What is contract manufacturing?

Contract manufacturing is when a contract is entered into by two companies. The agreement between them states the terms and conditions that one company will follow when producing parts or any other component or material for the other company. Depending on the component, the company doing the contract manufacturing in California may supply all materials, produce and package the product and ship it to the purchasing company. The purchasing company will not have to be concerned with raw material sourcing and storage nor will they have labor concerns.

The working model of contract manufacturing in California can and does work in many situations. The process itself is nothing more than outsourcing; the buyer has the producer make the product under a private label agreement. The process can be effective in:

  • Pharmaceuticals
  • Food production and packaging
  • Computer and other electronic components
  • Personal care products
  • Automotive parts and components

Wherever there is a viable arrangement between two companies, one producing for the other, it is no more than contract manufacturing in California.

Often, the company that is responsible for the manufacturing process has no product of its own. Either of the parties will initiate a discussion, during these discussions and negotiations the job of the manufacturer is to convince the buyer that their facility is well suited to produce the product economically, to a high standard of quality with minimum rejects and all shipped according to a detailed schedule. The manufacturer will attempt to show the customer that his efficiencies and magnitude of scale can translate to higher profits for the customer.

contract manufacturing is advantageous for both parties to the agreement. For the manufacturing entity, he is guaranteed a predictable and steady flow of work as contract manufacturing usually has within the agreement, certain volumes of parts that will be purchased and taken from the manufacturer over the life of the contract, which can be for a number of years. This contractual quantity makes it easier for the manufacturer to plan his material acquisition and labor requirements.

From the other party’s point of view, the client, he has no need to purchase raw material, provide a site for manufacturing, provide the expensive manufacturing machinery or hire and train production workers. There is a complete elimination of employee problems, machine breakdown or any of many small, time wasting issues that are bound to happen during contract manufacturing in California. The client is left to do what he is geared up for; marketing and selling the product to his customer base.

Sub contracting as a concept can be applied to the service industries as well. Telecom, Internet, cellular access can all be services purchased from one company, branded and sold by another.

For computer and electronic contract manufacturing in California, Caltronics Design and Assembly, Inc. can offer design, manufacture and testing of just about any print circuit board.

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