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How to Find a Suitable Contract Manufacturing Partner?

MANUFACTURING_PARTNER
The benefits of contract manufacturing are triggering manufacturers to utilize it as a strategy to speed up production and increase revenue. According to BCC Research, the worldwide contract manufacturing industry should increase from $2.0 trillion in 2018 to $2.7 trillion in 2023, a 6.7% CAGR.

Given the growing demand, contract manufacturing has a long way to go in innovating new solutions for manufacturers.

As technology takes over and enhances many of the processes we used to handle with manual labor, we are freed up to use our minds creatively, which leads to bigger and better leaps in innovation and productivity.

– Matt Mong, VP Market Innovation and Project Business Evangelist at Adeaca

Let us look at the benefits and concept of contract manufacturing, often known as manufacturing partners in some circles.

 

Contract Manufacturing: Concept and Benefits

 

Concept

Contract manufacturing is a business model in which a company agreeswith a contract manufacturer to make components or finished goods based on the hiring company's design. In short, it is a business model in which one company hires another company to manufacture components or goods for them or their products.


Benefits

The following are some of the primary advantages of contract manufacturing that attract manufacturers to adopt this concept and find a trusted supplier to manufacture any product or part of their product without much difficulty.

  • Cost Efficiency: In contract manufacturing, companies do not have to pay for the facility, equipment, or labor needed.
  • Resource Allocations: The money and resources saved through contract manufacturing can be redirected towards other company operations.
  • Faster Lead Times: Hiring a contract manufacturer reduces manufacturing time. This improves market speed, delivery time, and customer service.
  • Quality Control: Contract manufacturers are likely to have their own quality control processes in place, which allow them to spot counterfeit or damaged products early on.
  • Advanced Skill Sets: Companies can benefit from the skills they may not possess, but the contract manufacturer does.

 

Contract Manufacturing Examples

Here are some examples of contract manufacturing companies that offer manufacturing services to other businesses and work on full-service outside manufacturing projects.

 

Example 1: Kimball Electronics Group

Kimball Electronics Group provides a comprehensive range of electronics manufacturing services, including engineering, prototyping, testing, electronic data interchange (EDI), new product introduction, and repair depot services. Soldering, assembly, reflow, de-paneling, flux application, inspection, screen printing, testing, and rework are all processes used in their manufacturing.

 

Example 2: Scapa Healthcare

Scapa Healthcare, headquartered in Knoxville, Tennessee, provides contract manufacturing services for medical and cosmetic products. Their portfolio of products includes sunscreen, silicone medical adhesives, and innovative materials. Additionally, the organization provides development, packaging, and logistics services.

 

Things to Consider While Selecting a Contract Manufacturing (CM) Partner

You need to know how to identify the ideal contract manufacturer for your business to accelerate production and produce high-quality items. Below, we've listed some of the most important things to keep in mind while looking for an outsourced manufacturing partner for your company.

 

Competency

Understanding a contract manufacturer's (CM) capabilities in terms of logistics and fulfillment is critical. Is your potential CM able to meet shifting product demands? How to use the CM's services? You may need one or more services from CM for your product, so always examine their capabilities or develop a list of their services and see which ones are valuable for you.

 

Knowledge or Prerequisite

A qualified, experienced, subject matter expert CM always correctly understands the requirements and delivers the services as per expectations and within the time frame specified in your production schedule. Always inquire about their qualifications or certificates in the places where your product will be manufactured.

 

Compliance

Any contract manufacturing plan must have an agreement or compliance clause. Always inquire about the compliance procedure and thoroughly understand the terms and claws to avoid future issues.

 

Workforces

Verify your possible contract manufacturer's personnel count. Is it easy to talk to them? Is labor skilled enough to meet the product's goals? It is critical for large-scale production and production, requiring swift responses. Any work force shortage might cause production delays.

 

Gear & Expertise

Check for machines and equipment as well as human labor in your possible CM. Many CM lease equipment to complete a project. So always check how the CM will organize the essential equipment for your project. Expertise in using the equipment is also necessary. Verify which machines were used and whether or not professionals were involved.

