The prime limitations of contract manufacturing to overseas company and local manufacturer in foreign countries are outlined below:
- Local companies may not stick on to manufacture quality and design standards, thereby creating serious product quality issue to the overseas company.
- Local producer in the foreign country does not have control over the production process as products are manufactured exactly as per the terms and specifications of the contract.
- The local company manufacturing under contract manufacturing is not free to sell the contracted output as per its wish. The goods have to be sold to the international company at predetermined prices. This leads to lesser gains for the local company if the open market prices for such goods tend to be greater than the prices agreed upon under the contract.