What is Contract Manufacturing?
Contract Manufacturing (CM) as the name imply, is a contractual agreement between a service provider and the hiring firm, whereby the service provider is to manufacture merchandise on behalf of the hiring firm, the original equipment manufacture (OEM). The CM service provider is committed to deliver the manufactured product with the same quality as it is manufactured by the OEM themselves The CM service provider is to follow strictly to the good manufacturing practice of the OEM, purchase and use only raw material from the approved vendor list and use the same tooling as the OEM company.
Is Contract Manufacturing A Common Practice?
Contract manufacturing is fast becoming a norm for many industries, such as medical, electronic, semiconductor, personal care, automotive, energy, aerospace , marine, and many more. The list just keep going on. In todays contacts, contract manufacturing is becoming a necessity in nearly any trade. The OEM company will source for a CM service provider to undertake the production process while they focus on their key competence, which may be in the area of product research and development (R&D), software development, sales and marketing, advertising and channel distribution, logistic and warehousing and etc. Once the OEM decided to outsource their production, a plan will be set up to document the scope of supply, role and responsibility of the CM service provider. Quality and delivery expectation and many other requirement. Availability of production floor area, skill work force, tooling, global material sourcing expectation and etc will also be spell out in the contract agreement.
In most cases, there may be multiple contract manufacturers bidding for the same project. Sometime the OEM may issue multiple contracts to difference bidder so as to maintain competition among various bidders. Once the OEM has shortlisted a suitable manufacturer, the contracted firm will be the manufacturing factory, leaving the OEM to focus on what they do best.
Who Use Contract Manufacturing?
Contract manufacturing can be utilized in just about any companies and products. From a sub-assembly process to the complete assembly, testing and packing of the merchandise, both large and small OEM are outsourcing their production process to the contract manufacturing company.
Plenty of huge corporations are outsourcing their manufacturing process as an alternative choice to stay competitive and lean in their operation. A few product examples are electromechanical assemble, assembly cell, control panel wiring, power-line communication system , cable harnessing and many more.
Contact us at sales@exxeltech.com for a non-obligated discussion of your specific need to fulfil your manufacturing needs.
