The highs and lows of contract manufacturing

Daniel Marr – group head of marketing for chemical manufacturer, Airedale Chemical – navigates the mysterious realm of contract manufacturing.

The world of contract manufacturing can seem a mysterious and complicated one, shrouded in secrecy and potential pitfalls.

Daniel Marr, group head of marketing, Airedale Chemical.
Daniel Marr, group head of marketing, Airedale Chemical.

The truth is, outsourcing some areas of your manufacture can be the best solution for many operations once you understand how contract manufacturing works, and more importantly, how it can work for you.

What exactly is contract manufacturing?

Contract manufacturing is when one business produces a product for another company based on a provided formula, framework or design. It’s a particularly useful method in the chemical; food; medical, and automotive industries.

Benefits

There are several reasons why contract manufacturing is fast becoming such a popular option for so many manufacturers, such as being able to lower manufacturing costs as there’s no need to invest in facilities and resources.

This is particularly useful if trialling a product or producing a ‘limited edition’ as it eliminates the need for new plant which would only be required for a short length of time. Using existing facilities at another business removes the associated costs.

Not only does contract manufacturing reduce the need for capital expenditure, it also removes the set up time for such facilities and resources meaning the time-to-market can be significantly reduced – a major advantage when getting a new product to market, particularly if it means beating a competitor.

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Contract manufacturing is a particularly useful method in the chemical; food; medical, and automotive industries.

This method also allows for flexibility, making it easier to test out new products and formulas without commitment.

You can also tap into expertise that may not be available internally at your own site; a real plus in the chemical industry.

At Airedale Chemical, we find that allowing access to our in-house laboratory and team of technical analysts is a massive draw for clients.

They can utilise our research and development lab; quality control facilities; new product development capabilities; formula benchmarking instrumentation, and chemical augmentation technology.

All of which are highly specialist areas which few manufacturers have access to within their own organisation.

What are the challenges?

As with all transactions involving intellectual property (IP), buyers can be understandably nervous. Contract manufacturers are well-used to handling corporate concerns and confidentiality is paramount with water-tight contracts and legally binding non-disclosure agreements in place to ensure secret formulas and exclusive recipes never leave the four walls of the contract manufacturer’s site.

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As with all transactions involving intellectual property (IP), buyers can be understandably nervous.

A good contract manufacturer will allow the buyer to maintain exclusive control over the IP of the product. Ensure this is addressed in any agreements before signing on the dotted line, as losing control of it during this process could mean a loss of advantage in the market place.

How to choose a contract manufacturer

It’s common practice for a buyer to meet with a number of potential suppliers before making a final decision. Ensure that you not only meet the sales representative armed with the flashy presentation, but also the production team and technical experts, the ones who will be dealing with your products on a day-to-day basis.

Visit the site and its facilities to get a genuine feel for the company and what it can offer you. Don’t be shy in asking for references. Use the experience of others to help guide your own decision.

There are also more official endorsements which anyone looking for a reliable and trustworthy contract manufacturer should look for. Companies which are ISO9001 and ISO4001 accredited will have demonstrated absolute commitment to meeting only the highest quality and environmental standards.

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Companies which are ISO9001 and ISO4001 accredited will have demonstrated absolute commitment to meeting only the highest quality and environmental standards.

At Airedale Chemical, we have an entire department dedicated to health and safety, and upholding the highest possible standards in the quality of our work and our environmental credentials.

In the chemical industry, it’s also advisable to seek a company which is REACH regulated. This ensures your contract manufacturer supplier has shown high levels of consideration in protecting people and the environment, and responsibility for managing potential risks, and encouraging innovation in the industry.

Due to companies and brands continuing to drive diversity and innovation, the past few years have seen contract manufacturing grow significantly, and we forecast this expansion to continue.

The uncertain nature of the economy means manufacturers are uneasy about unnecessary expenditure. Contract manufacturing allows them to develop and test products providing flexibility without commitment.