A thorough supply agreement is crucial when outsourcing to a contract manufacturer. You could lose thousands of dollars if you don’t clearly define a crucial clause in the contract. When bringing a manufacturer on board quickly, you could be tempted to sign a simple contract, but it would be wiser to make sure that you and the manufacturer are on the same page from the beginning.
It might be difficult and complicated to put together a fair and thorough supply agreement, but we can assist. Making sure the manufacturer you select to work with is the best choice should be your priority.
Describing How To Choose The Best Contract Manufacturer For Your Business
It’s hard to find a contract manufacturer with a good track record for reliability and quality, but it’s not impossible. It is important to find a contract manufacturer with these qualities: financial resources, knowledge of the industry, and excellent customer service.
Demanding Enough Financial Resources
A competent contract manufacturer makes sure that their bank account is always in good shape so they can make purchases of the newest tools and technology or access it in an emergency. A contract manufacturer that is doing well financially is much less likely to fail and abandon you. However, any financial guarantees must be reasonable. If something seems too good to be true, it probably is, as the saying goes.
A Record Of Making The Product You Need
In comparison to an inexperienced manufacturer who must go through a stage of trial and error before supplying a product that satisfies your expectations, a manufacturer who has expertise in producing the exact or comparable product you require will save you a tonne of time and money.
Customer Service
Responses to emails and phone calls on the same day are uncommon. It’s not always easy to reach decision-makers right away. Rapid response times for different requests aren’t always respected.
At Renown Pharma, we are very proud of how hard we work to give great customer service. However, this is something we note because it is not typical among contract manufacturers in India (or many other countries, for that matter).
You can learn more about what makes a top contract manufacturer different from the competition here.
WHY A Ironclad Supply Agreement Is Necessary
A solid supply agreement protects your company from making mistakes that could cost a lot of money and ensures a good working relationship with your contract manufacturer. Fewer misunderstandings will occur, and both parties will feel more at ease knowing that they are on the same page.
A supply agreement needs to address the following five points:
1. Materials
When you hire a contract manufacturer to get the raw materials and parts for your product, they need to know what those parts and materials are. If the manufacturer knows what you want, they can come up with solutions faster and make sure there aren’t any flaws or recalls.
Advice: Add a bill of materials to the contract.
2. Pricing
Specific pricing terms, in addition to the unit price, are included in the agreement to help prevent price changes that come as a surprise in the future. To avoid future issues (or unpleasant shocks depending on the organization you’re dealing with), take into account variations in commodity and transit pricing.
3. Quality Control
You are entrusting the manufacturer with the quality of your goods. Because of this, it’s critical to make clear to them what level of quality you anticipate from them. Below are a few ideas:
Define the quality assurance and inspection techniques you want them to use.
- Specify the merchandise and packaging in full
- Request a product fault warranty for your parts.
4. Ownership Of Tools And Mold
Make it clear in the supply agreement that you own all the molds and tooling that will be utilized to produce your product in order to prevent any misunderstandings. In the event that the contract manufacturer loses or breaks one of your molds or tools, you can also take advantage of the situation to ask for a liquidated damage provision.
5. Intellectual Property
Ask the contract manufacturer to admit in the agreement that they comprehend the intellectual property rules in your nation as well as their own and that they won’t reveal your design and trade secrets to anyone else in order to preserve your design and trade secrets.
You should be alright as long as your supply agreement has all five essential components. To help with the procedure, we always advise contacting a lawyer.