Just imagine: your brand starts growing, demand starts increasing, and customers are loving your products. Sounds amazing, right? But, this is not completely a happy situation. Soon, you’ll see yourself stressing out because of your production capacity. You will have demand and orders, but of course, setting up more machinery will take up a lot of capital, which you might not have at the moment. And we all know how impatient customers are. They will soon turn to your competitors.
See how a happy story just became a sad one. But don't worry, we have a solution for this!
Third-party manufacturing, also known as contract manufacturing. It’s a game-changer for businesses looking to scale without investing heavily in infrastructure, equipment, or labor. Outsourcing production has become a popular strategy across industries, and we are not saying the data speaks for itself. The global contract manufacturing market is projected to reach $322.7 billion by 2033, growing at a CAGR of 7.2% from 2023. This gives us clarity that it can definitely be adopted as it is adopted worldwide and is safe to pursue.
But how do you decide if it’s the right move for your brand? And what steps do you need to take to ensure it’s done seamlessly?
In this blog, we will discuss why, when, and how to start third-party manufacturing for your brand while also addressing potential risks like counterfeit products, pilferage, and inventory inefficiencies.
Why Should You Consider Third-Party Manufacturing?
Third-party manufacturing offers a host of benefits that make it an appealing choice for businesses, especially startups and SMEs:
1. Cost efficiency
Setting up a manufacturing unit requires a significant investment in equipment, facilities, and manpower. By outsourcing production, you save these costs and allocate resources to other priorities like marketing or product innovation.
2. Focus on core competencies
Third-party manufacturing frees up your time, allowing you to focus on building your brand, improving customer experience, and developing new products.
3. Access to expertise
Established manufacturers bring years of experience and specialized knowledge. This makes sure that your products meet industry standards.
4. Scalability
With third-party manufacturing, scaling up is faster and less stressful. Your major working capital is not stuck in your machinery investment, and you don't have to pay attention to the hassles that manufacturing will bring with such a large plant.
5. Global reach
Third-party manufacturers often have production facilities in strategic locations, helping your brand enter international markets efficiently. For example, you are operating from India, and people in the US love your product. If you manufacture them in India, logistics to the US can be a huge hassle. But, if the third-party manufacturer is in the US, they make the product there, store it there, and eventually, it becomes easier for you to access the US market.
So, these are some reasons why third-party manufacturing/contract manufacturing is a good option to consider. But when should you go for it? Keep reading to know!
When is the Right Time to Start Third-Party Manufacturing for Your Brand?
Here are some indicators that signal it’s time to consider third-party manufacturing:
1. Rising demand:
If your in-house team can’t keep up with growing customer orders, it’s time to seek external support.
2. Limited resources:
Lack of infrastructure, skilled labour, or advanced machinery can hinder your ability to produce at scale. If you see any of the issues, it is better to rely on external expertise.
3. Expansion goals:
If you are planning to enter new markets or launch additional product lines, third-party manufacturing can help you achieve faster turnarounds. Plus, it gives you an advantage to access new markets easily.
4. Cost pressures:
Outsourcing can help lower production costs while maintaining quality, especially when working with manufacturers in cost-effective regions. One measure of the burden that comes off is the capex investment required for new and more machinery.
5. Shift in priorities:
If your focus has moved to branding, product innovation, or customer acquisition, outsourcing production can allow you to prioritize these areas, which is actually a good approach if you aspire to make a global brand.
Now that you have the clarity and want to go ahead, here is how to do it.
How to Start Third-Party Manufacturing for Your Brand?
Starting third-party manufacturing can seem like a complex process, but breaking it into clear steps makes it manageable. Here’s a step-by-step guide to get started:
Step 1: Identify your needs
Before reaching out to manufacturers, define what you want to achieve:
- Products and volume: Decide which products you plan to outsource and estimate the production volume required to meet customer demand.
- Quality standards and compliance: Specify the quality benchmarks and ensure the products meet regulatory requirements in your industry.
- Timelines: Clearly define delivery schedules to avoid delays that might disrupt your operations.
⭐ Pro tip: Make a proper document of all the things you need from your third-party manufacturer/contract manufacturer to deliver, like:
- Product
- Quantity per month
- Quality standards
- Timelines
Step 2: Research potential manufacturers
Finding the right manufacturing partner is crucial:
- Look for manufacturers with experience in your product category and strong expertise in the relevant field.
- Check their certifications, like ISO, which indicate adherence to global quality standards.
- Assess their reputation by reviewing client feedback or seeking recommendations.
- Make sure the manufacturer aligns with your expectations for quality, reliability, and timelines.
Step 3: Negotiate terms
Once you’ve shortlisted potential partners, discuss:
- Pricing and minimum order quantities (MOQs): Agree on cost structures that work for both parties.
- Share your requirements: Let them know your expectations. You may share the guideline document you created at the beginning.
- Lead times: Set realistic production and delivery timelines to ensure consistency.
- Intellectual property protection: Include confidentiality clauses to safeguard your designs, formulations, or proprietary information.
Step 4: Perform due diligence
Conducting due diligence helps you avoid potential pitfalls:
- Visit the manufacturing facility to evaluate their equipment, processes, and hygiene standards.
