In a contract manufacturing business model, a company will contact various contract manufacturers with a component design and request quotes for the parts production (RFQ’s). Each manufacturer will return with a quote based on the processes, labor, tooling, and material costs of the parts production. After the business has received several quotes, the hiring firm will select a manufacturer. The CM will then as the businesses “factory”, producing and shipping units of the component on behalf of the hiring firm.
You do not have to pay for the cost of procuring and maintaining a facility and the equipment needed for production. You also save on costs like wages, training, and benefits.
A contract between a manufacturer and your company may last several years, meaning you have a reliable source of product and the manufacturer has a steady work-flow.
In addition to the skilled professionals already working for the manufacturer, the CM is likely to already have relationships with raw material suppliers or methods of efficiency within their production, which will ultimately save you money.
Because their reputation is on the line, contract manufacturers are likely to have their own methods of quality control in place that help them to detect counterfeit or damaged materials early, this keeps your company safe if a problem should arise.
Outsourcing your manufacturing means that you can focus on the bigger picture of your business.