Latest trends in contract manufacturing

Companies in industries from electronics to pharmaceuticals choose contract manufacturers to produce their wares. Contract manufacturing allows businesses to increase their production capacity without capital investment or hiring additional staff.

According to IndustryNet's hand-verified data, the nation's contract manufacturers have seen an uptick in growth over the past year. This article will examine how and why contract manufacturing shows more substantial growth than U.S. manufacturing as a whole. It will also detail variations by industry sectors and geographic regions.

Sales and Employment

Average sales in contract manufacturing increased by 2.26 percent. The plastics segment was the leader in sales growth, at 15.28 percent. Pharmaceuticals and medical products saw no changes from the previous year, but sales in electronics rose 0.86 percent and manufacturing and packaging 2.84 percent.

From 730 contract manufacturing companies with a total 48,104 employees, the number of jobs is up 3.32 percent. In employment growth, pharmaceuticals led the pack at 7.16 percent, followed closely by plastics at 6.94 percent.

Hiring increases in electronic contract manufacturing were 1.90 percent. Jobs in contract manufacturing and packaging increased 2.04 percent, and medical contract manufacturing positions 2.20 percent.

In explaining the discrepancy between the rise in employment in the medical and pharmaceutical industries, versus the lack of growth in sales, it is essential to understand the challenges unique to these sectors.

For companies serving these industries, quality control is indeed a matter of life and death and is often labor-intensive.

Superior, well-trained and educated personnel is required to meet safety and regulatory demands. Choosing manufacturers in the United States in preference to those overseas presents distinct advantages in maintaining the highest product standards.

Day-to-day monitoring of quality procedures offers fewer logistical challenges than maintaining control with foreign suppliers.

Geographic Effects

When a company chooses a manufacturer, a primary consideration may be proximity. Not only does closeness simplify oversight, but it can also reduce shipping charges. Pride Industries in Roseville, Calif., tops the list of contract manufacturing employers, with 3,000 workers.

Its proximity to Silicon Valley offers effective monitoring of quality, yet Pride Industries is far enough inland to avoid high real estate prices. Pride serves the medical industry and the military, providing contract manufacturing of electronics as well as manufacturing and packaging.

Pride's mission is the employment of workers with disabilities, including disabled veterans. Quality is assured through ISO 9001 and 13485 certifications. It also holds a California license for the manufacture and distribution of medical equipment.

Contract manufacturers often choose to locate as close as possible to their customers, to transportation hubs, or both. The highest concentration, 217, representing 29.73 percent of companies, is in the Midwest, convenient both to the country's largest transportation center in Chicago and also to ports along the Mississippi River.

This region encompasses Illinois, Indiana, Michigan, Ohio, Wisconsin, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota and South Dakota.

A significant number of firms are found along both coasts, with 116 facilities; 15.89 percent of those firms are located on the coast of -- or in Hawaii's case -- in the Pacific Ocean.

The Middle Atlantic states: New Jersey, New York and Pennsylvania, are home to 103 contract manufacturers, 14 percent of the companies listed by IndustryNet.

Tessy Plastics Corporation of Skaneateles, N.Y., is a leader in the plastics sector and one of the top ten contract manufacturers by sales growth.

Specializing in scientific injection molding, the company and its 1,075-person staff serves companies around the globe. Tessy's engineers also keep its customers ahead of the curve by providing research and development services.

In the south Atlantic region-consisting of Delaware, Florida, Georgia, Maryland/District of Columbia, North Carolina, South Carolina, Virginia and West Virginia-89 manufacturers, comprising 12 percent of companies reporting, also take advantage of coastal locations.

The New England region (Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island and Vermont) boasts 71 firms, or 9.73 percent.

A fair number of companies, 57, or 7.81 percent, have chosen to locate in the mountain region, convenient to electronics and military facilities, Mountain states include Arizona, Colorado, Idaho, Montana, Nevada, New Mexico, Utah and Wyoming.

Freeport Center Associates LLP is situated in Clearfield, Utah, and is the biggest company by square footage. Clearfield is the home of the Freeport Warehousing and Distribution Center, allowing Freeport Center associates access to a convenient channel for efficient transportation of the products they manufacture. The FedEx hub in Sparks, Nev. also meets shipping requirements for companies in the mountain area.

A smaller number of companies, 51, or seven percent, is located in the west south-central region covering Arkansas, Louisiana, Oklahoma and Texas. The fewest firms, 26 (four percent), are found in the east south-central region made up of Alabama, Kentucky, Mississippi and Tennessee.

Of note from these areas is Carc, Inc. of Lake Charles, La., another of the top ten companies in employee growth. Carc specializes in manufacturing and packaging. Like Pride Industries, Carc provides opportunities for persons with disabilities and maintains close ties to the community.

Also in these regions is UPM Pharmaceuticals, Inc., of Bristol, Tenn. UPM is one of the top ten companies by square footage. This company is both a developer and producer of pharmaceuticals. It can take a product from concept all the way through manufacturing and packaging, straddling two segments of the contract manufacturing industry and thus increasing its opportunities for sales.

Employment growth by region closely mirrors the number of companies present. In the Midwest, 16 companies, or 25 percent report increases. In both the Pacific and South Atlantic regions, 10 companies each, 15.63 percent, show a rise in hiring.

The New England and west south-central regions, each have seven companies, or 10.94 percent, whose workforce has grown. The mountain and east south-central regions each have two firms, or 3.13 percent showing an uptick in the number of employees.

Companies developing new products can work closely with nearby contract manufacturers to produce pilot runs. Businesses can also improve their products by employing the engineering skills of local contract manufacturers to create additional components.

Through the use of on-shore contracting manufacturers, rather than those located in low-cost economies, U.S. companies can prevent domestic job losses and a dilution of local manufacturing bases.

Large offshore providers working for multiple companies, including competitors, may also create a severe challenge to the security of intellectual property, while domestic providers pose a much lower risk.

Learn More

Firms must find contract manufacturers with convenient locations, the required capabilities, certified quality management systems, and access to a well-trained pool of potential employees. IndustryNet is a one-stop resource for businesses to research and procure whatever products and services they need.

IndustryNet compiles and maintains up-to-date information on over 400,000 manufacturers and suppliers of more 10,000 products and services. Customers conducting a free online search can not only develop a list of qualified vendors, but readily obtain a quote and contact a company either directly or through social media.

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