Frequently Asked Questions
What are the potential risks when a company enters into a contract with another firm for product manufacturing?
When a company enters into a contract with another firm for product manufacturing, there are several potential risks involved. One of the primary risks is the loss of control over the manufacturing process. The hiring company provides a design or formulation to the contract manufacturer to duplicate or enhance, but the actual production is out of their hands. This can lead to potential quality control issues, as the hiring company must rely on the contract manufacturer's quality control strategies. Another risk is the potential for intellectual property theft. While the typical contract manufacturer uses the customers’ designs and IP, there is always a risk that these could be misused or stolen. This is particularly a concern when dealing with contract manufacturers in countries with less stringent IP laws. Additionally, there is a risk of dependency on the contract manufacturer. If the contract manufacturer runs into problems, such as financial instability or production issues, it can directly impact the hiring company's ability to get their product to market. This can be particularly problematic if the contract is for a significant portion or all of a company's product line.
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