How to get the most from your contract manufacturer

While selecting an outside manufacturing firm might seem like a daunting task, there are simple ways to make the transition as smooth as possible. BOB OLSON discusses the secrets to building a strong relationship

As the functional foods market continues to become more complex, so too does the need to bring products to market more quickly and efficiently. The benefits of contract manufacturing are obvious to many: a company that outsources a manufacturing arm frees up its time to concentrate on other core competencies, such as sales, information management and marketing.

Additionally, the potential to decrease debt by shifting the capital-intensive manufacturing arm to another company is an increasingly viable solution as costs continue to rise, and the food production market becomes more saturated with products with shorter shelf lives.

Deciding on which company to hand over a core function of your business can be intimidating, frustrating and time consuming. There are literally hundreds of specialised companies from which to choose. To make sure you get started on the right foot, let?s look at some of the important things to consider when choosing a contract manufacturer (CM).

Why work with a CM?
Contract manufacturing used to be viewed with scepticism, as many companies were hesitant to put labels on products that they had not manufactured in-house. Today, as companies continue to try to trim the fat and free up capital, CMs are being embraced because they save time and money, and can improve the product?s quality.

When properly executed, the right partnership between vendor and contract manufacturer can lower costs by minimising investments in equipment, plants, expert personnel and the amount of stockpiled inventory a company must keep in reserve.

As the functional foods market grows and a seemingly endless supply of new products fill (and vanish from) the shelves, time to market becomes a top priority. Shorter lead times mean less inventory to be held by suppliers. Partnering with a CM that?s R&D-ready can decrease development time and add flexibility to your arsenal.

Consider the fact that CMs mostly specialize in one thing: production. They don?t brand or manage your company, and the learning curve of their staff is much lower because they are already trained. The bottom line is that you can often get a higher-quality product faster, and at a lower cost by utilising a contract manufacturer.

What to look for
When the time comes to look for outside manufacturers to do the job, it helps to know what to look for. With such a large number of CMs to choose from, be sure to assess the services you require. Identifying the services you will need up front and the cost involved will help you to be better prepared to compare potential companies, not to mention save you a lot of frustration and time.

Prepare a list of questions to ask each CM you interview. Do the facilities, equipment, processes, services, quality and certifications meet your needs? Do they have the capacity and production know-how to meet your requirements? What are the qualifications and experience levels of the technical staff? Do they have a good reputation? Are they adequately capitalized? Should you use a toll processor or a turnkey manufacturer? Do they offer a solid cost/quality ratio?

Consider company size a factor as well. Because CMs generally run at higher capacity than branded companies, costs are lower. When shopping for the right contract manufacturer, bigger is generally better.

Packaging capabilities should also be a concern. Do they offer consumer-size or bulk packaging? Anticipate how your needs might change as new products come to market, and look for a CM that offers a wide filling range and several packaging material options. Depending on your product or ingredient, ask the CM if they provide poly bags, composite cans, plastic jars, bottles and safety precautions. Foil and heat induction sealing systems, and tamper-evident seals offer maximum security.

An increasing number of top CMs are offering R&D as part of the package, in an effort to increase their value as a one-stop shop
It is worth noting that an increasing number of top CMs are offering R&D as part of the package, in an effort to increase their value as a one-stop shop. Partnering with a company that is R&D-ready can decrease development time and add flexibility to your arsenal. A leaner, more flexible system of production also garners more confidence from investors.

A contract manufacturing partner with equipment engineering and packaging specialists is especially handy when time-to-market pressure is a consideration. With the ability to alter equipment specifics to meet requirements at a faster rate, branded companies can consistently meet the needs of consumers as the marketplace fluctuates.

Review your ingredient needs and restrictions. Define your product?s flavour, colour and shelf-life specifications, and discuss your demographic target with your CM prior to production. Forecast your volumes needed and price points to be sure of a match. You may not require a high-speed, high-acid RTD line or homogenisation capabilities for your current products, but it never hurts to ask for a complete list of processes offered by the CM.

When reviewing potential partners, don?t go straight for the cheapest bid. A cheaper CM might mean poorer quality or fewer people on staff. Their product will be behind your label, so quality and quality-control measures should be higher priorities.

Make sure that your CM has a rock-solid quality control program. Demand the highest standards and most rigorous quality assurance. This ensures that your products are safe, as well as meet all regulatory specifications.

Determine any certifications your product may require and make sure that those assurances are offered by the manufacturer. USDA approval, Kosher certification and ISO 9001 are all positive marks of distinction, as they show the manufacturer?s commitment to the quality of their food and beverage products.

Finally, make at least one visit to the CM?s facilities. From there you can determine your comfort level with their operation and staff. Ask to see third-party audits and examine the condition and age of the equipment being used. There?s a lot riding on this decision; make sure it?s the right one.

Collaborating for quality
Some companies tend to spend a lot of time identifying opportunities for outsourcing labour, and relatively little time managing the relationship with their CM. While preparation and selection are crucial steps in choosing a quality CM, it?s the thorough follow-through that really saves time and money, and avoids conflicts once the wheels are turning.

The benefits of working with a contract manufacturer are best realised by treating the CM as a partner, not an outside extension of the company. It?s the ?You jump, I jump? mentality. Either both partners win, or both lose.

Leave as little ambiguity as possible to avoid complications. Many companies create cross-functioning teams to help manage their company?s contract manufacturing systems and keep everything on track. Assign a project manager who is responsible for implementation with the CM and day-to-day communication between the two companies.

Because communication is so important in the relationship for both the contractor and the CM, senior executives should meet on a regular basis to review the progress of the partnership. Also be sure to include the CM management in discussions about logistics and budgeting that could affect them.

Choose on quality, reputation, production capabilities, functionality, reliability and corporate compatibility, and you will be off on the right foot. Keep the lines of communication open once you?ve chosen a partner, and you?ll be well on your way to a successful contract manufacturing relationship.

Bob Olson is the director of national accounts for Century Foods International.
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