What is Contract manufacturer?

For a small Shopify store, a contract manufacturer lets you sell physical products without owning a factory. You design or spec the product, they produce it in bulk, and you handle sales and fulfillment. This is common for skincare, candles, supplements and apparel brands that want their own label without the overhead of manufacturing.

The tradeoff is lead time and minimum order quantities. Contract manufacturers often need weeks or months to produce a batch, and they may require a minimum run size. You need to plan purchase orders around their production schedule, not just shipping time, or you will run out of stock while a new batch is still being made.

Example

A skincare store sells a face serum made by a contract manufacturer with a minimum order of 2,000 units and a 6 week production time. The store sells 60 units a week. To avoid a stockout, the store must place its next order when remaining stock covers at least 6 weeks of sales, which is 360 units, plus extra for safety stock.

Common mistakes

• Treating production time as shipping time and ordering too late.
• Ordering below the minimum order quantity and getting delayed or rejected.
• Not tracking separate lead times for raw materials versus finished production.

Contract manufacturer and SteadyShelf

SteadyShelf uses your contract manufacturer's lead time to calculate the order-by date for each SKU and rounds suggested quantities to their case pack or minimum order size.

SteadyShelf is launching on the Shopify App Store. Join early access to get the install link first.

Related terms

Lead time · Minimum order quantity · Private label · Co-packer · Manufacturing lead time

Full inventory glossary

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