What is a Contract Manufacturer?
A contract manufacturer (CM) is a company that manufactures products or components on behalf of another business. Its scope may range from producing individual components, such as machined drive shafts, to manufacturing subassemblies or complete products, such as mobile phones or hair dryers.
Contract Manufacturing
Contract Manufacturers (CM) are the perfect answer to businesses that are looking to outsource their manufacturing. This can happen for several reasons:
- There are no in-house capabilities
- There is a need for a specialist process
- Cost of in-house manufacturing is prohibitive
- Logistical or demographical constraints
A common scenario for a company using contract manufacturing would be something like this:
“AMEX Inc. has designed an electronic product that consists of one PCB, one LED screen, some plastic moldings for the case, a keyboard, and a charger. AMEX Inc. is a design firm with no manufacturing capabilities, therefore need to outsource 100% of the manufacturing. They decide to use different contract manufacturers to produce different parts of their product.
- Molding Supplier to produce the case components
- Electronic Manufacturing Service (EMS) supplier to produce the PCB
- Charger manufacturing supplier
- LED screen supplier
- Keyboard supplier
Once they have identified all their suppliers, they still need assembly. This is where the EMS supplier would pick up more responsibility. The EMS would purchase directly from AMEX Inc’s approved suppliers the case molding, the charger, the LED screen and the keyboard. The EMS supplier would then assemble the product and ship to AMEX Inc.”
So in a nutshell, a Contract Manufacturer can be anyone who is providing a service for someone else who is looking to outsource their work.
You can read more about a CM’s role in NPI in The New Product Introduction Process Guide for Hardware Startups.
You may also enjoy this blog post: OEM, ODM, Contract Manufacturers: Choose your China Supplier Wisely
Listen to this podcast episode about OEM vs ODM vs Contract Manufacturer
We recorded an episode of the podcast where we discuss the difference between OEMs, ODMs, and CMs, including their benefits and drawbacks. This should help you make a decision on which supplier type is best for your needs: