In 2018, the global Contract Manufacturing Organisation (CMO) was valued at $92.42 billion. Business is booming, and more companies than ever are now using contract manufacturing.
So, what is it, and is it right for you?
Let’s find out.
What Is Contract Manufacturing?
Businesses that use contract manufacturing hire other companies to produce their products for them. This provides smaller businesses with a significant advantage.
They can sell their products on a large scale without needing the assets required to run a large warehouse or factory.
It’s the dream of any entrepreneur or business owner: Your product will be manufactured swiftly and sold in vast quantities by a contract manufacturer.
This process can save time and money, all while increasing the reach of your business. A contract manufacturer can be based anywhere, but China and the U.S provide some of the most popular services.
The Benefits of Contract Manufacturing
Businesses of all shapes and sizes can benefit from contract manufacturing. Here are just a few of the ways it can help you:
The Hiring of Service or Labor
With contract manufacturing, it’s also possible to subcontract labor. For example, if you’re a smaller company, you might not have enough employees to make your production process run smoothly.
In these cases, you can outsource. This method is popular with many large-scale manufacturers, especially as you’ll be able to select manufacturers who are experts in your specific field.
You Gain an Operational Advantage
If the demand for a specific product is high, and a contract manufacturer can provide the capacity to meet this demand, you’ll generate more profit.
In some cases, you’ll also be able to work with contract manufacturers if you’re looking to pilot a new product. They’ll be able to test the market for you before you launch into large-scale manufacturing, saving you time and resources.
This is one of the most significant benefits of contract manufacturing. They’ll have the resources, time, and manpower to adapt to the specific needs of your product.
This means it can often get to the market quicker than you can achieve by working in-house.
You’ll also find that many suppliers offer a range of services. These can include warehousing and 3PL services, quality inspection and testing, manufacturing, order consolidation, assembly, IP servicing, and more.
If you outsource and select the appropriate supplier, the expansion opportunities are vast. Your customers will also be satisfied with more resources.
CM’s can provide high-quality testing and assembly, so your products are guaranteed to be safe and fully functional.
You Can Enter Different Markets
As a merchant, it can sometimes be hard to trade and perform business in other countries.
When you outsource and provide contracts to manufacturers in different countries, you’ll find it much easier to sell your products outside your national market.
It can also be cheaper to enter other markets through contract manufacturing, so you’ll give yourself the best chance to generate more profit.
You Can Dedicate More Time to Selling
Marketing is an important business. Suppose you can’t target potential consumers effectively. In that case, the quality of your products won’t matter because you won’t be reaping the rewards.
If you use contract marketing, you’ll be allowing other people to handle the practical side of your business while you focus on selling. As a result, you’ll be able to strike a better balance and give yourself a fighting chance in the market.
High-Quality and Low-Cost
Your products will be safe in the hands of professionals who can use their expertise to maximize the quality of your products. Many contract manufacturers are experts in production activities.
They can often perform this work to a higher standard than most businesses who choose not to outsource.
What Are the Disadvantages?
The benefits of contract manufacturing are substantial, but the process doesn’t come without its disadvantages. These can include the following:
Lack of Control
You’ll lose control over your production activities. If you have solid and existing production skills, you might choose not to outsource. If you’d prefer to hand-pick your employees yourself, this may also be a problem.
Although you’ll be able to select the manufacturer yourself, you won’t be able to choose individually or approve the people who manage your products. Your CM will take care of this for you.
Potential Delivery Delays
Contract manufacturers work on a colossal scale. Sometimes, due to a heavy workload, they may not produce products on time, and your customers could experience some delays.
Potential Outsourcing Problems
If you choose to outsource abroad, you could be interacting with people who speak different languages and live in different time zones. If you’re impatient, communication could become stressful for all parties involved. Make sure you’re happy with who you’re outsourcing to.
What channels will you use to communicate? Are you happy to speak with manufacturers in different time zones, even if it’s not during your business hours? These are all critical questions to consider.
Are You Ready to Get Started With Contract Manufacturing?
We hope that having read this blog post you now have a clearer idea of why you need contract manufacturing.
If you’re looking to hire a labor force, access better equipment and facilities, and/or have goods built, contract manufacturing could be a perfect solution.
You’ll also be able to negate start-up costs, improve product quality, concentrate on your brand and keep up with seasonal demand.
