What is defined as contract manufacturing?

Contract manufacturing refers to the practice where a company outsources the production of its goods to a third-party manufacturer, often located in a different country. This allows the company to leverage the manufacturing capabilities and lower labor costs of the foreign entity without investing in its own production facilities. In this scenario, the foreign manufacturer produces goods that are sold under the brand name of the contracting company. This approach is common in various industries, from textiles to electronics, facilitating cost savings and efficiency in production.

In the context of the other options, the production of goods solely in domestic markets does not align with the definition of contract manufacturing, which typically involves external partnerships. Manufacturing that focuses only on electronics is too narrow and does not encompass the full scope of contract manufacturing, which can apply to numerous product categories. Similarly, producing goods under a company's brand exclusively refers more to private-label manufacturing but lacks the outsourcing element essential to contract manufacturing, where another company is responsible for production.