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How Companies Use Contract Manufacturing

by Last updated Nov 29, 2020 | Published on Apr 23, 2019Contract Manufacturing

Estimated Reading Time: 3 minutes

Contract manufacturing, also known as outsourcing, continues to grow as a business practice for industries such as semiconductors and medical devices, considering that contract manufacturers can save companies a considerable amount of time, resources and overall production costs.

Strategic outsourcing allows your business to maintain high standards for production efficiency and quality, by tapping into equipment and expertise that’s established and proven, but without the risk of increased overhead costs.

What is Contract Manufacturing?

In its simplest definition, contract manufacturing is hiring an external company to complete tasks for your project. A great contract manufacturer is like adding additional experts to your team for the duration of a project – or potentially in an ongoing fashion.

By contracting out manufacturing tasks to a reliable partner, you avoid the time-consuming hiring and training process. You gain that company’s wisdom and expertise. You can utilize their space to get the project completed. Often, the contracted company sources all materials needed to complete the project as well – which can lead to a cost savings for you.

Depending on the needs of a project, a contract manufacturer can:

  • Create a prototype based on your design
  • Offer design expertise based on your design concept
  • Produce one component for a project or multiple components for a system
  • Produce an entire system for a larger manufacturing project
  • Build, test and ship your components

Learn more about the benefits and misconceptions of contract manufacturing.

The list goes on. Think of a contract manufacturer like Axenics as bridging the gap between a project’s inception to completion by producing and supplying the necessary components. The direction of outsourcing generally flows like this:

  • A contract manufacturer produces components, such as bent tubing, welded pipe or manifolds for a manufacturer
  • That manufacturer uses those components to finalize an assembly or operating system
  • The manufacturer markets and sells the finished products or systems under their own company’s brand

How Contract Manufacturing Benefits OEMs

Increasing demands for production while maintaining operational efficiency means a company has to decide whether to expand by adding more permanent hires and constructing larger production spaces or take advantage of the skills and existing facilities of a highly-regarded contract manufacturer.

Making strategic decisions about what aspects of the business to focus on, while determining which tasks should be accomplished by a contract manufacturing partner is how smart businesses experience continued growth.

How do companies determine what to keep in-house or what to outsource?

One way is looking at potential risk of loss. Investing capital into new equipment, potential new staff and training quickly adds an immense burden to the bottom line. These tasks could be strategically outsourced to a qualified vendor in an effort to save time and money. Plus, you are getting the knowledge and talent of a company who already excels at this type of production.

Imagine your company has just gotten a huge, new manufacturing project. Ask yourself:

  • Can we increase staff and production output quickly and efficiently enough to meet the increased market demands?
  • Where will we store all the overflow components?
  • Will cash-flow and storage space become problems that prevent long-term profitability?
  • Will increased spending to keep up with order requests detract from their overall profitability?

If the answers point to a slimmer profit margin, it may be time to consider partnering with a contract manufacturer that has decades of experience in component production and problem solving.

Unfortunately, some businesses don’t comprehend the advantages of outsourcing, and often underestimate the time and cost savings that can be achieved by working with an expert contract manufacturing company – until it’s too late, and they are behind schedule and over-budget.

Axenics’ 35 years of expertise in manufacturing operations, combined with our purchasing power and ability to ship globally, makes us an ideal contract manufacturing partner.

Want to learn more about how you can benefit by partnering with a contract manufacturer? Take a look at our free whitepaper, Elevate Your Production Capabilities with Outsourcing.

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