Private label and contract manufacturing are commonplace across many industries, but there still remains some confusion about their respective definitions as well a the difference between these two manufacturing methods. In this article, we will discuss about contract manufacturing and private label manufacturing. In addition, we will enumerate some of the reasons why private label manufacturing is preferred by small and even large-scale enterprises.
What is contract manufacturing?
Simply put, contract manufacturing refers to outsourcing of the manufacturing process to a company that has the expertise, knowledge, and equipment to manufacture goods for other companies. The formulations, specifications and number of items to be produced are provided by the company owner. The company owner has the exclusive decision for making changes in the formulation of the products to be manufactured.
Advantages of contract manufacturing include reduced marketing risks, guaranteed superior product quality, and more opportunity for client companies focus their attention on other important activities such as marketing the brand to its target consumers.
What is private label manufacturing?
Private label manufacturing is a method of production wherein manufacturers own the formulations or specifications of products but are sold under another company’s private label or brand. Private label manufacturing companies offer a low-cost solution in the manufacturing of popular goods of the same or even competing brand. Large supermarket chains that sell products under their own label alongside similar products from other well-known brands is a perfect example of private label manufacturing process.
Private label product suppliers assume ownership of the products along with their formulations and specifications. An advantage that top private label companies get from such a process is that they are able to establish profitable relationships with major brands who want to sell their brands under their own brand or label. With this in mind, the marketing and selling expenses for private label manufacturing companies are kept low, whilst ensuring higher profit margins for the business.
If you wish to find out more information on whether contract manufacturing or private label manufacturing best suits your needs, give us a call on 03 9358 6388 today.