Common Misconceptions about Contract Manufacturers

Over the past few months, we discussed the benefits of contract manufacturing and the common mistakes companies make when beginning an outsourcing program.  This month we address the real risks, which have been sensationalized to the point of creating common misconceptions about contract manufacturers, and discuss how to avoid them.

 

Misconception #1: Contract Manufacturers Deliver Inferior Quality

Many organizations believe a contract manufacturer cannot, or will not, match their own standards of quality. We hear this often, particularly if their orders represent a small portion of the factory’s much larger business. Simply put, nothing could be further from the truth. Like most manufacturers, contract manufacturers operate on low margins and profit on volume. Poor quality would likely lead to a series of ‘one-and-done’ orders, which would be extremely short-sighted. Further, overhead is inherently higher on any initial order from almost any customer, and would result in a net loss.

 

Misconception #2: You Lose Control Using Contract Manufacturers

Moving production outside your organization will by definition result in reduced control of the process. Through good communication with your manufacturing partner, however, your involvement in the process can be as detailed as you want it to be. Moreover, as discussed previously, additional time gained by delegating production efforts frees up resources better used for development, marketing, servicing customers and other tasks.

 

Misconception #3: You Risk Losing Intellectual Property with Contract Manufacturers

Intellectual property (IP) is critical to the viability of many businesses. It is a risk good contract manufacturers are aware of and have safeguards in place to protect.  Still, as you should with all partners, limit the details provided to the contract manufacturing partner to only what’s essential. Also, you should execute a robust non-disclosure agreement (NDA). With a US-based contract manufacturing partner (like Revotech), the NDA is binding, enforceable, incentivizes diligence and provides recourse in the rare event it is necessary.

 

Correcting Misconceptions about Contract Manufacturing

For over 15 years, we have been helping companies navigate the contract manufacturing landscape. While these are not the only misconceptions about contract manufacturing, in our experience these are the overwhelmingly most frequent ‘objections’ we hear. As we provide our services, we regularly see how it can increase our customers’ competitive advantages and derive the numerous benefits of a quality contract manufacturing partner relationship. And as a result, we hope to correct these common misconceptions about contract manufacturing so more companies can experience the same results.

 

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