With the popularity of shows like Shark Tank and online marketplaces such as Amazon and eBay, entrepreneurs can dream up just about anything, have it manufactured relatively easily and start selling it to the masses.
While the process might come with different names, many know it as contract manufacturing. Farming out your production to an outside firm can help you produce and sell products without having to invest in machinery, equipment, or specialized product knowledge.
For some SME’s and ‘start-ups’ it leaves them free to do what they do best – sales and marketing!
For others it is a method of defraying capital investment, at a time when the ‘great idea’ has yet to deliver great revenues!
So, who would benefit from Contract Manufacturing?
An entrepreneur with no experience and limited funds wants to get his/her idea to market quickly
A business wants to try out a one-off product requiring different equipment and/or materials to produce
A business wants to introduce a new product line
A business wants to white-label a product the manufacturer already makes
A manufacturer may possess the needed expertise a business does not have
A manufacturer may have the quality control to meet standards/regulations for certain products or industries
In an uncertain economy, contract manufacturing offers flexibility to any business unable to make a financial commitment, and in any business, building in flexibility is a very good idea!
Often a business will approach a manufacturer with a recipe, formula, or design to produce items to certain specifications. They come to an agreement which normally includes confidentiality and the business maintaining intellectual rights to the product(s). Companies that outsource production to manufacturers in other countries frequently choose to do so to reduce costs, but must consider cultural issues, political issues, bad weather and other factors that could affect the supply chain and impact delivery times.
The Importance of Inventory Management Software in Contract Manufacturing
Managing inventory in a manufacturing operation is complex. The very fact that you are converting components or ingredients into different products creates inventory headaches. Add to that multiple levels of assemblies in traditional “batch” manufacturing plants, and coping with ‘co-products’ and ‘by-products’ in “process” manufacturing plants, e.g. food, chemicals, pharmaceuticals, and it is hard to cope with pen-and-paper or even spreadsheets.
In contract manufacture, another layer of added complexity is introduced, as you need to segregate manufacture by customer, and account for it accordingly.
SOS Inventory is Ideal for Contract Manufacturers
SOS Inventory is designed specifically for the SME Contract Manufacturer. It is functionally rich, affordable and easy-to-implement. It is widely used across the manufacturing spectrum from cookie dough to car components.
It provides the controls needed to allow a Contract Manufacturer to maintain profitable control of its business in a pressured environment.
The Attraction of Offshore Contract Manufacturing
Costs will often make overseas production seem attractive, and yet, as the recent Corona virus pandemic has demonstrated, extended supply chains are a point of weakness in any business model; they are easy to disrupt and will quickly impact your delivery promises and compromise your hard earned yet fragile reputation.
Please remember that in this digital age, you are competing with the “best in the world in your own back yard”. Bad news travels fast, and your failure to deliver will soon be common knowledge.
The other element that you might bear in mind if you are thinking of offshore contract manufacturing is culture & trust.
Please don’t presume that the world operates to the standards and morals that you are used to. It doesn’t!
If you are thinking of offshore contract manufacture because the reduced costs are compelling and that alone can turn your ‘great idea’ into a goldmine; well, please employ someone who has done it before, and who can act as a ‘pathfinder’ for you.