Outsourcing manufacturing needs of a company gains your company a certain strategic advantage. Many industries not only in the field of medicine, are gaining tremendously from contract manufacturing and the increase in the number of CM’s is not the only factor that belies this fact.
A factor that was considered an added expense the increasing revenues and the ease with which a company is able to manage its own core business logistics are making more and more run to the CM’s. It is not only OEM’s that stand to benefit from hiring and external manufacturer, large firms are adopting CM over franchising, small businesses are risking in it and more traditional established companies are moving away from the conventional practices.
Obviously, there are greener pastures on this side of the fence, but if you are looking for more reasons to opt for contract manufacturing, here they are:
In most cases, the contract between a CM and an OEM or any other company is a long-term contract spanning approximately 5 to 10 years. Both the CM and the contracting company benefit from the steady flow of business. Such stability and reliability is important for business growth, Fluctuations in production can cost you your business, money not forgetting the decline in growth levels.
2. Major savings
The costs of setting up your own manufacturing plant can be daunting. The property, the facilities, the equipment, the labour force and their training will cost you a good amount and the return on this investment is slow and gradual. Major benefits are realized in the long term and there are other factors to place into consideration.
With contract manufacturing, all these costs are felt by the CM and not yourself. Capita l, labour and other overhead costs are instead translated into the contracting cost, which is a fraction of the initial cost of setting up your own; hence, the saved funds are readily directed to other areas of importance.
Companies that opt to CM in low cost countries such as China, Brazil and other emerging nations save extra on the due to the ready labour and technology resent in these nations.
3. Specialized technology
Quality products require the top-notch technology that offers precision and accuracy. The investment in such is not little and chances are that it is not the core area of your business. The result is neglect in this sector for other pressing needs. Although, a necessary decision in the end it ends up hurting your core functions.
When using a CM, manufacturing is their core business; hence, all efforts are geared towards having the best quality as with regard to technology. You gain quality and inimitable products. In addition, you benefit from the CM’s quality control and counterfeit checking measures.
4. Focus on one’s core competencies
By outsourcing a vital but support function of your business, you are able to concentrate on your core competencies and raise your company or business to the next level.
Allowing the CM to deal with logistics that would otherwise weigh you down frees you up for more business functions.
5. Gained skills
You gain the skills of the CM by association and mere facts that they are reflected on your products. The same applies for business relations and networks. The CM has a better position in the market for sourcing the materials, suppliers and other valuable aspects of the supply chain that may not be readily available to you.
6. Cost effectiveness
Given that it is the CM’s core business, apart from the quality and the technological benefits the cost of production of the product is lower than an inside job on your part. The CM is dealing with an array of clients which ensures all they factors of production are dealt with in the large scale resulting in a reduction in cost in the production process, acquiring of materials and so forth. These benefits trickle down to you by way of cheaper yet quality products.
All these factors and many more withstanding, it is clear the contract manufacturing hold much promise for all industries and especially in the medical arena where the use of sophisticated machines to ease the work of medical professionals is increasing by the day.
Contract manufacturing is the direction most industries are heading if they have not arrived there yet. As you can see, the paradigm shift on manufacturing perspectives will bring much revolution and revenues to all involved!
The author, Chad, is an avid follower of technological trends in the medical industry such the latest practices of medical contract manufacturing.