- Verify the manufacturer’s certifications to ensure compliance with industry regulations and legal requirements.
- Assess their capacity to handle your production needs during peak demand.
Step 5: Sign agreements
Once satisfied with the manufacturer, formalize your partnership:
- Draft a detailed contract that includes:
- Pricing and payment terms.
- Quality assurance protocols.
- Delivery schedules and penalties for delays or non-compliance.
- Intellectual property protection clauses.
- Review the contract thoroughly to address any ambiguities before signing.
Step 6: Monitor production
Your role doesn’t end after signing the agreement:
- Monitor production processes and ensure transparency.
- Schedule regular audits and inspections to verify quality and adherence to standards.
- Maintain clear communication with the manufacturer to address potential issues promptly and ensure smooth operations.
⭐ Pro tip: Using AI in manufacturing and track-and-trace technology for monitoring can significantly reduce your efforts, as well as give you better insights and reduce errors.
By following these steps, you can establish a reliable third-party manufacturing setup that aligns with your brand’s goals and ensures consistent quality for your customers.
Industries Benefiting from Third-Party Manufacturing
Third-party manufacturing is widely adopted across various industries, and all can take advantage of it. Some of the most common industries that are seen to be utilizing this and benefit from this are given below:
- Pharmaceuticals: To meet stringent compliance and high-volume demands.
- Cosmetics and personal care: For quick scalability and access to specialized formulations.
- Food and beverages: To reduce costs and streamline production.
- FMCG: To cater to diverse product lines and maintain consistent supply.
- Automotive components: For precision manufacturing and cost efficiency.
Well, these are just a few examples and do not limit your brand if you do not fall under the above industries.
But this is not it. Everything has some challenges. Keep scrolling to know more.
Challenges and How to Overcome Them
Third-party manufacturing offers many advantages, but adopting third-party manufacturing for your brand also comes with challenges. Below are some of the potential challenges and their solutions.
1. Communication gaps
Miscommunication can lead to delays, errors, or unmet expectations.
Solution:
- Establish a clear communication protocol with regular updates and progress reports.
- Appoint a dedicated liaison officer who can act as a bridge between your brand and the manufacturer, ensuring all expectations are clearly conveyed and met.
2. Quality concerns
Outsourcing production can sometimes result in inconsistent product quality, which can harm your brand’s reputation.
Solution:
- Include strict quality control measures in your contract, such as batch sampling and routine inspections.
- Use product authentication tools to verify the integrity and authenticity of goods before they reach your customers.
3. Counterfeiting risks
Third-party manufacturing involves multiple stakeholders, increasing the risk of counterfeit products entering the supply chain.
Solution:
- Implement anti-counterfeiting technology like secure QR codes or blockchain-based solutions to track and verify your products at every stage.
- These tools not only protect your brand but also build trust with your customers.
4. Pilferage and inventory issues
Handling inventory across different manufacturing units can lead to pilferage or mismanagement, causing financial losses.
Solution:
- Use advanced inventory management systems to monitor stock levels and optimize inventory.
- Incorporate track-and-trace technology to ensure transparency and accountability, reducing the chances of pilferage and improving efficiency.
5. Dependence on a single manufacturer
Relying entirely on one manufacturer can disrupt operations if they face capacity issues, delays, or other setbacks.
Solution:
- Diversify your manufacturing partnerships to spread risk.
- Work with multiple manufacturers for different products or regions to ensure a steady supply chain, even if one partner encounters issues.
By proactively addressing these challenges, you can leverage third-party manufacturing’s benefits while minimizing risks. With proper planning and technology integration, you can make this happen.
Well, we know the solutions for the above challenges are still a little confusing and unsatisfactory. Here is a direct solution that can ensure the overcoming of all the above-mentioned challenges.
Acviss: Your Ally in Third-Party Manufacturing
Here are the solutions and services Acviss provides to overcome the above-mentioned challenges:
- Anti-counterfeiting technology: Protect your brand with secure, non-cloneable authentication that guarantees product authenticity from factory to consumer.
- Optimized inventory solutions: Leverage track-and-trace technology to streamline inventory management and reduce pilferage.
- Product authentication tools: Build trust with your customers by offering easy, transparent ways to verify product authenticity.
Acviss ensures seamless control, transparency, and security in your third-party manufacturing process, making scaling your brand smoother and safer.
Ready to secure your brand? Book a free demo today!
Conclusion
Scaling your brand is exciting, but it's also about playing smart. The future of your brand is in your hands, and it’s all about moving forward without fear. Third-party manufacturing is a brilliant way to scale your brand without diving headfirst into huge investments. It gives you the flexibility to grow without the burden of managing every tiny detail of production. But, as with any big move, it does come with challenges—things like quality control, counterfeiting, or inventory issues that can trip up your plans if you're not careful.
But here’s the thing: you don’t have to face these challenges alone. With solutions like Acviss, you can take full control and keep your brand safe. From preventing counterfeiting with secure product authentication to optimizing inventory with track-and-trace, Acviss ensures your third-party manufacturing process is smooth, secure, and scalable.
Don’t just dream about growth—make it happen today.
