Are you an entrepreneur with a new product idea you would like to bring to market? Perhaps you don’t have the production equipment needed to produce your product yourself, or maybe you are hoping to sell or license your idea to a company, but need some initial stock to show sales potential, value, and usefulness.
In these situations, hiring a contract manufacturer may suit your needs. But what is a contract manufacturer and what can you expect from them?
A contract manufacturer is a for-hire firm that will produce a specific quantity of your product for a set fee based on agreed upon specification. The price of the service is based on an estimation of the processes, labor, tooling, and materials costs.
Hiring a contract manufacturer may make sense to startup businesses and self-made entrepreneurs because it takes the lengthy process of manufacturing off their shoulders and entrusts it to a product creation team that has experience in the industry. It also may save a business money because it allows an inventor to not have to purchase manufacturing equipment. Some contract manufacturers may even inventory and ship products, which can be both labor-intensive and cost-prohibitive for a small business.
There are always risks associated with outsourcing, and contract manufacturing is not an exception. Consider speaking to an attorney to go over the business arrangement and ensure you have an understanding of the services you are paying for and their extents and limitations. Generally, keep these words of advice in mind when considering a contract manufacturer:
Don’t Be a Cheapskate
A lower price tag may not always be the best option. This price may just include the bare minimum of necessities for your product, and you will be stuck paying for expensive and necessary add-ons in order for your invention to turn out like you imagined.
It is also possible a low price can be associated with substandard materials or less-than-stellar craftsmanship. Although this is not always the case, be wary when considering an offer that is much lower in price than competitors’ pricing. Be sure you are familiar with the specifications and know exactly what you are getting for the cost.
Bigger Isn’t Always Better
On the other hand, a higher cost may not always be indicative of a higher quality product, just as a big-name manufacturer may not always be the best option for you.
Research many different manufacturers on consumer sites and ask for references from customers who produce products similar to yours. Always compare specifications throughout your top choices to ensure each company is offering comparable materials and labor. If a small, yet reputable company can provide you with the same service and quality materials as a big-name competitor for a better cost, it is worth considering the less expensive, but also lesser-known company.
Quality Over Quantity
A simple law in manufacturing is the more product you purchase, the less each will cost to produce. This is because the production phase of manufacturing is the most costly since it involves expensive and time-consuming processes and preparation work. Once the machines start to run, the only difference between producing 500 or 5,000 of your product is the raw materials. It may sound appealing to get 10 times more product for only double the cost, but don’t just buy because the price per unit is less.