Manufacturing agreement template

Manufacturing agreements are essential for maintaining a transparent and efficient partnership between a company and its manufacturer. This article explores what manufacturing agreements are, their purpose and how to manage them efficiently using contract management tools like Juro.

What is a manufacturing agreement?

A manufacturing agreement is a formal contract between a client (a business that needs goods produced) and a manufacturing firm.

This contract outlines the specific conditions under which products will be made. It covers production obligations, quality standards, timelines, costs, and shipping and delivery logistics.

By clearly defining responsibilities and expectations, a manufacturing agreement ensures both parties understand their commitments, facilitating smoother business operations.

What is the purpose of a manufacturing agreement?

Manufacturing agreements serve several important functions:

• Clarify expectations. They detail what is expected from each party – including the scope of work and deliverables – to prevent misunderstandings and ensure alignment.
• Ensure quality. By specifying quality standards and testing requirements, these agreements ensure that the manufactured products meet the client’s specifications and needs.
• Protect intellectual property. Manufacturing agreements often include clauses that safeguard sensitive information and intellectual property, which is crucial for businesses that innovate and need to protect their proprietary technology and designs.
• Legal compliance. These agreements help ensure that both parties adhere to national and international manufacturing standards and regulations, mitigating legal risks and promoting ethical practices.
• Cost management. Clear terms about pricing, payment schedules and penalties for non-compliance help manage finances effectively and reduce the risk of financial disputes, making sure that both parties have a clear understanding of the financial aspects of the agreement.

Who manages manufacturing agreements?

Manufacturing agreements are managed by professionals who specialize in various aspects of business operations. 

Supply chain managers make sure that the production process is seamlessly integrated into the broader supply chain operations, coordinating with suppliers, managing logistics and overseeing the flow of materials to maintain efficiency and meet production schedules. 

Lawyers or in-house legal teams review and draft manufacturing agreements to ensure they are comprehensive and legally binding. They handle compliance with relevant laws and regulations, mitigate risks and protect the company's interests by including necessary clauses and contingencies. 

Procurement specialists negotiate the terms of the agreement, focusing on securing the best possible deals and maintaining a reliable supply chain. They evaluate supplier capabilities, manage supplier relationships, and work to achieve cost savings while ensuring quality and timely delivery of materials.

By collaborating, these professionals ensure that manufacturing agreements are effectively managed, balancing operational efficiency, legal compliance and cost-effectiveness.

When are manufacturing agreements used?

Manufacturing agreements are crucial in several business contexts:

Outsourcing production

Businesses that do not have their own production facilities, or those that choose to focus on design and sales while outsourcing production, use manufacturing agreements to manage the relationship with their manufacturing partners. This allows them to ensure that the products are made according to their specifications and quality standards.

Product launches

When a company introduces a new product, it uses manufacturing agreements to ensure that the production phase aligns with its market introduction plans. These agreements help coordinate timelines, production schedules and quality requirements to ensure a smooth and timely product launch.

Capacity expansion

As a business grows and faces increased demand, it may need additional manufacturing resources without expanding its own facilities. Manufacturing agreements enable companies to partner with external manufacturers to meet this increased demand, ensuring that production scales effectively while maintaining product quality and consistency.

What should a manufacturing agreement template include?

A well-crafted manufacturing agreement template should include the following elements:

