As a consumer packaged goods company, choosing to outsource various product packaging functions is one of the smartest business strategies you can ever implement. The main benefit of outsourcing your packaging needs is reduced operational costs due to a reduction in staff since you can operate with a smaller employee force. Along with minimizing the number of resources devoted to salaries and wages, you can also save on operational expenses such as the cost of pension plans and health coverage, storage, office space, heating and other costs associated with this department.
Another big advantage of using contract packaging services is the ability to focus on the core business. With less time and resources devoted to packaging (which is an essential but ancillary aspect of your business), it is possible to concentrate on the production process. This is likely to increase your chances of producing consumer goods that are of the highest quality, which will only serve to boost your company’s reputation and attractiveness.
Management of capital costs is also another huge benefit that is associated with outsourcing packaging needs. By using the services of a contract packaging company and co-packers, you can save on the costs associated with the acquisition of packaging machinery and supplies required to produce the goods sold by your company. With the right contract packaging partners, you could greatly reduce the actual cost per unit produced, allowing your company to be more competitive in the marketplace.
Increased productivity and output are additional benefits associated with the outsourcing of packaging functions. This can be attributed to a focused work environment found in contract packaging companies. Employees of a contract packaging company and co-packers have extensive knowledge and experience in all aspects of packaging. They are often fully trained in this area and are therefore able to achieve high efficiency due to focus and skill level, which can be very beneficial to your organization.
Outsourcing your labor to a contract packager could lead to another example of outsourcing advantages. When investors see how efficiently your company is operating, they are more likely to make a commitment and sink more resources into the future of the organization. This can lead to better opportunities to develop new, innovative products, or expand the company in some other fashion in order to increase the stability of the whole operation.
When choosing a contract packager, you’re developing a partnership. The contract packaging partner you intend to choose should be able to undertake your project at a reasonable price aligned with your specific time schedule and quality assurance. Your potential contract packaging partner should have a proven track record when it comes to controlling costs, adequate experience in your particular market, the capacity and flexibility to handle all of your projects, the willingness to work with you for long periods, a good reputation for financial and organizational stability, a location that is cost-effective in relation to your enterprise, and unwavering commitment to investing in innovation and customer service as well as quality assurance.
Naturally, in order to make sure that the opportunity translates into a genuinely profitable partnership, the company you’re going to choose as your contract packaging partner must place a high value on communications. Processes, expectations, decision-making, and ramifications must be clearly understood by all parties (you, contract packaging provider and co-packers) before you sign any agreement. This will require you to work closely with your potential contract packager to craft the specific contract for a project, detailing the duties and expectations of each party – you (the manufacturer), the contract packager, co-packer or the retailer.
Once duties and expectations are clearly defined, your next step should be to establish a reliable two-way communication process so that any potential problem can be identified as soon as possible and resolved quickly. Make sure the contract identifies the contact or person who clarifies specifications and acts as the referee for problem-solving. The contract should also specify in writing how problems are going to be resolved.
Even though a number of contract packaging companies focus on providing a narrow skill set – notably the provision of labor for the packaging work – others provide a wide range of services, including but not limited to: assembly, capping, boxing, auto-bagging and drop sealing and sealing. Still, other companies further broaden their value to clients by providing a broad range of service offerings with everything from fulfillment and inspection to skidding and warehousing. Depending on your specific needs, you may want to seek out a contract packager with specialist skills such as advanced logistical expertise or FDA regulation knowledge.
When selecting a contract packager, make sure you have a good understanding of what your specific market will bear in terms of an introductory price. You have to carefully evaluate the co-packers charges with your internal costs in order to determine the cost of your goods and ultimately an introductory price that you can go to the market with. Also, make sure you check if the contract packager meets the quality requirements that your quality assurance team has set forth, and whether the company has met all industry standards and regulations. Choose a contract packager who offers complete creative services to help enhance your overall packaging efforts, and allows you to remain in control of your product packaging every step of the way.
Another benefit of using a contract packager like Aaron Thomas Company, Inc. is our many locations. We were able to save one of our client’s $1MM per year by packaging some product in Los Angeles and the balance in Memphis. Since we weren’t shipping finished goods back east, the bulk is denser and they were able to save on transportation.