What is contract manufacturing?
In the past, it was common that only goods held in stock could be sold to customers. But in the meantime, goods are also being sold that have not even been produced. This is called contract manufacturing or production to order. This means that a product, a car for example, is not manufactured until a customer orders it.
Additional demands are placed on logistics by contract manufacturing. The majority of manufacturing companies no longer maintain their own warehouses, as these tie up a lot of capital and are usually not part of the core business. Therefore, the task of timely delivery of parts needed for production is placed in the hands of logistics service providers.
Advantages of contract manufacturing:
- Individual customer requirements can be taken into account
- No need to maintain a warehouse with prefabricated goods
Disadvantages of contract manufacturing:
- Production is quickly compromised by vulnerable supply chains
- No exact planning possible
- Very good communication network between parts manufacturers needed