A contract manufacturing company is a company that contracts to a single manufacturer for products or components. It's a form of offshoring. Normally, a contract manufacturer doing packaging operations is known as a contract packer or copaker. However, if the product is to be finished and delivered, such as in the case of pharmaceuticals, electronics, chemical products, or even automobiles, it's known as a contract manufacturer.
As mentioned above, there are some risks associated with contract manufacturing. In fact, there are thousands of such companies in the United States alone - and many of them in India as well. Many times, a contract manufacturer will outsource non-core activities such as freight forwarding and call center services. The whole purpose behind this is to keep costs low in order to make more sales, but outsourcing these kinds of activities is not without its own risks.
One of the things you can do to ensure that you get bids from a contract manufacturing company that's right for you is to ask them to supply you with their entire portfolio. You'll need to spend some time searching around online to see what else they've done. Ask for a quote over the phone or in person. Look for a manufacturer who has experience with your kind of product and with the kind of services you need. Don't forget to ask them how they go about placing orders - whether by in-house only, or via an external provider such as a fulfillment house.
Another thing you can do to make sure that you're getting right quotes and that you're making the right kind of investment is to find a contract manufacturing company that offers a full range of services to their clients. Many such manufacturers offer a full range of services, including customized samples, labeling, and even full scale production. Some of these manufacturers cater to only one particular industry - for example, if you're a medical device manufacturer looking to customize parts for an already manufactured product, many of these companies have an entire service department just for this purpose. Be sure to include this when checking out different forms of contract manufacturing.
Last but certainly not least, contract manufacturers who offer full service options are a more secure choice than those that simply provide parts. While it's certainly true that some third-party contract manufacturers will only take on small jobs that are simple enough to produce, there are some very large corporations that hire third-party contract manufacturers for all their contract manufacturing needs. If a larger corporation needs a printer for every single piece of equipment it produces, for example, it can quickly hire an entire third-party manufacturer to do the job. Contract manufacturers who also offer a full range of services to their clients increase the security that you have a fully functional set of machines waiting to be put to use.
When it comes down to it, choosing between contract manufacturers is really a matter of economics. Which type of low-quality product will save you more money in the long run? Which type of high-quality product will generate the highest profit figure? The answer to these questions ultimately comes down to your company's specific situation. As long as you keep tabs on all the factors above, choosing a good, high-quality but low-cost contract manufacturing company should be a no-brainer.