Contract manufacturing
The term wage production refers to the outsourcing of individual manufacturing steps or entire orders to external service providers. The model of wage production is applied across industries in a variety of areas and is also very popular in metalworking.
The wage production gives the client the opportunity to assign certain services to after-contractors and thereby achieve a higher cost-effectiveness in its manufacturing processes. Capacity bottlenecks or the absence of suitable machine tools are also among the typical reasons for wage production.
What does wage production mean?
The wage production is also referred to as a foreign production or as a “extended workbench”. The principle of wage production is based on the outsourcing of services to specialised manufacturing companies: The contracting entity instructs a service provider to produce certain components, components or assemblies for him.
As part of the contract award, the contracting entity shall provide the contracting entity with the technical, time and economic framework. The manufacturing operation produces the desired components and supplies them to the client in time.
The distribution of roles in wage production provides that the contractor concentrates exclusively on the manufacturing process itself and appears as a subcontractor for the manufacturer. It is not in any contractual relationship with the end customer and therefore does not deal with the areas of product development and marketing.
Typical reasons for commissioning a service as a wage production are from the client's point of view:
- Capacity bottlenecks in the company's own production facility
- Greater profitability through outsourcing production
- Lack of production machinery (e.g., CNC machine tools)
- Lack of expertise in specialized Manufacturing processes
Advantages and disadvantages of wage production
The outsourcing of production services has various advantages and disadvantages.
The advantages at a glance:
- Low wage costs due to outsourcing of production steps
- Lower fixed costs, as your own machine park does not have to be expanded
- Fast and timely order processing
- Flexible order processing
- Manufacturing processes remote from the operation can be carried out
The disadvantages at a glance:
- Optional longer lead time for orders
- Exchange rate risks (for payment in foreign currency)
- Low transparency in the procurement chain
- Higher dependencies
The disadvantages at a glance:
- Optional longer lead time for orders
- Exchange rate risks (for payment in foreign currency)
- Low transparency in the procurement chain
- Higher dependencies
What production processes are commissioned in wage production?
Wage production is very widespread in the metalworking industry as well as in other industries. The range of factory-made workpieces ranges from CNC precision turning parts to modern measurement and control technology to complete assemblies for various industrial sectors. In principle, all production methods according to the DIN 8580 standard are suitable for wage production: change the original shapes, deformations, separations, joining, coating, material properties.
The typical production methods of wage production include:
The advantages at a glance:
- Milling
- Drilling
- Thread cutting
- Bending
- Stamping
- Soldering
- Welding (e.g. MAG/WIG)
- Surface treatment (galvanizing, Electrotoxication, nickel plating
Also in terms of materials there are no restrictions in wage production, steel, stainless steel, aluminum, brass, copper and many other materials can be processed. The batch sizes of wage production range from single series production to small series production to large series production.
What distinguishes contractors from contractors?
The terms of the contractor and the contractor are often identical in the language of handling. The contract manufacturer (“Contract Manufacturer”) differs from the contract manufacturer (“Toll Manufacturer”), however, according to the glossary “Invoicing Prices” of the Federal Ministry of Finance, by obtaining the material and raw materials required for processing.
For example, a contract manufacturer in mechanical engineering would order the steel material required for order processing on his own behalf. On the other hand, the contractor receives the material from the contractor and only takes over the pure processing.
Which industries are represented in wage production?
The model of wage production is used in many different industries. Key industrial sectors include:
- Machine and plant engineering
- Automotive industry
- Engine technology
- Measurement and control technology
- Control technology
- Energy technology
- Drive technology
- Conveyor technology
- Hydraulics
- Commercial vehicles
- Pump construction
- Railway technology
- Medical technology
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Lexicon Themes
- Metalworking (31)
- Plastic processing (8)
- Parts (8)
- Surface treatment (8)
- Welding (7)
- Machining (6)
- Sheet metal processing (6)
- Cutting (6)
- Turning (5)
- Manufacturing (5)
- Milling (4)
- Tool making (4)
- Suppliers (4)
- Casting (4)
- Procurement (4)
- Contract manufacturing (3)
- Profiles (3)
- Automation technology (2)
- Gearing & Thread (1)
- Forging (1)
- Wire processing (1)
- Heat treatment (1)