Study: My Understanding of Services

12/10/2018

Know the Nature of Contract Manufacturing

The outsourcing or contracting out of manufacturing services of a business to another outside firm, business or third party vendor is called contract manufacturing. The manufacturing of the products to their required specifications, engineering the product or designing and manufacturing the product comprise the manufacturing services.

In a manufacturing business, the main line of activities cover inbound goods, manufacturing, outbound goods and marketing. These core activities in a manufacturing firm are supported by other departments like human resources, finance and research and development. There will be other groups that will support the manufacturing activities of the company, and these are third parties involving in the raw materials and processed materials that will be factors in the manufacturing of the products. When contracting services, note that it is restricted to labor and other allied services only.

Where there is excellence in manufacturing, contract manufacturing is advantageous for a business for it gives higher value to the products. Globalization, increased collaborative environment in the supply chain, and the economics of cost by relying on others further led this business activity. Third parties are great solution to businesses because they will have costs advantage, will have proximity to their clients and an advantage in competence with their vendors.

The scheme of contract manufacturing is being employed by businesses who are into consumer and industrial goods industries. Contract manufacturing is being practiced in industries such as automobiles, electronics, and pharmaceuticals together with the collaboration with their suppliers. To cite an example, a soap manufacturer would use third party vendors to package their soap using their brand name, or aerospace in heavy engineering industries would take third party vendors to not only design their components but also to manufacture it.

There are factors that would necessitate getting a third party vendor in contract manufacturing, and these are the increased communication flow between them, the information technology and the need to be near their clients.

Be aware of the responsibilities when conducting contracting manufacturing. For a contract manufacturing company to be labeled as professional, it should have the ability to offer different products in the industry it belongs. There should be good alternatives that can be offered through the research and development group. Aside from the label as the responsibility of the contract manufacturer, they should also make sure to provide accurate labels with product information.

Further, it is the responsibility of the contract manufacturer to manufacture accurately the product based on the specifications, and to implement packaging that is in compliance with the quality control guidelines.

Where medicines are concern, contract manufacturer can contact a capsule manufacturing specialist as the third party who will do the encapsulation, tablet packaging and product development. Note that in the case of several pharmaceutical firms, the benefits of contract manufacturing of medicines are already proven.
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