Contract Manufacturers
Contract manufacturers produce specially designed products for another company. Although the buying company does not actually manufacture the product, their name appears on the finished product when it is sold. In this kind of transaction, the second company is referred to as the OEM, or original equipment manufacturer.
The contract manufacturers process is often called outsourcing. Outsourcing is beneficial for both sides, as the contract manufacturers receive business and revenue from the transaction while the OEM is freed to concentrate on other business aspects. Often, the OEM is not a manufacturing company itself or does not physically make the product being outsourced. By purchasing the product from contract manufacturers, the OEM saves money on engineering, infrastructure, and assembly costs.
In recent years, the global economy has seen more and more OEMs looking to foreign contract manufacturers to manufacture their products. Although many people think of outsourcing as the process of buying products from a company outside of the country, contract manufacturing actually includes any transaction where an OEM has its product manufactured by another company.