Some companies outsource the assembly of their products to contractors.
As the name suggests, contract assembly is a term used to describe the process of outsourcing the assembly portion of a manufacturing process to a company suitable to handle the assembly. There are several reasons why a company might choose to go the contract assembly route. For some companies, it can be a form of comparative advantage in that they outsource the manufacturing process that they are less able to run profitably to another company that they have no problem doing. In that case, the other company may have more modern equipment or a wider range of equipment and trained staff that will provide a faster response time. It could also be because it may be cheaper for the company to outsource the assembly process for various reasons,
The cost of maintenance and repair of the machines is usually taken into account when companies choose to contract the assembly.
When the decision is made to engage in contract assembly, the company subcontracting the assembly will look for a company that handles the specific type of assembly process it wants. Generally, the main types of manufacturing processes that require contract assembly include the manufacture of electronic products, machines with complex parts, or even some seemingly innocuous products that only require the contract assembler to assemble a certain item in its final stages, like the binding of a book. according to specifications and package the final product in the specified packaging. In the case of electronics, most companies outsource the production of individual items and electronic components, mainly to Asian countries where labor is much cheaper. When these articles are ready, they will be sent to the location of the company that owns them, from where they will be sent to the company that has been contracted to carry out the contractual assembly of the articles.
In this scenario, it is clear that it is possible for an investor to subcontract different phases of the manufacturing process to external companies, including hiring this company to establish the contract. Even a part of machinery or automobile manufacturing can be outsourced through contract assembly. In this case, the contract assembler may be contracted to assemble some component of the vehicle on behalf of the automobile manufacturer.