Product Manufacturing Deals are Far More Complex Than Ever.
Traditional supply and manufacturing arrangements focused on arm’s length transactions between product customers and their manufacturers. These arrangements were typically driven on straight-forward manufacture of labour intensive products and components to complement customers’ own manufacturing footprints. Such manufacturing, aimed at the lower cost of labour, usually involved clear ‘hand-offs’ between customer and manufacturer and the risk points were relatively easy to identify. In the last twenty years, however, manufacturing in Asia has moved beyond mere manufacture to become broader virtual extensions of customers’ product value chain. Manufacturers’ services now include activities such as product development, mold financing and management and inventory and logistics management. This manufacturer integration into broader aspects of supply chains has brought significant advantages and opportunities, but also raises new issues and risks. In order for brand companies and other product customers to protect their businesses and maximise their manufacturer relationships, their contracts and broader engagement framework must be properly structured to bring out the best in the relationship while properly managing the risks.