How to streamline production through contract manufacturing

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Some of the world's largest, most powerful and iconic manufacturing companies don't manage all of their manufacturing in-house.

An average car has thousands of parts. An average car manufacturer has about 18,000 suppliers across the value chain, according to McKinsey . In the aerospace sector, this number is 12,000, and in the technology sector, 7,000.

For a variety of reasons, manufacturers turn to smaller or specialized suppliers to produce the parts they need, a process popularly known as industrial contract manufacturing.

In this blog post, we explore what it is and how you can streamline it in your organization.

What is contract manufacturing?
Contract manufacturing is the process of outsourcing the production of goods to vp audit email list an outside manufacturer.

In this case, you typically focus on research, customer insights, design, and marketing, while the actual manufacturing of the product is outsourced to a supplier. If you've seen "Designed in California. Assembled in China" on any of your tech products, this is what it means.

Role of contract manufacturers
The primary role of a contract manufacturer is to produce goods according to contract specifications. This may be the entire product or just a part of it. However, in practice, contract manufacturing services include more than just that.

Specialized Services : Contract manufacturers support the entire manufacturing process with specialized services such as raw material sourcing, assembly line employee training, packaging, etc.

Quality Standards : Ensure compliance with SLA, industry standards and regulatory requirements.

Scalability : Contract manufacturers often have spare production capacity available, allowing them to scale up without investing a lot of time or equipment.

Distribution : Some contract manufacturers also handle product distribution directly from their warehouses. For example, if you are a US-based company that sells worldwide, you can have your overseas manufacturer ship directly to other markets.

Does this mean that contract manufacturers always do all the manufacturing? No, this is not the case. There are several types of contract manufacturing, which we discuss below.