Co-packer considerations: How to find the right one for your business

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  • Co-packer considerations: How to find the right one for your business

    Getting into a broad industry like manufacturing is heartbreaking for beginners. There are a number of business concepts, manufacturing structures, many different types of contracts and more. Hence, to thrive in your business, you have to get help at what you are not specific in, and using a co-packer as a partner is not a bad idea.

    This article will discover co-packer considerations and how to find the right one for your business.

    What does co-packer mean?

    Co-packers offer contract packaging services to product manufacturers

    Contract Packaging is known as Co-Packing, is the overall process of assembling a product into its finished packaging. Co-Packaging can be a simple or complex process as it is customized depending on the specific scope of the product packaging, which varies significantly across the retail, commercial or trade industries. Co-packers offer contract packaging services to product manufacturers and often act as an extension of the company. 

    The finished packaging may come in various forms based on the product’s characteristics. Co-packers can be tasked with something as simple as adding a barcode sticker to a product or more complex as planning, designing, producing and fulfilling the entire package. 

    As has been established, co-packing focuses on the packaging and branding products given to them with permission from another company. As a result, the co-packing services can cut across many industries, including:

    • Cosmetics – The cosmetic industry relies heavily on proper packaging to dent the competitive market. The co-packing services can help a brand in this industry to transform into a market leader.
    • Pharmaceuticals – Generally, medicine isn’t packed by its manufacturing firm. So Co-packing is a crucial aspect of collaboration in this industry.
    • Beverages – Bottling companies are a must-have for the beverage industry. Without them, it would present a tremendous challenge for a company to distribute its products.

    Why do you need a co-packer?

    Co-packers are specialized in handling varying levels of the contract packaging sequence

    Because of the short-term or the long-term and medium to high-volume nature of product packaging fulfillment, combined with the demand for specialized equipment and staffing hours, contract packaging services are typically outsourced to contract packaging companies. These experts are specialized in handling varying levels of the contract packaging sequence. 

    In addition, they have many in-house resources or outside partners to respond to specific product packaging requirements on time. Ultimately, this gives product manufacturers and product managers great flexibility in defining the packaging process based on the needs of the product.

    There are four main reasons why you need to consider co-packing as a way of streamlining your business operations, including:

    • Cost

    For most companies that opt to enter into a co-packing agreement, the cost is the main driving factor. However, instead of company A establishing a packaging unit, these costs can be saved by outsourcing the services of a co-packer.

    • Technology

    Co-packers invest many resources in technology that helps make the packing exercise smooth and time-efficient. Unfortunately, many companies lack this technology, so it is necessary to seek a partnership with a co-packer.

    • Spike in demand

    Co-packing services can come in handy if a company is experiencing a spike in demand for its products. However, this sudden increase may mean the company cannot meet the packaging requirements at its facility, so they need to agree with a co-packer.

    • Specialization

    Specialization is the main principle of economics and running a business. Firms that choose to specialize in one specific mission might find the services of a co-packer to be necessary. This may inform their choice to get into a co-packing agreement.

    Understanding co-packer cost structure

    Co-packers fee structures come in three forms

    Co-packers fee structures come in many forms. It would help if you counted on the co-man charging fees that cover their costs plus a margin that will vary depending on the complexity and uniqueness of your raw materials, production process, packaging, labor, and familiarity with your product type. Most co-packing companies also have minimum order quantities (or “MOQs”) — which can be challenging to manage for companies with emerging products. Sitting down to break down co-packer charges can help you determine if hiring a co-packer is the right option for your small business or not.  

    A food and beverage co-packer usually identify their pricing on three standard rates: 

    1. Flat day rates – this type is a set fee for an entire workday that allows hired labor workers to produce as many units as possible in the hours they operate.
    2. Per hour rates – this type is the hardest to find but can accommodate more minor production requirements for smaller businesses. Usually, a food and beverage co-packer will utilize this kind of agreement when you may need a little extra product created or when they can meet your unit requirements within a few hours.
    3. Per unit rates – This rate is as simple as it sounds; per-unit rates are precisely what they state and get paid based on the number of units.

    However, it is essential to know that the basic co-packer pricing above will start and almost involve a panoply of additional fees that you should monitor carefully and gradually.

