Contract manufacturing is the use of external suppliers for the finished products,components or service instead of producing or providing them in house.
Reasons for popularity of contract manufacturing in recent times are;
- Contracting out manufacturing free capital that can then be invested in core activities such as market research, marketing and sales
- Contractors has capacity and flexibility to start production very quickly to meet sudden variation in demand
- Specialist contractors can offer superior quality and efficiency as result of specialization.
- There is enough work to keep internal staff occupied.