The Power of Contract Manufacturing: How It Can Drive Down Costs and Increase Flexibility
The contract manufacturing industry is thriving globally due to its ability to drive the immense reduction in the cost of manufacturing goods and to grant companies increased flexibility faster than traditional methods.
In this article, we’ll take you through the primary reasons why contract manufacturing can deliver improved cost performance and production flexibility.
Reduce Labor Costs
Labor cost is a key element in the manufacturing industry. Typically, the labor is more expensive when you are from the developed world. So it makes more sense to outsource your production to China.
Depending on how far along you are in manufacturing your product, you may be paying upwards of 50-70% for labor costs.
When shifting to contract manufacturing, it’s typical to see those costs reduce by 30-50%. While lower costs aren’t guaranteed, there’s plenty of room for negotiation based on your volume requirements.
In some cases, companies have been able to negotiate down as much as 80% of their original labor costs. This is a massive saving that can help you create a more profitable business model from day one.
Reduced Capital Requirements
If you’re not ready to invest in building an in-house engineering team and buying expensive equipment, contract manufacturing is the best option to help you get a product to market with minimal risk.
You simply pay for services as needed rather than extra investment, otherwise, that will be a waste of having a facility with equipment that sits idle most of the time.
Some manufacturers may even let you use their machinery at fairly lower prices if you hold an order of larger quantities or have a good relationship with them.
Typically, a professional contract manufacturing company focuses more on improving efficiency. They have a pool of in-house specialized engineers because a company’s production efficiency obviously cannot be improved overnight.
Increase Inventory Flexibility
Since you are not tied to a specific factory, you can switch manufacturing plants at any time without having to change production plans. This gives you increased flexibility for where and when you buy raw materials as well as components needed for your product. In this case, you will never be stuck with too much or too little inventory if you have contract manufacturing.
Meanwhile, when you work with contract manufacturers, they handle all aspects of manufacturing including procurement and logistics.
The cost savings associated with using a third-party supplier is passed on to you in terms of lower prices. In addition, because these companies specialize in one aspect of manufacturing (such as PCB assembly), they do it better than anyone else in their field which means they can offer better quality products at competitive prices.
Increase Manufacturing Experience
If you choose a professional contract manufacturer who is specialized in what they do, you will be worry-free in many situations.
The most important one is that they usually have a customized plan for you to meet your needs in production, quality standards and lead time. It will be easier and more effective to get your project done.
The other excellent experience for you if you have a professional contract manufacturing firm is that they have one-stop supply chain services to deal with from sourcing, quality control, warehousing and shipping. With these services, you can save your time and money in finding other third-party companies for your business.
Manufacturing In China With Confidence
Contract manufacturing is only becoming more prevalent as time goes on. When your company needs contract manufacturing services, come to Shield Works. We take care of every aspect for you, so you can focus on innovation and launching products as quickly as possible.
With our well-established facility based in Zhuhai, Guangdong Province, we offer a range of services to accommodate your needs, from a one-time contract manufacturing and precision assembly to warehousing and fulfilment, without ever worrying about inventory or quality control. Our production process is streamlined, efficient, and optimized – so no matter what phase your business is in, we can take care of you.
We pride ourselves on excellent customer service and British background management experience. Contact us to find out how we can help with your project!