Contract manufacturing: what is it, and what are its specifics

What it is

When a company does not manufacture products itself, but orders them from another independent company - this is contract manufacturing. In fact, it is manufacturing outsourcing.

It is suitable for companies that do not have their own facilities. The money they would have to invest in equipment, premises and staff salaries, they can invest in brand promotion and sales.

Companies with their own plant or factory also sometimes outsource the manufacturing of products under their brand. This is profitable when a large volume of production is needed and their own facilities are not enough. Or when a new product line is planned, but there is no suitable equipment or personnel for it.

Even if the company has its own plant, contract manufacturing may be more profitable

Types

OEM - original equipment manufacturer or original product manufacturer. In this case, the manufacturer performs one of several operations. If there are several manufacturers, the customer ensures cooperation between them - organizes the supply of raw materials, logistics between different manufacturers, etc.

ODM - original design manufacturer or the developer and manufacturer of the product. This type implies that the customer transmits the whole manufacturing cycle to the executor and receives the final product.

The contract manufacturers themselves are divided into two types: the first deals only with contract manufacturing, while the second one releases the product under its own brand. The advantage of the first type is that they have well-established business processes and ready-made solutions. Manufacturers of the second type are good in that they establish more personalized communication with the customer and offer flexible terms of cooperation. 

You can choose to whom you can outsource production functions in Russia on the exchange of the "Moscow Innovation Cluster" fund. It contains the capacities of workshops, factories and laboratories in various industries - from light industry to electronics.

Benefits for the customer

• Savings. It is cheaper than maintaining your own production, renting equipment or production with equipment.

• Fast product entry into the market and just as fast exit - the company can react quickly to changing customer needs. 

• Implementation of virtually any idea thanks to the manufacturer's knowledge, experience and equipment. 

• Reduction of risks. For example, if the demand for the product falls, the customer can reduce the volume, but pay the price under the contract.

Risks for the customer

• Theft of a design or idea. The manufacturer may become a competitor. 

• Decrease in quality. The contract manufacturer may use raw materials and equipment that does not meet the specifications.

• Weak control of the production process. The customer will not know that the raw materials or technology do not meet specifications until he identifies the defective batch. 

• Violation of agreements. For example, the contractor did not calculate his capabilities and missed deadlines.

Working with a contract manufacturer

The most important thing in industrial outsourcing is to choose a suitable manufacturing company, so that after the release of the first batches, you do not have to look for a replacement. Therefore, at the stage of selection, you should pay attention not only to the cost of services and convenience of logistics, but also to the following features:

• Production facilities - how they meet the needs and potential of the customer, what is the maximum and minimum batch volume.

• Scientific base - whether there are scientific staff, a laboratory, how it is equipped. This is important for the manufacture of innovative, unique or environmentally friendly products.

• Quality control - how does the manufacturer check the compliance of the product with the parameters specified in the terms of reference.

• Communication - how interested and willing the manufacturer is to discuss the terms of cooperation, to work with complaints.

Biomicrogel^® contract facilities

BMG provides modern production facilities, a laboratory and technologists for the contract manufacturing of the complete cycle or individual steps. Here is what a full-cycle plan looks like:

Discussion of terms of reference, recipe approval

The BMG team reviews the customer's terms of reference and product formulation, and assesses the profitability of production. If it turns out to be profitable for the customer and the BMG NGO, they begin to agree on the cost.

The Biomicrogels^® team can help make almost any idea come true - since 2012 we have been producing liquid, viscous and paste products to order and under our own brand: from oilfield chemicals to automotive cosmetics

Documentation, certification

Before creating an order for production, our specialists prepare an estimate and a description of the production process. They shall stipulate the protection of customer's intellectual property in the contract and help to certify the products.

Production, quality control

If the client has no raw material suppliers, Biomicrogels^® specialists will find them. After that production proceeds to the manufacture of products according to specifications.

BMG production facilities have high-tech equipment, and the process steps are partially or fully automated

The BMG team conducts incoming, inter-operational and outgoing quality control. For the output control, samples are taken from each batch and the integrity of the packaging is checked.

Packaging, storage

Finished goods are packed, packed and stored in a heated warehouse. The warehouse is equipped with modern safety systems and forklift trucks, so finished products do not suffer and do not lose their consumer properties during storage, loading and unloading.

Delivery

We deliver goods to the warehouse of the marketplace or the customer. Biomicrogels^® production and warehouse are located in Yekaterinburg. This is a convenient location for logistics - the city is equidistant from the central and eastern parts of Russia.