Contract manufacturing in international markets is used in situations when one company arranges for another company in a different country to manufacture its products; this is also known as international subcontracting or international outsourcing.

The company provides the manufacturer with all the specifications, and, if applicable, also with the materials required for the production process.

This type of contract sets out the requirements, which the manufacturer must meet concerning the quality of the products, certification, quantities, conditions and dates of delivery, etc.

It also establishes guidelines for the inspection and testing of the products set forth by the company which contracts out the manufacture, or by its own clients.

it also outlines modifications to orders, as well as guarantees and compensation in case of breach of contract. Since the process is essentially outsourcing production in foreign markets to a partner that privately brands the end product, there are a number of different companies and industries that can make use of this type of contract. Model of International Contract Manufacturing.

Advantages

Why would a company opt for contract manufacturing?

Manufacturers can save significant money on labour, materials and other expenses related to production. Third-party contract manufacturers are usually in developing countries with an abundant supply of cheap labour and minimal regulations.

So long as the company maintains appropriate oversight, contract manufacturing can permit a company to lower its production costs, maintain the quality of its production and increase its profit margins.

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