• Identification of parties: Full legal names and addresses of both the client and the manufacturer.
• Product details: Complete specifications, including materials, designs, and special requirements.
• Production volume and timelines: Clear expectations for production quantities and delivery schedules.
• Pricing, invoicing, and payment terms: Detailed cost structure, including how and when payments will be made.
• Quality control measures: Standards for quality, compliance with industry standards and details on handling non-conformities.
• Intellectual property rights: Specification of who owns product designs, patents and other intellectual property.
• Confidentiality agreements: Provisions to protect sensitive information shared during the manufacturing process.
• Termination clauses: Conditions under which the agreement can be terminated by either party.
• Warranties and liabilities: Clarification of warranties provided by the manufacturer and the liabilities each party assumes.
• Dispute resolution: Methods for resolving any contractual disputes that may arise, including arbitration or mediation procedures.
• Force majeure: Clauses detailing how unforeseen events like natural disasters or other force majeure events will be handled.
• Inspection and acceptance: Procedures for inspecting and accepting products upon delivery, including any rejection terms.
• Shipping and delivery terms: Details on how products will be shipped, delivery timelines and responsibilities for shipping costs.
• Amendments and modifications: Procedures for making any changes to the agreement after it has been signed.
• Governing law: Specification of the legal jurisdiction and governing law that will apply to the agreement.
• Indemnification: Provisions detailing how one party will compensate the other for any losses or damages arising from the agreement.

The manual approach to managing manufacturing agreement templates

The manual approach to managing manufacturing agreement templates usually involves several steps:

1. Drafting the agreement: Initially, the contract is drafted by legal professionals or business managers. This involves outlining all necessary terms, conditions, and specifications manually, often using word processing software or handwritten notes.
2. Printing and filing: Once the draft is finalized, the contract is printed out. Physical copies are made and filed in cabinets or storage rooms. This process requires meticulous organization to ensure documents are easily retrievable.
3. Review and approval: The draft is then manually distributed to all relevant parties for review. This could involve physically handing over copies or sending them via mail. Each party reviews the document, marks changes or suggestions, and returns the copies.
4. Revisions and amendments: Any changes suggested during the review process are manually incorporated into the document. This often requires multiple rounds of printing, reviewing, and revising, which can be time-consuming and prone to errors.
5. Physical signatures: Once the final version is agreed upon, wet ink signatures are required. Parties either sign the document in person or it is sent via post for signatures. This step can introduce significant delays, especially if parties are located in different geographical areas.
6. Storage and retrieval: After signing, the agreements are stored physically. Retrieving these documents for reference, audits or future contract amendments involves manually searching through files, which can be inefficient and time-consuming.
7. Compliance and monitoring: Ensuring ongoing compliance with the terms of the agreement is also a manual process. This may involve regular checks and updates, which are documented and filed physically, further adding to the workload.

Why is it painful to manage manufacturing agreements in this way?

Managing manufacturing agreements manually involves extensive and time-consuming work. 

Drafting, reviewing, and updating paper documents take a lot of time, often requiring multiple rounds of revisions and approvals. This process can lead to delays and increases the risk of errors. Storing physical copies and retrieving them for reference is cumbersome, resulting in lost time and potential document loss or damage.

The need for physical signatures adds further delays, especially when parties are in different locations. And manual processes for tracking changes and maintaining version control are inefficient and error-prone. 

Overall, the time lost in managing agreements manually hampers productivity and efficiency, highlighting the need for more streamlined digital solutions.

Automate manufacturing agreements with Juro

Fortunately, you can modernize and automate the process using a contract management software solution like Juro. Here’s how Juro can help:

• Self-serve templates. Teams can independently create contracts from predefined templates, speeding up the process and reducing dependency on the legal team.
• Collaborative workflows. Stakeholders can collaborate in real-time within the platform, ensuring edits and approvals are handled swiftly and transparently.
• AI-enhanced drafting and negotiation. Juro’s contract AI tools provide drafting guidance, risk assessment, and negotiation insights, improving the quality and compliance of agreements.
• Centralized storage. A single contract repository for all contracts enhances security and access, making management more straightforward and compliant.
• Seamless integration. Juro integrates with popular CRM and ERP systems, making it a natural extension of existing business processes.
• Analytics and insights. Real-time data analysis helps identify trends, manage risks and optimize contract performance, informing strategic decisions.

Adopting Juro not only streamlines the management of manufacturing agreements but also enhances operational efficiency and reduces legal risks, allowing businesses to focus on growth and innovation.

Juro's AI-native contract automation platform empowers all teams to create, agree, execute and manage contracts up to 10x faster than traditional tools. To find out more, hit the button below to book your personalized demo.