Contract manufacturing
(noun)
a business model where a firm hires another firm to produce components or products
Examples of Contract manufacturing in the following topics:
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Contract Manufacturing
- In contract manufacturing, a hiring firm makes an agreement with the contract manufacturer to produce and ship the hiring firm's goods.
- A contract manufacturer ("CM") is a manufacturer that enters into a contract with a firm to produce components or products for that firm .
- In a contract manufacturing business model, the hiring firm approaches the contract manufacturer with a design or formula.
- Mutual Benefit to Contract Site: A contract between the manufacturer and the company it is producing for may last several years.
- Compare the benefits and risks of employing a contract manufacturer (CM)
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Outsourcing
- Outsourcing is the contracting of an existing business process to an external, independent organization.
- Outsourcing is the process of contracting an existing business process which an organization previously performed internally to an independent organization, where the process is purchased as a service.
- Contract manufacturers had to manage bills of material with different part numbering schemes from multiple OEMs and support customer requests for work -in-process visibility and vendor-managed inventory (VMI).
- The specialization model creates manufacturing and distribution networks composed of multiple, individual supply chains specific to products, suppliers, and customers who work together to design, manufacture, distribute, market, sell, and service a product.
- Outsourcing is the process of contracting an existing business process which an organization previously performed internally to an independent organization, where the process is purchased as a service.
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Logistics
- There is often confusion over the terms "supply chain" and "logistics. " It is now generally accepted that the logistics applies to activities within one company/organization involving distribution of product, whereas supply chain also encompasses manufacturing and procurement and, therefore, has a much broader focus as it involves multiple enterprises, including suppliers, manufacturers, and retailers, working together to meet a customer's need for a product or service.
- Companies also outsource production to contract manufacturers.
- Inbound logistics is one of the primary processes of logistics, concentrating on purchasing and arranging the inbound movement of materials, parts, and/or finished inventory from suppliers to manufacturing or assembly plants, warehouses, or retail stores.
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Countertrade
- Offset agreement: Party A and Country B enter a contract where Party A agrees to buy sugar from Country B to manufacture candy.
- Buyback: This occurs when a firm builds a plant in a country, or supplies technology, equipment, training, or other services to the country, and agrees to take a certain percentage of the plant's output as partial payment for the contract.
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Quality Control
- Therefore, quality control in relation to customers would be the continuous act of making sure products, designed and manufactured, are produced to meet and exceed the needs of customers.
- For contract work, particularly work awarded by government agencies, quality control issues are among the top reasons for not renewing a contract .
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Classifying Business Products
- In the case of some manufacturers, business products are their entire focus.
- Manufactured products are those that have undergone some processing.
- There are a number of specific types of manufactured industrial goods.
- Parts are manufactured items that are ready to be incorporated into other products.
- Because the need for services tends to be unpredictable, they are often contracted for a relatively long period of time.
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Joint Ventures
- Sony Ericsson is a joint venture between Swedish telecom corporation Ericsson and Japanese electronics manufacturer Sony to develop cellular devices.
- A consortium JV (also known as a cooperative agreement) is formed when one party seeks technological expertise, franchise and brand-use agreements, management contracts, and rental agreements for one-time contracts.
- Sony Ericsson is a joint venture between Swedish telecom corporation Ericsson and Japanese electronics manufacturer Sony to develop cellular devices.
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Special topic: supply chain management
- In the manufacturing sector, supply chain management addresses the movement of goods through the supply chain from the supplier to the manufacturer, to wholesalers or warehouse distribution centers, to retailers and finally to the consumer.
- For example, a retail store that sells electronic products may contract with an outside business to provide installation services to its customers.
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The Goals of a Business
- Advocates of business contract theory believe that a business is a community of participants organized around a common purpose.
- Contract theorists see the enterprise being run by employees and managers as a kind of representative democracy.
- Advocates of business contract theory believe that a business is a community of participants organized around a common purpose.
- Most contract theorists see the enterprise being run by employees and managers as a kind of representative democracy.
- Similarly, a business does not have an unlimited right to pollute the air in the manufacturing process.
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The Business Cycle
- The business cycle is the medium-term fluctuation of the economy between periods of expansion and contraction.
- Just before 2008, the business cycle peaked, and the economy began to contract.
- These fluctuations occur around a long-term growth trend, and they typically involve shifts over time between periods of relatively rapid economic growth (an expansion or boom) and periods of relative stagnation or decline (a contraction or recession).
- Contraction: The period of time in which real GDP declines and unemployment rises.
- Sismondi and his contemporary Robert Owen, who expressed similar but less systematic thoughts in the 1817 Report to the Committee of the Association for the Relief of the Manufacturing Poor, both identified the cause of economic cycles as overproduction and underconsumption.