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Outsourcing

Contract Manufacturing

In contract manufacturing, a hiring firm makes an agreement with the contract manufacturer to produce and ship the hiring firm's goods.


KEY POINTS

  • A hiring firm may enter a contract with a contract manufacturer (CM) to produce components or final products on behalf of the hiring firm for some agreed-upon price.
  • There are many benefits to contract manufacturing, and companies are finding many reasons why they should be outsourcing their production to other companies.
  • Production outside of the company does come with many risks attached. Companies must first identify their core competencies before deciding about contract manufacture.

Source: Lumen Learning, https://courses.lumenlearning.com/suny-internationalbusiness/chapter/reading-contract-manufacturing/
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