What Are Contract Manufacturing Services and What is The Process?

What Are Contract Manufacturing Services and What is The Process?
Dudley Industries
Post by Dudley Industries
September 16, 2021

We’ve helped hundreds of businesses take their ideas and products to market through our contract manufacturing services, but what does this actually mean?

Our customers are experts in their field whether this is laboratory testing equipment, audio mixing desks, architectural lighting concepts or any other industry.  Each requires their equipment to be housed in metal casings or constructed with metal parts and this is where our expertise comes in.  The hiring company will be the recognised brand name and will have achieved their position in the market through branding, product design and innovation and through our contract manufacturing agreement we will help create their products.

Just as using external IT services or marketing agencies, Contract Manufacturing makes sense to take advantage of another company’s expertise to help grow your own business and product range.

What is Contract Manufacturing?

Contract Manufacturing is an agreement between two companies that sees one company produce components or complete products for the other company.  The hiring company will dictate the design and hold the intellectual property of the parts concerned i.e. it is their design.

The level of involvement by both parties will vary depending on the skills required.

The hiring company will typically work with a number of different Contract Manufacturers for each product, for example some products may require plastic parts, metal parts, PCB boards, labels etc.  They may take responsibility for assembling all these parts themselves or they may work with one of their suppliers to complete the assembly.  Every project will be different.

What are the Different Types of Contract Manufacturing Projects?

The type of contract manufacturing will differ based on the project and what is required of it.  For example in Private Labelling or Own Label the purchasing company may buy an entire product from a manufacturer but have it made with their brand on it.  For example a supermarket bottle of bleach may use the contract manufacturer’s bottle design and formulation but the fragrance and bottle colour may be exclusive to the supermarket.

Contract Manufacturers may just provide parts for a product which is then assembled elsewhere or they may produce every part and undertake the assembly and ship a finish good back to the hiring company.

Some contract manufacturing may just be labour with no production required, this might be assembly or packing.

Which Industries Rely Heavily on Contract Manufacturing Solutions?

Contract Manufacturing is a widely used process; in fact, it’s probably rarer to find a product made entirely by the company marketing it than products that have been sub-contracted.


Examples of Contract Manufacturing Projects You May Not Have Considered

Whilst writing this article I’ve taken a look at the various items on my desk to consider how they are made, the company website for the brand of keyboard I’m typing on refers to themselves as ‘designers of products and experiences’ so we can safely assume it is manufactured for them under contract, not surprising when you consider the plastics, PCB boards and Bluetooth connectivity.

What Are the Benefits to Using Contract Manufacturing Services?

It’s impossible to be an expert in everything, so for example a product designer for a lighting company will be aware of design trends and lighting concepts but might not be au fait with the properties of stainless steel and how it will cut and bend and this is where an expert Contract Manufacturer can help. By understanding the desired outcome, the CM can offer their expertise and advice on the design to ensure it can be easily and repeatedly produced with consistent quality.

Working with a CM that has experience in your industry will certainly help as they can help you avoid the pitfalls they’ve encountered before, helping you to fast track to a result.

Using a CM will help you streamline your supply chain, by letting the CM take control of their materials means that your purchasing team don’t have to juggle many different suppliers.  To provide a specific example from our industry, we are experts in sheet metal engineering and with this comes an extensive purchasing network that enables us to buy raw materials in greater quantities and at better prices than you will likely be able to with your project alone.  This, backed up by our FTSE100 parent company Rentokil Initial, ensures that we can tap into a global supply chain immediately.

Are there any risks involved with Contract Manufacturing Solutions?

As with all business relationships there are risks but these can all be assessed, managed and controlled.  By using a CM you are letting go of a degree of control and let’s face it, not all relationships work, but these risks can all be removed by thorough research at the start of the project and clear communication on requirements, tolerances, quality expectations and service level agreements.

Inventory control can become quite complicated with a contract manufacturing supply chain as consideration needs to be given to finished goods and parts both at the hiring company and throughout the supply chain.

We always recommend the use of Non-Disclosure Agreements (NDAs), we fully appreciate that you are handing over your intellectual property and designs, so we want to always assure you that we handle this information confidentially.

Another question to consider when dealing with contract manufacturing solutions is, does the manufacturer have the capacity to grow with you? Your new product is expected to achieve growth for your company so as volumes increase can your CM meet your future demand?

Outsourcing manufacture to companies overseas can bring cost efficiencies but naturally this increases the risks; lead times may be extended due to shipping times, currency fluctuations may impact agreed prices, even time differences can make communication difficult.  All of these risks can be overcome but due consideration should be given to these potential issues and weighed up against the benefits of re-shoring production to British companies.

What’s the Process Involved for a Contract Manufacturing Project?

All projects commence with a conversation; ideally we start this as early as possible in a project.  The internal skills and resources of the hiring company will usually dictate our level of involvement. It is usual for a hiring company to discuss and request quotes from a number of different companies. Quotes will always differ due to the contract manufacturer’s facilities, raw material prices, quality and overheads. The cheapest quote isn’t always the most economical, for more information on this read our blog on How to Choose a Contract Manufacturer

Once price, quantities and lead times have been agreed the drawings for the products required can then be converted into design for manufacture.

Start a conversation with Dudley Industries to Discuss Your Next Contract Manufacturing Project

Let’s talk!  If you are looking for contract manufacturer to help take your next product to market let’s start the conversation. Please ask us about our capabilities, our quality standards and how we protect your intellectual property; we’re happy to provide full transparency on how we can work together.

Please contact our team of experts on 01253 738311 (ask to speak to Adrian Hyland) or email us using this form.

Dudley Industries
Post by Dudley Industries
September 16, 2021