As a rule of thumb, if a business is manufacturing certain goods to supply to their customers, they have a certain in-house manufacturing capacity. This means that they have some sort of a manufacturing plant or factory that they can use to produce the goods that they are offering. Manufacturing plants require a lot of resources and time to build and as such, manufacturing capacity may not increase overnight for even the most successful businesses.
If a small business wants to start manufacturing their product, they’ll find it much wiser to outsource their manufacturing to an independent business till they are sure that their product will sell as well as they had anticipated. Imagine having acquired land, labor and capital to start manufacturing only to realize that their goods aren’t on par with industry standards. There’s always a lot to learn before a business can get it right so outsourcing is probably the best that they can do.
The businesses that earn their revenue by letting other companies use their manufacturing facilities have every reason to ensure quality. For a new business, this can mean that they can benefit from high-end manufacturing facilities and produce a very solid product from the very get-go, which is important for them to successfully capture their place in the market.
These manufacturing companies invest a lot of their own resources in things such as cutting machinery research to make sure that their industrial clients benefit from having used their facilities. Somewhere down the road, the new business in question can start to build their own manufacturing plant, while their products are being manufactured. They can also use their outsourcing experience to build a more viable manufacturing plant for themselves.