 

Whereabouts

The CM's location is the main factor to check. Because the CM may have numerous plants, knowing which plant is assigned to your product is essential to knowing every aspect of its production. Also, the assembly location must allow you to visit and inspect the manufacturing between cycles.

 

Business Stability

Finding a reliable contract manufacturer with solid financial backing and market roots is essential to avoid market scams. However, you must also analyze and solve risk factors like equipment failure, supplier capacity, and unreasonable expectations.

 

Selection Myths of Contract Manufacturing Partner

Once you've produced a list of shortlisted contract manufacturing partners who meet all of the criteria described in the preceding heading, you can proceed by following the steps below to select the best contract manufacturing partner.

 

Look for Who is Willing to Invest in Your Business

Incorrect. The objective is to find a vendor prepared to manufacture at a loss. A contract manufacturer's strength is that they can stay competitive and make a profit for both parties.

 

Focus on Tier 1 CM Partners from the Market

This one is indeed not acceptable. Tier 1 is a financial phrase used to separate large corporations from smaller ones. You want a contract manufacturer who understands your business and your needs. Don't worry about the manufacturing partner's size.

 

Go Ahead with the One Who Offers the Best Services at the Lowest Price

Trying to get the cheapest quote isn't always the best idea. You should get a quote from your contract manufacturing partner, but the quote may not always reveal the complete story. Cost per unit frequently captures approximately 75% of total supply chain cost.  Some contract manufacturers charge the OEM the remaining 25%. Consider the complete picture while selecting a CM partner.

 

Final Words

Manufacturers use contract manufacturing to meet their commercial goals. Therefore, contract manufacturing is a win-win situation for both industrialists and contract manufacturers. Finding the proper contract manufacturing partner for your company is not straightforward, but our brief guide can help you identify the right manufacturing partner.

 

FAQ

 

What makes a good contract manufacturer?

The most significant contract manufacturing firms are more than just supply chain partners. They recognize and treat your items as if they were their own, are meticulous in their operations, and are concerned with quality and capital.

 

What differentiates contract manufacturing from outsourcing?

A contract is a legally binding arrangement. It involves two or more parties. For example, outsourcing is outsourcing some tasks to an outside organization under a contract agreed upon by both parties.

 

What's the difference between contract manufacturing and licensing?

Contract manufacturing only outsources production phases, while licensing is far more complex. In return for fees, a corporation sells the right to utilize its intellectual property to another company. Licenses are like franchises.

Spotlight

Gough Group

The Gough Group is New Zealand and Australia's leading equipment supplier to the construction, infrastructure, mining, forestry, transport and power system industries, providing value-added solutions across all markets. We’re a diverse group, made up of five trading subsidiaries incorporating ten distinct businesses.

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Toyota Supercharges North Carolina Battery Plant with New $8 Billion Investment

