Contract manufacturing is a process where a business hires a third-party company to manufacture their product or good. But you may wonder why a business would pursue this method. Wouldn’t it be better to keep the production process in-house?
There are many benefits of contract manufacturing for both large and small businesses. Here are five of the best.
Think of everything you would need to manufacture your own product or good. You’d need to buy the necessary equipment, hire the workers to conduct the process, acquire a building large enough for both, and many more. By hiring a contract manufacturer, all these costs are offset onto the company you hire, thus reducing your overhead and allow you to allocate your resources to other areas.
Another way contract manufacturers can help reduce costs is with ingredients and raw materials. Acquiring the components needed to manufacture your product can be expensive. But a contract manufacturer may already have all the materials you need because they’ve worked on similar products in the past. And even if they don’t have everything you need now, they will have more connections and pre-existing relationships with the suppliers of those materials so they can both acquire them easily, but also sometimes at a discount from what you would pay as well.
A quality contract manufacturer can help you save costs in other ways as well. They should employ their own quality control testing processes to ensure your product is high quality and delivers what your customers are looking for.
Maybe you’re ok with all the costs associated with manufacturing your own product. But have you considered how long it will take you to acquire all of it? You need to research the right equipment and materials you need, find the best vendors for both the price and quality you want, you need to vet the employees you will hire, and many more processes that will take time and delay how long it takes for your product to reach shelves.
By hiring a contract manufacturer, those time concerns are lessened. They already have the equipment, qualified workers, materials, and many more in-place. So once an agreement’s signed, they can begin production. And if they’re able to begin production earlier, that means your product will be delivered earlier as well. Now you can get good in front of customers sooner and begin making sales.
Scaling up operations has many of the same concerns as starting manufacturing in the first place. If your business is ready to scale up, you’ll need to ramp up your manufacturing process as well. That means going through the same loop of hiring and acquiring everything you need, but now at larger quantities and higher prices.
But hiring a contract manufacturer makes scaling up easy. Manufacturers work with many different clients at once, so they’ll already have additional manpower and equipment available if you need to increase your orders with them. So, scaling up is less reliant on your company’s capabilities and resources, and more reliant on your contract manufacturer’s capabilities. And if the company you originally hire can’t scale with you, there are likely other candidates out there who can.
All these benefits have a consistent theme: they mostly speak to start-ups or small businesses. Yes, larger companies can still profit from contract manufacturing, particularly if they do not have production capabilities. But smaller businesses have less resources initially for production, and therefore gain the most from using this method.
An experienced and reliable contract manufacturer can also help start-ups and small businesses avoid common pitfalls and mistakes. For instance, if this is the first time you’ve ever developed the type of product you sell, they may know better ingredients or materials to use, or know common packaging mistakes that result in inferior results. Start-ups and small businesses can always use a partner to help them along the road to success, and the right contract manufacturer can be that partner.
Most contract manufacturers will focus on a specific industry or type of products. For instance, here at RNA Corporation, we focus on personal care, cosmetics and other similar goods. And by focusing on that certain type of products, a manufacturer will learn all the ins-and-outs that others may not. So, whether you’re launching a product for the first time or creating a new line of goods you’ve never explored before, the manufacturer can add valuable insight in the process that may not have occurred to you otherwise.
Contract manufacturing offers businesses a specialized partner who can help offset production costs while helping ensure your company sells the best product possible.