Contract manufacturing is the outsourcing of part of the manufacturing process of a product to a third-party.
Contract manufacturing is an outsourcing of certain production activities that were previously perform by the manufacturer to a third-party. A company may outsource the manufacture of certain components for the product or outsource the assembly of the product. Nowadays, outsourcing companies have become specialists in a multitude of services for manufacturers including design, production, assembly and distribution.
Manufacturers can save significant money on labor, materials and other expenses related to production. Third-party contract manufacturers are usually in developing countries with an abundant supply of cheap labor 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.