PR Newswire | November 01, 2023

Toyota announced a new investment of nearly $8 billion that will add approximately 3,000 jobs at Toyota Battery Manufacturing North Carolina (TBMNC). This brings total investment to approximately $13.9 billion and job creation to more than 5,000 – further supporting Toyota's multi-pathway approach to global vehicle electrification. This investment adds capacity to support battery electric vehicles (BEV's) and plug-in hybrid electric vehicles (PHEV's). An additional eight BEV/PHEV battery production lines will be added to the two previously announced, for a total of ten battery lines. Production will be increased in a phased approach, with line launches planned through 2030 to reach a total production of more than 30GWh annually. said Sean Suggs, president of Toyota North Carolina. "Today's announcement reinforces Toyota's commitment to electrification and carbon reduction, bringing jobs and future economic growth to the region. We are excited to see the continued energy and support of this innovative manufacturing facility." [Source:PR Newswire] In 2021, Toyota, in partnership with Toyota Tsusho, announced the new Liberty location with an initial investment of $1.29 billion for battery production and the creation of 1,750 new jobs. With today's announcement, Toyota North Carolina solidifies its position as the company's epicenter of lithium-ion battery production in North America. Overall, the campus will boast seven million square feet, equating to 121 football fields of battery production. "Through the last few years of building relationships, including my most recent trip to Tokyo and meeting with President Sato, our partnership with Toyota has become stronger than ever, culminating in this historic announcement," said North Carolina Governor Roy Cooper. "North Carolina's transition to a clean energy economy is bringing better paying jobs that will support our families and communities for decades to come." A pioneer in electrified vehicles, Toyota has put more than 24.6 million hybrid, plug-in hybrid, fuel cell and battery electric vehicles on the road globally. By 2025, the company plans to have an electrified option available for every Toyota and Lexus model globally. The company is steadfast in its promise of being best-in-town by supporting local nonprofits and education initiatives. This year, Toyota announced donations totaling $200,000 to the Boys & Girls Clubs of Central Asheboro and Greensboro, Junior Achievement of the Triad, Shift_ed and Volunteer Center of the Triad. Last year, the company announced a $1 million investment in North Carolina students enrolled with Communities in Schools Randolph County and North Carolina Agricultural and Technical State University. Additional Quotes from North Carolina Officials "Toyota's latest expansion in North Carolina is monumental," said Senator Phil Berger. "The additional jobs and increased capital investment are proof that the Triad and our rural communities are prepared to support high-tech manufacturing. I'm thankful for Toyota's dedication to our state and I look forward to seeing it continue to grow and employ hard-working North Carolinians." House Speaker Tim Moore said, "Today's announcement that Toyota will make an additional investment of nearly $8 billion at its newest North American facility right here in North Carolina is a tribute to the hard work the General Assembly has done to ensure North Carolina is the best state for business and innovation." He continued, "Toyota's success is a prime example of how a balanced budget, a strong workforce, and a AAA credit rating pave the way for business growth. Toyota's additional investment in North Carolina is a sign that we are on the right track."

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Manufacturing Technology

Rockwell Automation Invests in Momenta Fund for Sustainable Tech

Rockwell Automation | November 08, 2023

Rockwell Automation invests strategically in Momenta's Industry 5.0 Fund, focused on resilient, sustainable, and human-centric industrial operations. The Industry 5.0 Fund promotes a transition from shareholder to stakeholder value, emphasizing sustainability and empowering individuals with technology to make informed decisions. This partnership positions Rockwell Automation to gain early access to innovative technologies that have the potential to disrupt industrial markets and enhance sustainability while supporting startups at the forefront of digital transformation in energy, manufacturing, smart spaces, and supply chains. Rockwell Automation, a global leader in industrial automation and digital transformation, has made a strategic investment in Momenta's Industry 5.0 Fund. The Industry 5.0 Fund, with an initial capital of $100 million, supports startups dedicated to advancing resilient, sustainable, and human-centric industrial operations. Switzerland-based Momenta launched the fund in cooperation with the EU Commission to promote research and innovation in line with the Commission's Industry 5.0 initiative. The fund aims to transition industries to focus on stakeholder value over shareholder value, emphasizing sustainability and empowering people with information and technology for decision-making. Targeting entrepreneurs in Europe and North America who are at the early stages of development and are at the forefront of the digital revolution in energy, manufacturing, smart spaces, and supply chains, the Industry 5.0 Fund will provide them with venture capital funding and direct value creation. Rockwell Automation is an anchor investor in the fund, allowing the company early access to cutting-edge technologies that can disrupt industrial markets and enhance sustainability. The investment aligns with Rockwell's strategy for inorganic growth and provides valuable insights into next-generation technologies driving digital transformation. Cyril Perducat, Senior Vice President and Chief Technology Officer of Rockwell, expressed excitement about partnering with Momenta to support startups poised to disrupt the industry while expanding human potential. He emphasized the intrinsic benefits of adopting technology that benefits all stakeholders. Ken Forster, a founding partner at Momenta, expressed his appreciation for Rockwell Automation's investment in their Industry 5.0 fund. He acknowledged that Rockwell Automation played a defining role in industrial automation and digital transformation within North America. Under the leadership of an impressive team, they had also been extending their global influence. Ken noted that Momenta's primary focus for the past decade had been investing in companies that drive industrial impact. He further mentioned that they couldn't have found a better partner for the Industry 5.0 fund than Rockwell Automation.

