By David Winger
There are many reasons that a product-owner elects to outsource product manufacturing to a toll or contract manufacturer:
- Cost effective: New specialty and custom chemical production facilities and equipment are expensive to build, operate and maintain. A low margin or low volume product may not support the capital investment in new facilities or new equipment required to manufacture that product.
- Knowledge and expertise: Specialty and custom chemical contract manufacturers tend to have knowledge and expertise to transfer production processes used for both new and mature products. They have a great deal of experience transferring new product research and development processes to commercial-scale production equipment to bring the product to market faster. Additionally, manufacturing a wide array of products or specializing in niche products can create process improvement opportunities for both new products and mature products that the product-owner may not have developed.
- Focus: Outsourcing production allows the product-owner to focus efforts and resources on product development, brand development and marketing, and sales and distribution. The contract manufacturer focuses on production and quality operations to deliver the product on time, in the proper amount and with the proper quality.
- Flexibility: The use of contract manufacturers and toll manufacturers provides the product-owner flexibility in how to effectively and efficiently use owner’s own production facilities by focusing and optimizing the production of higher-margin or more proprietary products or products for which they have the equipment, facilities, and expertise in-house to manufacture better than competitors.