Contract Assembly
Contract assembly is the process through which one company assembles the parts of a product for a second company. In this type of
contract assembly transaction, the second company, or original equipment manufacturer (OEM), sells the product under their name. Contract assembly
is used to assemble materials or components that have been given to them into finished products. Once completed, the assembled product is sold to the OEM that provided the original components, or, in some cases, to an entirely different company.
Contract assembly benefits both the assemblers and OEMs in several ways. Contract assembly
workers can quickly and efficiently put a product together. Since their work is contracted, they are ensured profit. At the same time, OEMs can focus on creating the components and distributing, marketing, and selling the finished products, outsourcing the assembly process to contract assemblers. This business exchange creates efficiency at both ends.
Often the contract assembly process is realized through the use of an assembly line, in which each person or machine puts the same part on the product again and again. This
contract assembly process, often cited as an innovation of Henry Ford, enables many products to be assembled in a short period of time. Often conveyor belts are used in conjunction with the assembly process, speeding up the time it takes for each component to be added to the product.