Contract manufacturing is a popular type of outsourcing used by many U.S. companies. In this lesson, you'll learn what contract manufacturing is and some of its key concepts.
Contract manufacturing is the outsourcing of part of the manufacturing process of a product to a third-party. More specifically, contract manufacturing is an outsourcing of certain production activities that were previously performed by the manufacturer to a third-party. A company may outsource the manufacture of certain components for the product or outsource the assembly of the product. Nowadays, outsourcing companies have become specialists in a multitude of services for manufacturers including design, production, assembly, and distribution.