Contract Manufacturing v's. Private Label: The 3 Main Differences
You’ve decided to grow your business rapidly and expand your product range but need to enlist the help of an external manufacturer to help build your final product. The first decision is to weigh up the benefits of contract manufacturing vs private label, and which option is preferable to your individual needs.
Although both services will produce a product you can sell, the process and product will significantly vary depending on the level of involvement you want to have in the development.
Both options can help to achieve your business success – but which is better suited to you?
What is contract manufacturing?
Firstly, it is important to understand what each service actually involves.
Contract manufacturing is when a business outsources the knowledge, product capabilities and expertise of a third-party company to produce a product, or a component based on their exact specifications. Contract manufacturing is popular for several reasons including: product exclusivity, quick delivery time, industry specific solutions and accurate deadlines. Contract Manufactures will produce a unique product to the customer’s requirements.
What is private label manufacturing?
The private label manufacturing method is when a manufacturer produces their product under your own brand name, giving the private label manufacturer complete control over processes, specifications, and materials. Some companies favour private labelling as it can save time on the initial development and research stages and holds the potential for additional income streams, wholesaling some of your products to other retailers.
For example, our Washroom Accessories division provides both Private Label and Contract Manufacturing washroom solutions for their customers. Using a paper towel dispenser as an example some clients designed their own unit and we manufacture to their drawings, whereas some customers prefer to purchase a DI design and have their logo etched on to the unit – this is private label manufacturing.
Key differences between contract manufacturing and private label manufacturing
It is undeniable that both manufacturing solutions come with their share of benefits and typically result in a similar outcome. However, there are some key differences which you need to consider before making a decision.
Take a look at three of the key differences between a contract manufacturing and private label contract:
1. Customisation and involvement
The first key difference is the level of involvement that each solution gives you. Contract manufacturing allows you to be more involved in the design, branding and packaging stages, whereas private label manufacturing involves choosing a product that has already been developed.
As a business owner, having the degree of control that contract manufacturing gives you, provides you with the reassurance that if you wanted a minor tweak to the product, you have the capacity to do this. Private label manufacturers however don’t tend to allow their final product to be tweaked.
Upfront, private label manufacturing tends to come in at a lower price, due to the limitations that businesses have over customisations.
Whilst choosing an already existing product may seem the more cost-effective way to go initially, having an involvement in the initial customisation processes will help to formulate a product which is unique to your business, which in turn may give you a competitive advantage and more profitability in the long run.
3. Start-ups vs established brands
Although brands of any size can utilise the services of private label and contract manufacturers, contract manufacturing is typically preferred by more established brands. By outsourcing the manufacturing process, the team is able to focus on driving revenue and sales in other areas.
Additionally, contract manufacturing may also be a good fit for brands that are growing and ready to expand due to launching their own, bespoke goods.
The private label route is often better suited to smaller companies. Private label provides low start-up costs and the potential to expand a product offering without the complexity of bringing a completely unique product to the market.
Choosing between private label and contract manufacturing for your project
Contract manufacturing vs private label - what is the best option for you?
Both methods of manufacturing can be effective, but it ultimately comes down to the needs of your business. Before deciding, consider your answers to the following questions:
- How much involvement do I want in the process?
- What is my budget?
- Am I looking to grow my brand or expand my product offering?
We recommend contract manufacturing to businesses that are ready to hit the ground running and bring something new and exciting into the market.
Expert contract manufacturing services from Dudley Industries
Finding a trusted and reliable manufacturer that meets your needs is imperative.
With over 80 years of experience, at Dudley Industries, we provide high-quality contract manufacturing expertise and over the years, have helped hundreds of companies realise their projects from concept through to a large scale production process.