Top tips for working with a contract manufacturer

Shrinking budgets, tighter margins and streamlining efficiencies … no doubt your company is facing these issues. The answer to these challenges may be to outsource some of your needs to a contract manufacturer. Kimberly Lord Stewart investigates how

The decision of which contract manufacturer (CM) to choose should not be taken lightly. "CMs must be considered as a part of your supply chain, so it's almost like hiring a new employee in terms of interviewing, understanding, and choosing a company that you feel comfortable with and fits your needs," says Eugene Ung, director of marketing for Best Formulations. Above all, 'trust' is the operative word, said Andrew Goldman from Nutricap Labs.

Overwhelmingly, experts say it is essential to identify your company's core competencies. "It is always best to focus on what you do best, and consider outsourcing everything else to those better suited for the function," says Darrin Duber-Smith, president of Green Marketing. "The appropriate partnership between your organization and a contract manufacturer can lower costs and efficiencies, including investment in equipment, physical plant, personnel and inventory costs."

Duber-Smith warns that most contract manufacturers look the same from the outside in. And, while gut reactions and personal recommendations are important, the decision should be a formalised process with the following answers in writing:

  • What is the capacity for volume — large or small? Are there minimum runs? Or, can the CM keep up with a large volume?
  • What can one expect from a service-level agreement (SLA)? Companies that are hungrier may offer a better SLA than comfortable companies.
  • Ask about the specificity of Standard Operating Procedures (SOP). The SOP should outline all processes, expectations and contractual obligations. Have an attorney review it.
  • What is the turnaround time?
  • What are quality and cGMP compliance measures?
  • What is the open-door policy for oversight of raw-materials sourcing, production, bottling, labelling, packaging, warehousing and shipping?
  • Geography, transportation, packaging and cost cutting? A CM should be in tune with these cost-cutting measures that do not affect quality.

Q: In this economy, contract manufacturers stand a good chance of thriving, given they can improve efficiencies and reduce costs. What type of partnering approach is necessary for successful product development and launch?

A: "As a contract manufacturer, it's important to understand the specific needs of your customers, and make sure your strategic goals and infrastructure align with the customer. For example, if your customer has distribution in the big-box chains, you must be able to support the inventory demands/requirements of the customer. Also, having strong R&D capabilities is crucial in working with a customer to develop a shelf-stable, efficacious product that is scalable from a manufacturing perspective."

— Eugene Ung, director of marketing, Best Formulations

A: "It is important to understand goals and objectives, as well as how to add nutritional benefits to products. This means having a clear concept, a defined nutrition profile and a clear picture of who the product is trying to target. At DSM, we recommend the right nutrient mix, the right market forum and the highest-quality blend as long as the ingredients are science based. We apply the same standard for third-party ingredients that we employ with our own ingredients.

For instance, if a company is interested in developing a bar for mature women, our due diligence looks into the nutritional needs of that consumer, based on science and health concerns as well as any nutritional gaps."

— Todd L Sitkowski, senior marketing manager, DSM Nutritional Products

A: "Effective management means fully documenting all processes to avoid ambiguity. It means defining a clear set of performance metrics to keep both parties focused on continuous improvement. Secondly, open communications across all levels within the two organisations is imperative. Finally, it calls for both companies to treat the contractual relationship as a partnership, which requires trust and a willingness to share both the risks and the rewards."

— Steve Holtby, president and CEO, Soft Gel Technologies

A: "You said the right word — 'partnering.' That's exactly what's needed for a successful product development and launch. Some of Vita-Tech's client relationships are well over 30 years. At the very start of a prospective relationship, we welcome and encourage active engagement and due diligence performed by potential clients who are serious about their products. In this process, they get to know about us, they start to know us and we start to know them. It's a very important first step in what both parties hope will become a strong partnership that lasts for years to come."

— Greg Williford, VP of sales and customer service, Vita-Tech International

Sabinsa's Jim Cudahy reveals how to achieve "Success in a contract manufacturing relationship"...

Q: What are the key factors that are overlooked when contacting a CM?

A: "New product/technology innovation — most companies hire a CM for immediate needs. But if you consider the CM as an extension of your business, a CM should invest in innovations, technology and new products, which are a rich source of marketing. These investments will yield fruit not only for that CM, but also for its customers."

— Eugene Ung

A: "Sustainability. This can mean many things but at DSM, it includes a commitment to consumers, our business partners and the environment. Good corporate citizenship impacts the environment, but also the culture of safety and health of our employees. For example, our SHE Program (Safety, Health and Environment) is a safety and environmental program that meets or exceeds the environmental and safety standards of the region we work in."

— Todd L Sitkowski

A: Selecting the right contract-manufacturing partner is only an intermediary step in building longer-term success. Without a detailed, comprehensive transition plan and effective ongoing management of the partnership, even the best contract-manufacturing relationship will fail to achieve its full potential."

— Steve Holtby

A: Companies often overlook the value of a CM. GMP Labs is not a transactional arm, rather an enterprise partner, which can save thousands of dollars in soft costs and provide technical expertise, project support, and immediate response for large companies or start-ups. Above all, companies seeking CMs should expect competitive pricing without compromising attentiveness and quality control.

— Suhail Ishaq, president, GMP Labs

A: "Check whether your contract manufacturer is registered under the Bioterrorism Regulations Act. The act is a part of the federal GMPs regs and applies to raw materials. Homeland Security often clears imported raw materials through customs, which can increase delivery times. If your products require imports, consider applying for participation in Customs Trade Partnership Against Terrorism."

— Andrew Goldman, web marketing manager, Nutricap Labs

A: "The key factor in working with a contract manufacturer is you're in control. You come to a contract manufacturer to get the product you want, the way you want it, configured to meet your parameters, whether they be ingredients, potency, price, colour, shapes, packaging … there are many crucial points and as the client, you are the decision maker in these choices."

— Greg Williford

Anti-ageing multitasking ingredients

Contemplate these questions before you even think about developing a new product

Private label is a growing sector in this market, but even with the favourable climate, there are a few magical steps required for success. Here is a checklist from Keller:

  • Which label & what call outs — Will the product have a nutrition or supplement label, or both? Think regulatory. What packaging callouts are best?
  • Active or functional ingredients — When will the active ingredients be added, and how much? Who will test to make sure they are still present at the end of the process?
  • Prototype vs line run vs production run — How are each handled by the manufacturer? Understand the minimums associated with each.
  • Packaging specifications — Does the material needed for proper packaging work on the contractor's equipment? Does the packaging take into effect the active ingredients—water activity, UV sensitivity or pH?
  • Formula ownership — Who owns the formula, and what are the provisions if someone wants to purchase it?
  • Stability and shelf life — Who will evaluate, test and stand behind the findings?
  • Capacity and production variability — What is the capacity of the manufacturer, and what are the production variability components that impact capacity and quality?
  • Material sourcing — What will be sourced by the manufacturer vs the client? Who is responsible for quality, testing, standards, etc?
  • Formula-production realities vs Nutrition-Facts-Panel — How will you address the realities of production changes that alter the finished product's Nutritional-Facts-Panel?
  • Financial sweet spot — At what point does one cross the low or high threshold of the production-pricing sweet spot?
  • Seasonality of production — When are the highs and lows of production? Low production times can save time and money.

—Tony Keller, president, TandemRain

Source: TandemRain provides a soup-to-nuts product development service from its Vancouver, Washington office.

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