Contract Manufacturing used to be defined as simply one company fabricating a product for another. They would make it and ship it. Period. That model worked for many years but now the process has changed to push contract manufacturers to become valued suppliers. Over the years the term ‘outsourcing’ has become synonymous with contract manufacturing in some circles. While that is not always accurate, for some it has become a negative connotation regardless.
In the past the local machine shops became known as job shops. That was not the image they wanted (some perceived the term “job shop” as low added value) so they have worked hard over the years and rebranded themselves as Contract Manufacturers.
Then Contract Manufacturers (CMs) began to leverage the manufacturing capabilities and efficiencies of an emerging global market. As soon as we say ‘offshore manufacturing’ most people think China. Well before China was ‘the’ place to manufacture, Japan was producing world class automobiles and electronic consumer hard goods.
For the past 20 years China has been ‘The’ place for contract manufacturing. As costs rise and labor rates increased other countries like Vietnam, Thailand, Costa Rica, and India to name a few, began developing a strong supply base (including raw materials) and can now compete with China in certain categories. India has been competitvely manufacturing metals for years.
Now many of what used to be called the ‘local contract manufacturer’ are fabricating complex critical-to-function components, electronics, sub-assemblies, and finished goods around the globe. Managing a supply chain from 12,000 miles away takes a lot more sophistication than one around the corner. Long lead Items, Vendor Managed Inventory, Logistics, Warehousing, Leveraging Port Specific Tax Credits, Cross-Docking, and Blanket Release Purchase Orders are just a few of the differences between a local contract manufacturer and a true global manufacturing supply partner.
Thus, the emergence of Global Contract Manufacturing – or simply Global Manufacturing.