Companies often struggle to understand the difference between contract manufacturing and private label manufacturing. While there are some similarities, the two are actually quite different. However, the ultimate goal of both private label and contract manufacturing remains the same; produce high quality products that consumers want to buy.
Private Label Manufacturing
In private label manufacturing, one company makes the products but markets them under another company’s label or brand. The manufacturing company is the owner of the product and retains controls over product specifications, quality, and more.
Contract manufacturing
Contract manufacturing involves the outsourcing of the manufacturing and/or design process to another company. The owner of the company hiring the CM provides all of the necessary product specifications. Unless pre-determined by the company hiring the contract manufacturer, the CM cannot change the product specifications. However, it’s always a good idea to ask if there are ways to improve quality and reduce the costs of manufacturing. The right CM can usually provide insight into improvements to the manufacturing process or product design.
Benefits of Contract Manufacturing
Contract manufacturing is the ideal choice for companies looking to reduce risk and maximize operational efficiencies. Contract manufacturing has numerous benefits including:
- Reduced costs. Using a contract manufacturer allows companies to create high quality products at a much lower cost than producing the same products in-house. Companies that use a CM do not have to acquire or maintain appropriate staff, space, equipment, or technology.
- Lower risk. Production runs are typically made to order for specific quantities.
- Access to experienced professionals. Partnering with a contract manufacturer puts you in direct contact with experienced professionals qualified to offer advice on the design and production of a wide range of products.
Private label manufacturing and contract manufacturing both offer numerous benefits for businesses of all shapes and sizes. However, because of lower margins, contract manufacturing is typically the safest bet.
If you have questions about the contract manufacturing process, or you’d like to learn about outsourcing with a quality CM, Means Engineering can help. Please contact us for more information about our services.
