What’s the most difficult part of running a physical product-based company? Some argue it’s sales; others say it’s hiring the right employees.
According to a poll, 62% of respondents feel finding the right manufacturing service that ensures timely delivery is the biggest challenge of running a physical product-based business.
That said, in-house manufacturing is out of the question for most small to medium businesses and even some large companies. So we are left with just one viable and practical option: contract manufacturing.
The global contract manufacturing sector will be worth $2.7 trillion in 2023. Contract manufacturing has grown impressively because it delivers results and solves pertinent problems for product-based businesses, particularly electronic companies.
This article will explain the benefits of hiring an electronic contract manufacturing team in India and why both on-shore and off-shore contract manufacturing could be the right option for your business.
What is Electronic Contract Manufacturing?
Contract manufacturing refers to outsourcing the manufacturing of products or their components to a third-party contractor. Third-party contract manufacturers specialise in product development and design and don’t focus on sales or marketing. These contractors design, produce, assemble, and package finished products for the client to sell.
There are pros and cons to both on-shore and off-shore contract manufacturers. Generally, the performance of the contract manufacturer matters more than its location. However, when choosing an off-shore contract manufacturer, one should consider shipping costs, IP laws, and payment gateways.
Breaking into the electronics sector is difficult for businesses, especially when they are bootstrapped and don’t have access to many resources. For them, contract manufacturing is the key to success. It enables them to enter the market with competitive and high-quality products without going into massive debt or negative cash flow.
7 Benefits of Electronic Contract Manufacturing
Let’s check out the 7 key benefits of hiring an electronic contract manufacturing team in India, no matter where your company is based.
1. Better Products
The most obvious benefit of contract manufacturing is higher quality products. Starting a manufacturing unit from scratch is not feasible for most electronic companies. At the same time, you can’t expect growth with subpar products.
Contract manufacturing offers a convenient solution. An electronic contract manufacturer can make and deliver the products you want at a fraction of the cost of setting up a manufacturing unit. These contractors have years of experience and know the ins and outs of manufacturing. As clients, electronic companies benefit from the contractor’s experience and familiarity.
2. Access to Expertise
Experts are scarce, expensive, associate themselves with niche areas, and specialise in a fixed number of things. It can be challenging for an electronics company to find and hire a manufacturing expert, even if they have the budget.
Contract manufacturers are the easiest way to access experts in electronics manufacturing. Contract manufacturers employ experts for every aspect of the process, and by partnering with them, you can bring the same expertise to your products.
3. Cost Efficiency
The direct result of the abovementioned benefits is cost efficiency. A manufacturing unit has three major expenses – the physical space, equipment, and the people working there.
With a contract manufacturer, you don’t have to worry about the physical space of the manufacturing unit, equipment and tools, and workforce. You agree to a per-unit cost and pay the amount to the contractor. As a result, the variable costs and enormous upfront manufacturing costs don’t affect your company.
Contract manufacturing is a scalable option for electronic businesses, which makes it ideal for startups and small businesses. For example, if you want 5000 units this month and 50,000 units a month later, the only way to meet the demand is through a partnership with a contract manufacturer. The other option – building your manufacturing unit – will take time and money.
5. Improvements and Modifications
Technology in the electronic goods market is improving rapidly. Many products become obsolete in a few years for this reason. Adapting to new technologies and changing demands isn’t easy. There are a few restrictive factors:
1. Access to cutting-edge technological expertise
2. Access to manufacturing expertise
3. Understanding which features will work in the market and which will tank
Contract manufacturers allow electronic companies to add modifications and improve their products depending on what buyers want.
6. On-shore Contract Manufacturing Benefits
On-shore contract manufacturing has a few benefits over off-shore contract manufacturing:
1. You can physically visit the manufacturing unit for quality checks and face-to-face interactions
2. Delivery time is cut short
3. You don’t have to go over the laws and regulations of another country in detail
4. You get certain PR benefits from manufacturing your products in the home country
7. Off-shore Contract Manufacturing Advantages
Off-shore contract manufacturing refers to outsourcing your product manufacturing to a producer in another country. The advantages of off-shore contract manufacturing are:
1. You can save a lot of money by outsourcing your manufacturing to countries with cheaper production costs
2. Depending on your target country, you can have access to experts and workers with specialised skills (if the same skills are scarce/expensive in the home country)
3. Access to manual labour is much easier in certain countries
4. If you aim to break into foreign markets, the logistics and marketing capabilities of global contract manufacturers will be helpful
Are You Ready to Reap the Benefits of Contract Manufacturing?
Contract manufacturing is the key to success for many electronic businesses, especially those still trying to find their place in the market. Oakter is a leading electronic contract manufacturer based in India. With Oakter, you can access the expertise of manufacturing experts, enjoy low manufacturing costs, and get the best products for your customers.
Do you still have questions about electronic contract manufacturing? Our team at Oakter can answer your questions and help you make the right decisions for your business. For more resources on contract manufacturing, check out our blog.