of a CM producing, assembling, and packaging your product is that you will not have the overhead and CapEx. The downside is that you will not be doing the work yourself. This is why documentation is one of the most important parts of working with a CM.
Most CMs will have slight flexibility and the ability to source equivalent components, but they will generally not spec parts for you to avoid liability. Whether you have an in-house engineering team or an engineering firm, you should discuss the needed documentation with a CM to ensure you are supplying them with everything they need to bring your product to life. Documenting and defining as much as possible will also protect you and your company from sub-standard quality, unknown part replacements, and unwanted changes. Those documents will act as the final say.
Visiting the factories producing your product is one of the most important parts of the manufacturing process. Having a CM that will facilitate the process of you being involved in the production with the factories will save you a lot of money and time, regardless of the size of your company. We find it extremely helpful for customers to fly to China during the final production phase because they can make changes and improvements instantly instead of wasting a few days figuring out problems over the phone and email.
It can be hard to fly to another country and make all the arrangements while you are there. Having a culturally-savvy professional there to take you where you need to be and communicate in the local language is invaluable to the success of a trip overseas.
Factory validation and Audit
A CM will be able to audit and validate any factory or vendor you wish to work with outside of their network. Wherever you find a factory, you need to be sure it is the one in the pictures. Sources on websites like Alibaba sometimes are not as they present themselves and should be audited. This is very important for overall product quality and vendor reliability. If you are manufacturing in China, it would be much more difficult and time-consuming to recover from a vendor producing sub-par products. Once a vendor factory is audited, a CM can work directly with them in the process of assembling your product.
Whether you need a prototype or a 1000 piece production run, partnering with a contract manufacturer is almost always the best route.