Contract manufacturers like Shield Works offer companies an array of different services and high levels of expertise. So if you’re looking for a reliable manufacturer and want to move your production to China, contact Shield Works today for more information.
It’s no secret that outsourcing your manufacturing obligations can save you plenty of time and money. In fact, China is one of the most popular destinations to do so.
But, not every entrepreneur knows everything they should about contract manufacturing in China. So, we’ve put together a guide with all the details you should keep in mind.
Let’s get started.
1. You Need to Find a Reliable Supplier
As you might guess, you’ll need to find a reputable supplier before you can move forward with your manufacturing obligations. Although this responsibility can seem overwhelming at first, is not as difficult as you might anticipate.
In general, you’ll want to consider the following factors before you make your decision:
- The size of the factory
- The location
- Total production capacity
To elaborate on this last point, you should decide whether or not you want your supplier to exclusively manufacture for your business during the production process. Once you’ve figured out the necessary criteria, you can begin your search.
Keep in mind that either you or a dedicated professional must visit the actual facility before production begins. This is to ensure that the facility meets all your needs and that you aren’t being misled.
2. You Must Register Your IP
Unfortunately, many entrepreneurs are unaware of the fact that they need to register their intellectual property in China. This means that you should pursue any necessary patents, trademarks, or copyrights.
Foregoing this obligation can easily become a significant obstacle for your production process if another entity in China decides to register your IP under their name.
Not only will this prevent you from manufacturing a product, but you could also run into legal issues for infringing upon their copyright. Due to the murkiness of international law, it can be highly difficult to prove that you were the original creator and owner of a particular IP.
Even after you have registered your IP in China and found a reputable manufacturer, there is one extra step you need to take.
You must have your manufacturer sign a nondisclosure, non-use, non-circumvention (NNN) agreement in order to further protect your rights. Anyone who attempts to avoid this obligation is someone that you should never work with.
3. Prioritize Quality Control
Ideally, you would be able to provide your manufacturer with the necessary information and then receive a high-quality product. But, this isn’t always how things turn out.
It’s not uncommon for you to encounter quality issues while outsourcing your production overseas. Fortunately, though, this is often a result of misdirection that can be resolved through communication.
The best way to accomplish this is to have a third party regularly conduct QC checks during the production process. This will allow you to catch issues as quickly as possible and then take steps to remedy them.
Failure to do so could easily result in dissatisfied customers, delayed deadlines, etc. Put simply, brushing off your quality control obligation comes with a strong risk of hurting your brand’s image.
4. Preserve Approved Samples
It’s not abnormal for different batches of products to have inconsistencies between them. To elaborate, the first few rounds of Chinese contract manufacturing may meet your standards while subsequent batches may fall short.
To help keep everything on track, it’s essential that you preserve copies of approved samples. This will give your manufacturer a solid reference that they can strive to duplicate in the future.
Additionally, you can use an approved sample as an index of whether or not a current batch meets your standards. If it doesn’t, your manufacturer is obligated to make changes.
But, these can take a significant amount of time to complete. This also means your manufacturer may not be able to adhere to your time constraints.
So, it’s in your best interest to have multiple high-quality samples that your manufacturer can use in order to streamline the production process. In the event that your standards change, you should obtain new samples as quickly as possible.
5. Establish an Original Equipment Manufacturer (OEM) Agreement
For those who are unfamiliar with this type of document, this is an agreement between you and your manufacturer that aims to remove any form of ambiguity in your relationship.
This means that you need to elaborate upon any minute details that could cause complications in the future. In practice, you’ll find yourself having to clearly define the color you want your product to be, the projected timeline, etc.
In fact, colors are defined by Pantone number as opposed to terms like ‘red’ or ‘blue.’
Other factors to consider include:
- Ownership of tooling
- Dispute resolution
- Payment terms
- Quality requirements
The same can be said about product weights and dimensions. In addition to all of this, you’ll need to ensure that this agreement is enforceable in China and not just the United States.
This often means working with a Chinese legal professional to help you navigate the nuances of Chinese law. Additionally, it’s required that you write the document in Chinese.
Otherwise, your manufacturer could break all of your guidelines and suffer no consequences.
Contract Manufacturing In China Can Be Game-Changing
So, it’s essential that you keep the above information in mind. From here, you’ll understand everything you should about contract manufacturing and can then make the most of this opportunity.
Want to learn more about what we have to offer? Feel free to reach out to us today and see how we can help.