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Manufacturing Technology

Stratasys’ Latest Printer Offers Applications with Improved Parameters

Stratasys | November 06, 2023

Stratasys introduces the F3300 3D printer, offering high speed, uptime, and quality for targeting manufacturing industries with high demands. The F3300 empowers manufacturers to accelerate product development and address global supply chain challenges, delivering a strong return on investment. The latest printer will be unveiled during a live event hosted by the company on November 7. Stratasys, a leader in additive manufacturing and polymer 3D printing solutions will showcase its latest F3300 Fused Deposition Modeling (FDM) 3D printer at the Formnext conference, held in Germany from November 7 to 10. This printer offers exceptional value to manufacturing customers with reduced labor, higher part quality and yield, as well as maximized uptime. The solutions provided by Stratasys provide customers a competitive edge at every stage of the product value chain. These solutions include smart and networked 3D printers, polymer materials, a software ecosystem, and components on demand. The most successful companies in the world go to Stratasys to improve health care, provide agility to manufacturing and supply chains, and alter product design. Key Advancements Faster Print Speeds: Increased gantry speeds, speedier extrusion rates, and autocalibration. Higher Part Quality and Yields: Up to 25% improvement in accuracy and repeatability with autocalibration. Maximized Uptime: Machine monitoring, extruder redundancy, and an operator-friendly interface design. Cost Savings: Offers 25-45% savings compared to other Stratasys FDM solutions. Rich Garrity, Stratasys' Chief Industrial Business Unit Officer, remarked that the next-generation AM system empowers customers to scale production and reduce the need to compromise between traditional and additive manufacturing solutions. He added that the conventional capacity limitations, rising global supply chain challenges, and application complexity are incredibly stressful for manufacturing, and F3300 will empower buyers to accelerate product development, allowing faster innovation and maximized ROI. F3300 printer expands the range of production capabilities and provides performance-oriented manufacturers with the most expansive variety of best-in-class FDM printers. The F3300 is the latest addition to the FDM family, which includes the F900, F770, F450mc, and the F123 series. F3300 complements Stratasys’ F900, known for its dependability, use of high-performance materials, and large capacity. Built for manufacturing by the inventors, the F3300 will be the most sophisticated industrial 3D printer in the market. Its advanced features and design will transform how additive manufacturing is used in demanding industries like automotive, government/military, aerospace and service bureaus. The F3300 is expected to be available for shipment from 2024. Stratasys will host a live event on November 7 at 5:30 p.m. CET to uncover the F3300.

