Contract assembly is the process through which one company assembles the parts of a product for a second company. Contract assembly is used to assemble materials or components 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.
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Contract Assembly
Contract assembly is a type of contract manufacturing that benefits both the assemblers and Original Equipment Manufacturer (OEM) in several ways. Contract assembly workers can quickly and efficiently put a product together. Since their work is contracted, they are ensured a profit. OEMs are able to focus on creating the components, distributing, marketing and selling the finished products by outsourcing the assembly process to contract assemblers. This business exchange creates efficiency at both ends. Often the contract assembly process is accomplished through the use of an assembly line, in which each person or machine puts the same part on the product over and over 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. Contract assembly can be used for the electronics, military and medical industries. Often times conveyor belts are used in conjunction with the assembly workers in order to speed up the time it takes for each component to be added to the product.
Once the company hired to do contract assembly has the finished product or products they are the property of the OEM because it was their idea, design and product to market and distribute. Most times, the name of the contract assembly company is not associated or credited with the product in any way. The terms offshoring and outsourcing are often associated with contract assembly. It is not uncommon for an American design to be manufactured with parts from Germany and then the parts to be assembled in China before the products are shipped back to the United States to be marketed and distributed. Contact assembly is just one type of contract manufacturing services available. An OEM sends out a request for bids for assembly work. The OEM selects the best bid in terms of quality of work, cost and production time line. A contract is signed for a specific length of time or until a set amount of units are completed.