Different Types of Contract Manufacturing Companies

Different Types of Contract Manufacturing Companies

By on November 5th, 2018 in Manufacturing

Did you know that 84% of companies outsource their manufacturing?

Contract manufacturing companies are huge these days. This is especially true for businesses and private entrepreneurs who want to bring their ideas to market.

There are many different types of manufacturing companies to be aware of. Finding the one which is best suited for your business is easier if you know what type of contract manufacturer you’re looking for in the first place.

Let’s dig into the meat of the matter so that you’ll be able to make the right choice at the end of the day.

Defining Contract Manufacturing

Contract manufacturing(CM) is the outsourcing of the creation of your products to someone else.

Manufacturing facilities can range from moderately to extremely expensive depending on what you’re making.

The other term for CM, which is primarily used by solo entrepreneurs, is private labeling.

You’re paying someone else to produce the physical product and handling the rest of the logistics involved with marketing, shipping, and day-to-day details like customer service.

It’s a great way to get started, and the truth is that even enormous companies like Apple and Sony use high-end CM firms in order to bring their designs to life.

Not all contract manufacturing results in a complete product either. While the American automotive industry is notorious for producing their designs in their own plants, many of the parts which go into vehicles are brought in from other companies.

Depending on the firm, other services may also be offered including things like finding the raw resources required to produce the product or even managing your inventory through their own monitoring services.

What Types of CM Companies are Out There?

In addition to the range of services offered there are many contract manufacturing firms which specialize in different areas.

For instance, if you’re producing an herbal supplement, then you’re not going to want to try calling an electronics contract manufacturer.

The different firms out there can be separated into a few different types:

  • Pharmaceutical
  • Electronic
  • Medical
  • General Fabrication
  • Parts Fabrication

If your product falls into a specific niche, then you may want to look for one of the companies above.

However, for many people there’s a caveat: they simply don’t know what they need.

Agencies are a great way for those who aren’t yet 100% sure of what they need to get ahead. They act as a broker between different CM companies and the buyer by doing the finding and vetting of manufacturers for you.

Some companies focus on more than one area. If you’re looking for solutions to parts involving hydraulic, pneumatic, electromechanical, or automation systems, then you’re in luck.

Not all contract manufacturing companies are equal, of course, but most will do their best to ensure that your products are assembled properly.

Services Offered By Contact Manufacturing Companies

Since there’s such a wide variation in the different assembly needs of products, it makes sense to ensure that the company that you’re hiring is able to do what you need them to.

For some people, the assembly of a few parts per month is going to be enough. Still, others will want thousands of assembled products in the same span of time.

The biggest difference here is whether the company which you decide to use focuses on finished good manufacture or parts manufacture.

If you’re creating a small line of high-ticket items using proprietary technology it may make sense to just have the parts you need created and sent to you, with full assembly taking place in your own facilities.

You’ll still be able to save a lot of money if you do things that way, after all.

On the other hand, if you’re planning on moving thousands of simpler items then it makes more sense to find a company which specializes in producing finished goods before shipping them to you.

It’ll cost more, but the entire idea of outsourcing is to reduce labor costs on your end. Plus, you’d have to have someone to assemble everything once it’s arrived if your product is still in parts.

Scalability of Manufacture

It’s important to know just how many parts or products you’ll need.

Not everyone is a good fit for every CM company after all.

If you’re producing a small number of goods, it doesn’t really make sense to go with some companies either. Just because they can easily handle the order volume, doesn’t mean that the company is willing to do it.

There’s also some risk for larger companies when handling novel ideas from start-ups since the future outlook of business is unknown. Even if you know that your idea is going to change the world, a large CM firm may not agree that it’s worth the risk.

On the other hand, even larger contract manufacturers end up overwhelmed with supply demands sometimes. It even happens to some of the biggest companies and manufacturers in the world, like Apple and Foxconn.

Matching your required production to the contract manufacturer that you’re considering is important.

Tying it All Together

So, when you’re looking into the different types of contract manufacturing companies out there, you’ll need to know the following before you begin looking:

  • What type of product you’re producing
  • How much of it you’ll need
  • Whether you’re looking for parts or assembled goods

Once you have all of that sorted out you should be able to much more easily find a company which is suited for you.

There are a lot of CM companies out there and finding the right one will make your whole business move along much more smoothly.

If you’re looking at solutions for pneumatics, hydraulics, electromechanical items, or automation systems then contact us today and let’s see if our businesses can’t form a good fit.