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Manufacturing Technology

Toyota Supercharges North Carolina Battery Plant with New $8 Billion Investment

PR Newswire | November 01, 2023

Toyota announced a new investment of nearly $8 billion that will add approximately 3,000 jobs at Toyota Battery Manufacturing North Carolina (TBMNC). This brings total investment to approximately $13.9 billion and job creation to more than 5,000 – further supporting Toyota's multi-pathway approach to global vehicle electrification. This investment adds capacity to support battery electric vehicles (BEV's) and plug-in hybrid electric vehicles (PHEV's). An additional eight BEV/PHEV battery production lines will be added to the two previously announced, for a total of ten battery lines. Production will be increased in a phased approach, with line launches planned through 2030 to reach a total production of more than 30GWh annually. said Sean Suggs, president of Toyota North Carolina. "Today's announcement reinforces Toyota's commitment to electrification and carbon reduction, bringing jobs and future economic growth to the region. We are excited to see the continued energy and support of this innovative manufacturing facility." [Source:PR Newswire] In 2021, Toyota, in partnership with Toyota Tsusho, announced the new Liberty location with an initial investment of $1.29 billion for battery production and the creation of 1,750 new jobs. With today's announcement, Toyota North Carolina solidifies its position as the company's epicenter of lithium-ion battery production in North America. Overall, the campus will boast seven million square feet, equating to 121 football fields of battery production. "Through the last few years of building relationships, including my most recent trip to Tokyo and meeting with President Sato, our partnership with Toyota has become stronger than ever, culminating in this historic announcement," said North Carolina Governor Roy Cooper. "North Carolina's transition to a clean energy economy is bringing better paying jobs that will support our families and communities for decades to come." A pioneer in electrified vehicles, Toyota has put more than 24.6 million hybrid, plug-in hybrid, fuel cell and battery electric vehicles on the road globally. By 2025, the company plans to have an electrified option available for every Toyota and Lexus model globally. The company is steadfast in its promise of being best-in-town by supporting local nonprofits and education initiatives. This year, Toyota announced donations totaling $200,000 to the Boys & Girls Clubs of Central Asheboro and Greensboro, Junior Achievement of the Triad, Shift_ed and Volunteer Center of the Triad. Last year, the company announced a $1 million investment in North Carolina students enrolled with Communities in Schools Randolph County and North Carolina Agricultural and Technical State University. Additional Quotes from North Carolina Officials "Toyota's latest expansion in North Carolina is monumental," said Senator Phil Berger. "The additional jobs and increased capital investment are proof that the Triad and our rural communities are prepared to support high-tech manufacturing. I'm thankful for Toyota's dedication to our state and I look forward to seeing it continue to grow and employ hard-working North Carolinians." House Speaker Tim Moore said, "Today's announcement that Toyota will make an additional investment of nearly $8 billion at its newest North American facility right here in North Carolina is a tribute to the hard work the General Assembly has done to ensure North Carolina is the best state for business and innovation." He continued, "Toyota's success is a prime example of how a balanced budget, a strong workforce, and a AAA credit rating pave the way for business growth. Toyota's additional investment in North Carolina is a sign that we are on the right track."

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Manufacturing Technology

Rockwell Automation Invests in Momenta Fund for Sustainable Tech

Rockwell Automation | November 08, 2023

Rockwell Automation invests strategically in Momenta's Industry 5.0 Fund, focused on resilient, sustainable, and human-centric industrial operations. The Industry 5.0 Fund promotes a transition from shareholder to stakeholder value, emphasizing sustainability and empowering individuals with technology to make informed decisions. This partnership positions Rockwell Automation to gain early access to innovative technologies that have the potential to disrupt industrial markets and enhance sustainability while supporting startups at the forefront of digital transformation in energy, manufacturing, smart spaces, and supply chains. Rockwell Automation, a global leader in industrial automation and digital transformation, has made a strategic investment in Momenta's Industry 5.0 Fund. The Industry 5.0 Fund, with an initial capital of $100 million, supports startups dedicated to advancing resilient, sustainable, and human-centric industrial operations. Switzerland-based Momenta launched the fund in cooperation with the EU Commission to promote research and innovation in line with the Commission's Industry 5.0 initiative. The fund aims to transition industries to focus on stakeholder value over shareholder value, emphasizing sustainability and empowering people with information and technology for decision-making. Targeting entrepreneurs in Europe and North America who are at the early stages of development and are at the forefront of the digital revolution in energy, manufacturing, smart spaces, and supply chains, the Industry 5.0 Fund will provide them with venture capital funding and direct value creation. Rockwell Automation is an anchor investor in the fund, allowing the company early access to cutting-edge technologies that can disrupt industrial markets and enhance sustainability. The investment aligns with Rockwell's strategy for inorganic growth and provides valuable insights into next-generation technologies driving digital transformation. Cyril Perducat, Senior Vice President and Chief Technology Officer of Rockwell, expressed excitement about partnering with Momenta to support startups poised to disrupt the industry while expanding human potential. He emphasized the intrinsic benefits of adopting technology that benefits all stakeholders. Ken Forster, a founding partner at Momenta, expressed his appreciation for Rockwell Automation's investment in their Industry 5.0 fund. He acknowledged that Rockwell Automation played a defining role in industrial automation and digital transformation within North America. Under the leadership of an impressive team, they had also been extending their global influence. Ken noted that Momenta's primary focus for the past decade had been investing in companies that drive industrial impact. He further mentioned that they couldn't have found a better partner for the Industry 5.0 fund than Rockwell Automation.

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