Retailers are always looking for ways to improve efficiency, save money, and do whatever they can to ensure their company runs smoothly. Doing one thing that can meet all three things can be difficult, but 3PL services and warehousing in China can give you what you need.
Are you familiar with the term 3PL? Have you thought about the benefits of managing warehousing services overseas? Let us teach you what you need to know about both.
Keep reading to learn more about 3PL and how warehousing in China can benefit your business.
What Is 3PL?
Have you ever thought about what it takes to for a product to get from a warehouse to the retailer’s store?
Ecommerce logistics, inventory management, warehousing, packaging, freight forwarding, and fulfillment all have to work together in order to bring customers and sellers their much-needed products. Managing all of that on your own can get costly and time-consuming.
3PL is an abbreviation of the term third-party logistics, and utilizing 3PL services allows savvy business owners to outsource the important tasks we just mentioned.
3PL allows you to outsource operational logistics. This can include warehousing, production, delivery, and more. Overall, it allows you to focus on other parts of your business.
Many people associate 3PL with e-commerce retailers, but the truth is that plenty of companies have been outsourcing the manufacturing and shipping of their products for decades.
5 Major Benefits of Warehousing in China
If the idea of using 3PL services excites you, it’s worth considering warehousing in China.
Warehousing is a big part of 3PL services, and it’s important to note that warehousing goes far beyond just storing items in one place. Comprehensive services can cover order fulfillment, inventory control, contract warehousing, cross-docking, transport, and transloading.
Warehousing in China comes with its own unique set of benefits. Curious about why so many companies are deciding to go with warehousing companies in China? After you learn how they can benefit your company, you’ll wonder why you haven’t started using their services sooner.
1. Work Efficiently
As we’ve mentioned, warehousing requires many different services: Managing inventory, fulfillment, transportation, and other essential things. It’s a lot of different and equally important services to manage, and doing it on your own can be difficult.
When you outsource your warehousing services, you’re able to have one company manage everything. Instead of having to juggle a lot of different services, you’ll be able to have one company manage everything.
This doesn’t just make your workday easier. It can also help make things more efficient. Having all of your warehousing work handled by one provider means that one provider is also managing your paperwork, orders, and other important documentation.
2. Save Money
We just talked about how much time it takes to effectively manage warehousing services for businesses. The time cost is something important to account for, but the actual monetary cost can even more expensive.
Paying for warehousing services in the US can be very expensive. On top of thinking about the base cost of their services, you also have to think about how many people you’ll need on your own staff to help manage who you’re outsourcing to.
The strong Chinese economy is built around manufacturing and shipping. Services in China are generally much less expensive than services in America, and that’s especially true when it comes to shipping and warehousing. You simply can’t beat the costs.
3. Scale Effectively
One of the most difficult things about effectively growing a business is scalability. You want to make the right decisions around growth, but there’s a lot of risks around costs when you’re a retailer.
Growing your business when you’re a retailer will require buying and selling more products. Having a glut of leftover products can take up space in your store and could cost you a lot of money.
When you outsource warehousing, you’ll have a partner that can help you with inventory control. They can help ensure that you scale effectively and efficiently and make it less expensive for you to produce more products.
4. Tap Into Company Connections
Are you thinking about using a different manufacturer to produce your products? Do you want to use a new shipping company? Are you thinking about selling your products in China or in other markets?
Finding the right companies to work with can be difficult. However, the right warehousing provider can get you in touch with the right people.
Warehousing companies work with a lot of different businesses. If you want to break into new markets or try new services, your warehousing company could help get you the connections you’re looking for.
Instead of having to go off of anonymous reviews, you’ll be able to work with companies your warehousing provider trusts. This can be especially helpful if you’re thinking about working with other Chinese providers. They’ll understand the local markets better than you and can give you invaluable insight into the inner workings of some businesses.
5. Benefit From Their Expertise
If you’re focused on growing your company, you can’t spend your time worrying about logistics around warehousing. Instead of having to focus on menial tasks, let a true expert handle your warehousing needs.
Chinese warehousing services have helped small retailers and global conglomerates grow their businesses effectively. They can focus on the important warehousing work, and you can spend your time and energy on other matters.
Start Warehousing the Right Way
Warehousing in China can benefit business owners of any size. If you want to scale your business efficiently, save time and money, and make new business connections, it’s time to find the right company to work with.
Regardless of what 3PL services you need, we’re ready to help. Be sure to contact us today so we can start thinking about the best ways to help your business grow.