Many companies outsource their manufacturing needs to contract manufacturers and it’s typically to save on costs. After all, organizations such as breweries, food packaging companies, oil refineries, and other facilities don’t usually have the resources to build their equipment.
As such, it’s typically far less expensive for them to source that to someone who already has the needed manufacturing infrastructure in place. The trick then becomes finding a contract manufacturing pricing model that aligns with your budget and the services you require.
Contract Manufacturing Pricing Models: Factors At Play
What goes into contract manufacturing pricing models? Among the factors involved are the following:
One of the primary factors behind the cost of your project will be the materials involved. That will get quite specific—the type of plastic or metal you need could raise or lower the price significantly.
Materials may include:
- Raw materials, such as sheet metal or plastic
- Hardware, like nuts and bolts
The types of materials you choose should be based on the tolerances and requirements of your project.
The amount of labor is another component in a contract manufacturing pricing model, but so too is the type. Some types of labor only require strong arms, while others involve degrees and specialized training. The more complex your project or the more rigorous requirements, the more labor is likely to cost.
Equipment used in building your project may affect the price.
In some cases, the contract manufacturer may have adequate tooling on hand to produce your order. In others—and particularly in more specialized projects—they’ll have to engineer tools to meet your needs. The required tolerances, grade of materials, and volume will have an impact on the contract manufacturing pricing model.
Naturally, the more of your product you need, the more it’s going to cost—generally speaking. However, it might be beneficial to order in bulk.
For instance, some components come only in certain quantities. If your order would call for fewer than the base minimum, your contract manufacturer will have to account for that somehow.
Additionally, knowing the volume you need per year helps your contract manufacturer plan ahead, potentially lowering the price.
Some projects necessitate outside testing by a third party to fully comply with laws and regulations. That testing costs money, and as such, third party compliance will play a role in predicting the final cost.
For instance, equipment used to produce food and beverage products may need to be tested by the FDA.
Packaging and freight
Shipping comes with its expenses, including the costs of transporting your product.
Keep in mind that international shipping may involve fees for monetary exchange, customs, and taxes.
Finally, the overall quality will affect the contract manufacturing pricing model.
Performance testing and quality control are both expenses that are often overlooked, but if you want to make sure your product is built correctly, you’ll need to factor that in.
Even the most reliable contract manufacturers may have some defects in the results. This may be reserved to a handful of items in a batch, or it may require a full rework of the project. In either case, it’s worthwhile to factor yield and scrap into the pricing.
Information To Get A Contract Manufacturing Pricing Model Quote
With a clear idea of what goes into the pricing of your project, you’ll need to be able to provide some of the following information.
Use and materials
Information on the function your product will need to perform and the materials needed will be vital to helping your contract manufacturer find the best price for you. The more specific you can get, the better.
If you don’t already have specific materials in mind, you should at least have data on what tolerances and requirements your product will need. Items like heat resistance, temperature ranges, safety, and so forth should be taken into account.
2-D or 3-D schematics are a necessary component in planning your project. Some contract manufacturers can help you design your product, but if you have your schematics, be sure to provide them.
If you have a prototype of your end product, that can help streamline the production process by reducing development costs.
If your product needs electronic components, you’ll need Gerber files to help with the design process for those components.
Getting The Best Contract Manufacturing Pricing Model
Once you have all the necessary information together, you’ll naturally want to try to get the best price possible. That doesn’t always mean the lowest price, however—an especially low quote may mean diminished quality and higher maintenance costs in the future.
Instead of hunting for the lowest price, find a contract manufacturer who will provide the best service at a fair price. Besides, the better the information you provide at the outset, the more likely it will be that you’ll get a favorable offer.