3 FAQs About Contract Manufacturing, Answered

Advantages of contract manufacturing

If you own or manage an electronics company in the United States, you’re probably struggling to compete with larger manufacturers and looking for ways to improve your business model — without decreasing the level of quality and service you provide to your customers. One of the easiest ways to accomplish this and increase profits is to work with electronics manufacturing companies. If you’re not familiar with this concept, here are answers to three of the most frequently asked questions regarding contract manufacturing:

  1. What Is Contract Manufacturing?

    Contract manufacturers, often known as original equipment manufacturers or OEMs, are companies that create electronics that can be branded as being your company’s before you sell them to your consumers. These manufacturers are typically located in Asia, and can make either individual components (which you can have assembled in the U.S.) or complete devices.

  2. What Are the Benefits of Contract Manufacturing?

    The benefits of contract manufacturing deal with two areas of your business: production costs and efficiency. The chief benefit of contract manufacturing is that outsourcing to countries with much lower overhead and labor costs can significantly decrease overall production costs. These companies typically work with several electronics distributors, so they can often offer a lower price per unit because of economies of scale.

    Outsourcing electronics manufacturing can also allow your company to focus on customer care, marketing and other growth strategies, rather than managing the daily nitty-gritty of components manufacturing. Essentially, contracting out these peripheral duties allows your company to spend more time doing what it does best.

  3. How Can My Company Choose Good Electronics Contract Manufacturers?

    It’s important to choose the right manufacturer, and it’s worth spending a little time searching — sometimes even flying oversees to inspect several facilities — before signing any contracts. Of course, the manufacturing prices offered will be a primary concern. But you should also look into the quality of the manufacturing; if your customers get faulty electronics, that lowers the value of your brand, and you’ll be the one on the hook for replacing anything covered under warranty.

    You should look into companies that have their own customer service teams based in the U.S., which will cut down on travel expenses and time spent oversees negotiating. You’ll also want to consider the level of partnership you prefer; some OEMs are manufacturers alone, while others will work with you on development and distribution strategies.

Has your company used contract electronic manufacturing services in the past? What are some other benefits of contract manufacturing? Share your experience in the comments.

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