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Contract manufacturing

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Many firms, especially those that focus on design and problem-solving, sub-contract the manufacture, and maybe other functions as well, to specialist contract manufacturers.

A contract manufacturer (“CM”) is a manufacturer that enters into a contract with a firm to manufacture or assemble products for that firm.

A contract manufacturer (“CM”) is a manufacturer that enters into a contract with a firm to manufacture or assemble products for that firm. It is a form of outsourcing. In a contract manufacturing business model, the hiring firm approaches the contract manufacturer with a design or formula. The contract manufacturer quotes based on processes, labour, tooling and material costs. Typically, a hiring firm will request quotes from multiple CMs. The hiring firm will select a manufacturer and then, for the agreed price, the CM acts as the hiring firm’s factory, producing and shipping units on behalf of the hiring firm.