Contract Manufacturing: Become Brand Intensive, Not Capital Intensive
Contract manufacturing has its roots in the high-tech industry. For example, management at Sun MicroSystems decided to focus on designing hardware and software and subcontracting or purchasing virtually all the workstation’s components. By relying on suppliers, Sun was able to introduce four major new product generations in its first five years of operation, doubling the price-performance ratio with each successive year.
The trend toward specialization (marketing versus manufacturing) means that companies have to focus on what they do best. The goal: Move from a capital/asset (or manufacturing) intensive company to a knowledge (and marketing) intensive firm.
What does this trend mean e-business? To achieve better asset utilization, technology is being used to enable organizations to segregate marketing from manufacturing by quickly developing contract partnerships and distributing manufacturing globally.