Contract Manufacturers: 5 Steps to Regain Profitability

Over the past several years, businesses in nearly all industries have grappled with many coexisting phenomena, such as macroeconomic uncertainties, persistent inflation, and a changing labor market. Although inflation appears to be trending downward and the labor market has started to cool, the challenges of the last couple years have exposed commercial weaknesses that can erode margins and inhibit future growth.

Businesses across the board have seen a meaningful increase in costs, but for contract manufacturers (CMs) in particular, this poses a unique set of difficulties. While CMs have been successful at passing on the rising material costs to their existing customers, they often find it challenging to pass on rising non-material costs such as labor, freight, consumables, and other operating expenses. As a result, CMs’ profit margins have been squeezed, requiring strategic measures to combat these challenges. Additionally, CMs often find the need to align commercial…