Manufacturing can be extremely expensive. Companies must acquire land and build buildings or acquire an existing production site and adapt it to their needs. You must order and install large machines, purchase handling equipment and identify and order deliveries. Companies can bypass all this preparatory work by outsourcing the manufacture of their products to a wage manufacturer. A well-considered contract agreement is essential to the success of the relationship. A contract contract is a contract that establishes the service agreement between the product manufacturer or developer and the manufacturer. It defines the conditions under which the manufacturer manufactures the product, the quantity to be produced, the prices and the method of delivery of these products. The contract also covers compliance with legal provisions controlled by government agencies such as the Environmental Protection Agency, occupational safety and health administration, the Ministry of Agriculture and the Food and Drug Administration. A contract for the manufacture of the contract also includes shipping, ordering, payment terms and inventory management. An essential element of a manufacturing contract is the one that retains the rights to the construction of the product — the manufacturer or its customer. The decision may depend on one or the other or the need to adapt the design to its manufacturing processes. These contracts also contain repayment guidelines.

For example, one contract cannot authorize manufacturer refunds, while another may provide refunds if the manufacturer does not meet certain quality standards. Another key component is termination: how many layoffs must take place and what scenarios lead to termination. Many contracts involve consumer goods and these products include certain liabilities and potential risks. These risks and the part responsible for their treatment or reaction must be clearly stated in the contract manufacturing agreement. The supply of products or the risk that the manufacturer will not provide the products in time to enable the customer to meet its obligations to distributors and retailers is a significant risk, which could lead the customer not to delay their sales contracts. Companies hire contract manufacturers when they make the strategic decision to focus on product development, customer service and similar aspects of the product production and delivery process rather than on the actual manufacturing process. A contract manufacturer manufactures products under contract for other companies. Contract manufacturers use specifications, designs, formulas and similar information about mass products for their customers.

Contract manufacturers serve the first OEM or OEM market.