Outsourcing

Outsourcing, as a trend over the past few decades, has benefitted both consumers and companies. The ability to seek lower-cost labor, materials, and capacity has drastically reshaped the modern-day business environment. Have we hit peak outsourcing?

Outsourcing is prevalent in manufacturing, but it can be found in any industry where companies hire other providers to fill service needs at a lower cost than they could otherwise perform internally. Read this article, which discusses why contract manufacturing occurs and presents its opportunities and risks.

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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