Often businesses come up with the idea or design of the product but they do not have the capital to manufacture the product on a wide scale. Most of the time they lack the resources required to produce the items. This is where manufacturers come into the picture with their Manufacturing Agreement.
The importance of having a manufacturing contract:
Clarity- Manufacturing agreement brings the much-needed clarity to both the parties. A well-written contract help the manufacturer to understand the exact requirement of their clients.
Pricing– The detailed provision of pricing in the manufacturing contract will help preventing unexpected price adjustments in the future.
Assurance– When the task of production is undertaken by these contractors, they maintain quality standards and follow strict procedures as specified by the client to deliver high quality products that are then exported to the client’s country.
For companies engaged in large scale or high volume manufacturing, partnering with the efficient contract manufacturer is the single most important element. Three popular manufacturing contracts businesses can opt for:
Original Equipment Manufacturing (OEM)–
OEM is essentially when a company designs a product from the ground up and then contracts another company to manufacture it for them. Apple uses OEM for producing the iPhone. They come up with the design, then contract a number of third-party manufacturers to handle the mass production. The main benefit offered by OEM products is their price. Owing to economies of scale, OEM products significantly reduce the cost of production. Moreover, the company purchasing these products can use them to build systems without running their own factory.
Contract Manufacturing (CM)–
Contract manufacturing is a process in which one company outsources a job to another company, typically for the creation of a specific part or full product that is needed. Contract manufacturing (CM) companies can help you solve most of the issues related to evaluating your designs and manufacturing your product components. Contract manufacturing can also help you save time and money on hiring, as CMs already have highly qualified, trained production as well as research and development staff.
Original Design Manufacturing (ODM)–
ODM manufacturing allows you to make use of a supplier that can already produce the good you are interested in. an ODM provides “ready-to-go” products for the OEM. The latter purchases products from the former who determines what design and products to be built. ODMs have grown in size in recent years and many are now sufficient in size to handle production for multiple clients, often providing a large portion of overall production.
Working with a China manufacturer is significantly less costly than having your own manufacturing facilities. When a contract manufacturer takes the responsibility of their own hands, they are not only responsible for delivering the finished product but also doing what needs to be done per the standards set by the clients.