Contract manufacturing is a process that establishes a working agreement between two companies. As part of the agreement, one company custom-produces parts or other materials on behalf of the client. In most cases, the manufacturer also handles ordering and shipment schedules. As a result, the client does not have to maintain manufacturing facilities, purchase raw materials, or hire labor to produce the finished products.
The basic working model used by contract manufacturers translates well into many different industries. Because the process is essentially outsourcing production to a partner that privately brands the end product, a number of different business ventures can make use of this arrangement. There are many contract manufacturers in pharmaceuticals, as well as food production, and the creation of computer components and other forms of electronics. Even industries such as personal care and hygiene products, automotive parts, and medical supplies are often produced under the terms of a contract-manufacturing agreement.