The size of the global electronic contract manufacturing market is anticipated to reach USD 1158.6 billion by 2030. The market is set to expand at a CAGR of 10.25% during the forecast period from 2022 to 2030.
The consumer electronics industry is ever-evolving. Just when you think you’ve caught up, a new technology or trend pops up. It can be a daunting task to keep pace with it all.
That’s where contract manufacturing comes in.
By outsourcing manufacturing operations, consumer electronics manufacturers can:
- streamline their production processes,
- reduce costs,
- and focus on their core competencies, such as product design and innovation.
In this blog, we will explore how contract manufacturing transforms the consumer electronics industry and drives its growth. We will also examine why contract manufacturing has become a crucial strategic tool for companies looking to stay ahead of the competition.
What is Contract Manufacturing?
The term “contract manufacturing” refers to an arrangement between a company and a third-party manufacturer where the contracting company outsources a portion of its manufacturing operations to the contracted company.
This partnership can be established for various reasons, such as accommodating specialised manufacturing needs or increasing production outputs.
6 Benefits of Partnering With a Contract Manufacturing Company
Let’s look at the advantages of partnering with a contract manufacturer:
1. Reduced manufacturing expenses and enhanced profitability
Contract manufacturers have the necessary equipment and employees in place to fulfil manufacturing needs efficiently and cost-effectively.
Cost savings can be passed on to the contracting company, resulting in higher profitability.
2. Improved capacity to adjust production to meet demand
Contract manufacturing partnerships allow companies to scale production operations to meet current customer demands.
Hence companies can be more responsive to changing market conditions and customer needs.
3. Enhanced flexibility and independence
Outsourcing production to a contract manufacturer frees up a company’s resources for other projects, including employees and equipment.
This freedom allows companies to focus on expanding their product offerings or improving their marketing and distribution efforts.
4. Access to specialised expertise
Contract manufacturers may have specialised knowledge or experience that can benefit a contracting company, such as expertise in a particular manufacturing process or industry.
A company can leverage this expertise to improve its product quality or manufacturing efficiency by partnering with a contract manufacturer.
5. Reduced risk
Contract manufacturing partnerships can help reduce the risk for a contracting company by outsourcing the manufacturing process to a specialist.
Outsourcing production reduces the risk of quality issues, production delays, or other problems that could arise from managing the process in-house.
6. Faster time to market
Contract manufacturers can often get products to market more quickly than a company could by managing the manufacturing process themselves.
This faster time to market can be a significant advantage in competitive industries or when launching a new product.
Contract Manufacturing Trends in Consumer Electronics
Now, let’s go over some trends in consumer electronics:
1. Advanced in automation technology
Increased automation, such as robotics and artificial intelligence, enables contract manufacturers to produce consumer electronics products more efficiently and accurately.
This can lead to lower costs and faster turnaround times for contracting companies.
2. Adoption of Industry 4.0 technologies
Contract manufacturers in the consumer electronics industry are increasingly adopting Industry 4.0 technologies (IoT, cloud computing, etc.)
These technologies help them with real-time data analysis, predictive maintenance, and improved supply chain management.
3. Greater personalisation
Consumers are increasingly seeking out personalised products and experiences, and contract manufacturers are responding by offering more customisation options.
This can include the ability to choose different colours, materials, and features for consumer electronics products.
Consumers are also becoming more environmentally conscious, and contract manufacturers are responding by adopting more sustainable manufacturing practices.
This can include using recycled materials, reducing waste and emissions, and investing in renewable energy sources.
5. Reshoring and localisation
The COVID-19 pandemic has highlighted the risks of relying too heavily on offshore manufacturing, and some companies are considering reshoring or localising their production.
Contract manufacturers located closer to the contracting company’s headquarters can provide greater control over the manufacturing process and reduce the risk of supply chain disruptions.
Some Challenges of contract manufacturing in consumer electronics: How to overcome
Let’s look at some prominent challenges of contract manufacturing in consumer electronics and what you can do to mitigate them.
1. Quality control
Maintaining consistent product quality can be difficult when working with third-party manufacturers. Especially if they are located in different countries with different regulations and standards.
Ensure that you establish clear quality control standards and requirements in the contract. On top of that, conduct regular audits and inspections to ensure compliance.
2. Supply chain issues
Contract manufacturing companies may rely on their own suppliers to provide materials and components. This makes it difficult for the contracting companies to manage the entire supply chain.
To overcome this, you must establish a transparent supply chain and set up systems for tracking and managing inventory and delivery schedules.
3. Intellectual property protection
Contract manufacturers may have access to the contracting company’s proprietary technology and designs. This can increase the risk of intellectual property theft.
You can protect intellectual property with multiple intellectual property laws—non-disclosure agreements (NDAs), contracts, patents, etc.
4. Communication barriers
Working with manufacturers in different time zones and languages can lead to miscommunication and delays in production.
Ensure you use communication tools (video conferencing, project management software, etc.) to enhance communication with the manufacturing partner.
5. Dependency on manufacturers
Contracting companies may become too reliant on their manufacturing partners, making switching manufacturers or bringing production in-house complex.
Maintain a diversified supply chain and have a backup plan in case of issues with the primary manufacturer. Consider investing in building in-house manufacturing capabilities to reduce dependency on contract manufacturers.
Partner with Oakter for Successful Contract Manufacturing Solutions
Contract manufacturing can benefit companies seeking to enhance their production processes, minimise expenses, and increase effectiveness.
However, it is critical to select a reliable and skilled contract manufacturer and to consider all aspects of the outsourcing procedure thoroughly.
Oakter is a prominent original design manufacturer in India that produces and delivers over 500,000 units monthly.
Contact us today to learn more about contract manufacturing and take a step towards being the avocado toast of your industry!