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China Contract Manufacturing Services Company
Mar 02, 2018

  Contract Manufacturing Contract Manufacturing refers to the contract between an enterprise and a foreign manufacturer, and the manufacture of the product by that manufacturer. Contract manufacturing enterprises to enter the international market as soon as possible, the risk is minimal.

  It facilitates the establishment of a partnership between a firm and a foreign manufacturer or its full ownership in the future, for a total of three different types. A little bit can expand the international market, you can also export technical or trademark intangible assets, labor and management and other production factors, as well as part of the capital. The disadvantage is that it will be affected by trade barriers. The second is that partners become competitors and the third is the loss of control over product production. Fourth, the marketing activities of the enterprise may not be carried out as planned due to the delayed delivery of the other party.

Definition / Contract Manufacturing

Contract Manufacturing Contract manufacturing refers to the contract that an enterprise contracts with a foreign manufacturer and the product is manufactured by the manufacturer, and the enterprise is responsible for a cooperative form of product sales. Contract manufacturing enterprises to enter the international market as soon as possible, the risk is minimal. It facilitates the establishment of a partnership with a foreign manufacturer or the full ownership of it in the future.

Type / Contract Manufacturing

There are several different types of contract manufacturing:

1, the two parties to the production of different components, and then by one or both of the assembly into a complete product sales in one or both countries.

2, one of the key components and drawings and technical guidance, the other side of the production of secondary components and responsible for product assembly, and sales in the country or international market.

3. One party provides technical or production equipment, and the two parties jointly produce certain kinds of parts or components or certain products according to professional division of labor, and then market the products to one or both parties.

Advantages / Contract Manufacturing

The use of contract manufacturing, the enterprise will all or part of the production of jobs and responsibilities transferred to the other side of the contract in order to focus on marketing, and thus is an effective way to expand the international market. The advantage of this model is that firms that contract for manufacturing can not only export intangible assets such as technology or trademarks but can also export production factors such as labor and management, as well as some capital.

Shortcomings / contract manufacturing

This model has the following disadvantages at the same time: First, the contract manufacturing involves the import and export of spare parts or production equipment, which may be affected by trade barriers; secondly, it is possible to develop partners into potential competitors; Third, it is possible Lost the control of the production process; Fourth, it is possible because of the delay in the other party's delivery led to the marketing activities of the enterprise can not be carried out as planned.