Contract Manufacturing Firm – A Value Added Partner
Contract Manufacturing Service Provider is an innovator in their field of expertise and a value-added partner to the original equipment manufacturers (OEM). Contract manufacturing firm help the OEM to manufacture either semi-finished or finished products according to the OEM production and assembly process and requirement.
Lower Production Cost Through Contract Manufacturing
There are significance advantages to consider using contract manufacturing service provider as part of a company’s production/assembly extension arm.
1) Lower Inventory Cost – Contract Manufacturing give its OEM customers an edge by manufacturing products in smaller quantities including prototyping and prove of concepts (POC) but at larger quantity price.
2) Fixed Price – With contract manufacturing, the OEM can lock in the cost of production for the life of the contract. Regardless of any movement of components cost, labour rate, utility rate and etc, the production cost remains the same, which is another way OEM can control their bottom line.
3) Recoup Warehouse and Factory Space – When OEM uses contract manufacturing services, they recover warehouse and factory space they had been using to store their raw material and run their production. The OEM therefore is able to either better utilize their limited space or reduce their fixed overhead by reducing their warehouse and production space.
4) Improve Cash Flow – With contract manufacturing, the OEM pay for what they need as and when they need it. They no longer have to tie down with their cash flow to build up raw material inventory, upkeep their tooling and production equipment and maintain a high fixed head count and etc.
Contract manufacturing saves OEM time and money by manufacturing products matching the OEM drawings, specification, quality and schedule. By utilizing contract manufacturing services, the OEM can have small production run on a regular schedule hence further improved cash flow, lower cost of ownership and better bottom line. This relationship provides mutually beneficial advantages to both the contract manufacturing firm and OEM. By collaborating and maintaining a close communication with issues that need attention, both parties add values to each other operation efficiency. While the contract manufacturing service provider is able to make a profit by doing the work that they do best, the OEM received quality product which they may not be able to produce with their own limited resources.
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