    Both sides of working with a co-packer

    Co-packer can create packaging specifically designed to keep your products safe in transit with their molded pulp packaging

    Benefits

    • Lower per piece cost. This is what co-packers do as their job, so they can do it cheaper and probably faster than you can do it yourself.
    • Custom-designed packaging. Co-packer can create packaging specifically designed to keep your products safe in transit with their molded pulp packaging. There are no worries about using packing peanuts to fill the gaps in the box. Instead, their custom packaging can make those gaps disappear.
    • Eco-friendly packaging material. Their molded fiber materials eliminate the requirement for plastic packaging, helping reduce their dependence on fossil fuels. In addition, these materials are biodegradable and easy to recycle, which is hard for you to do by yourself. 
    • Shorten time to get into the market. Get access to large-scale production equipment, co-packers are in a position to manufacture at high volumes. If you’ve nearly landed a new contract or are dealing with current meet demand, a co-packer can help with fulfilling orders at a faster pace than a small-scale operation.
    • Access to add-on services. Some co-packers offer a wide range of services beyond product production and make packaging. These additional services include things like product storage, shipping directly to your customers, and R & D capability refining existing product formulation creating new ones.

    Risks

    • Higher investment. Co-packing companies often require a significant upfront payment to begin working with a new client.
    • Defined quantity runs. Co-packing companies need some level of business certainty. They’ll require you to commit to a minimum production run in advance. You’ll lose some of the flexibility you used to control how much and when you produced your product at first. 
    • Loss of direct quality control. When you were the producer, you maintained direct control over exactly what ingredients were used, where they were sourced, the technology of the facility used in manufacturing, and a host of other factors. When working with a co-packer, you lose immediate oversight of the production process. 
    • Incapable of adapting to customer production requirements. If your product requires some specialized process or uses novel or high-end ingredients, a co-packer may require modifications that compromise the final product’s quality product.

    4 Primary factors to look for in a co-packer

    When looking for a co-packer, there are four key things that must be considered

    When looking for a co-packer, there are several key things that must be considered. It should be given not just to your needs but to the limitations and requirements of your potential new partner and their facility. 

    Selecting a co-packer isn’t an easy choice with any business, so here’s what we highly recommend you look for when the time comes for your company.

    Price

    Firstly, the most obvious thing to take into consideration is the pricing matter.

    Working with a co-packer as part of your business model can be a bit of a financial balancing act. Yes, it can save you money regarding overhead and production volume, but there is always a trade-off. Outsourcing goes with a whole new host of fees that you didn’t have to worry about when starting. You have to pay for labor, packaging, storage, etc., which can add up with a co-packer.

    Then, the old saying that time is money and finding a co-packer will take plenty of time out of your hands. As you will no longer have to put all of your efforts into manufacturing, you can start to concentrate more on managing. Rather than on production, you’ll be able to think of ways to expand, like…

    • Discovering new product ideas
    • Wide-open the opportunity to network
    • Cooperating with new partnerships
    • And more than that …

    Using a co-packer that handles primary and secondary packaging can impact pricing, but these companies will give you more than a filler. If you know your company needs branding and display help, then a company like Tan Do will have more to offer.

    The last line is that your company should be sure that outsourcing is financially possible before considering a co-packer. Take more time to evaluate your needs and the costs and services of some facilities. Decide which requirements are essential to your products and what can come to a compromise. Always be cost comparing; look around until you find a co-packer that will meet your needs without breaking your budget.

    It is crucial to find the middle ground in out-of-pocket costs and incoming revenue to ensure that you stay afloat and sailing smoothly.

    Location

    While this usually applies to real estate, looking for a co-packer should be located.

    Even if you’re officially outsourcing your product, it’s still your product, so watching on production is essential. If quality control or assurance appears in unexpected problems, taking a visit to the facility might be crucial. If your chosen facility is overseas, this can quickly become an issue. 

    Proximity can also help with cutting shipping fees. For example, rather than paying transcontinental shipping fees, you could be paying a few hour’s worth of gas. In addition, the ability to keep an eye on things without having your hands complete will bring peace of mind.

    For some cases, there might not be the option of an in-state co-packer. However, if that is the case, choosing a facility with a stellar reputation for communication and transparency is non-negotiable.

    Whether you’re looking at co-packers nearby or having confidence in a facility across the country, you should see it for yourself. Having eyes on the existing facility can be enough to sway your choice one way or another. You can’t trust a company if their factory doesn’t meet your contract. Getting a good decision could take more than one visit. This is, again, the location of your co-packer would be beneficial to your bank account.

    Co-Packer Company History

    Reviews are another factor in evaluating a company’s reputation

    Like you start working with a new employee, you must perform a deep insight into the companies you are considering for partnership.

    They are looking for a co-packer like a job interview. Go with the questions regarding your requirements. Here are some questions to ask when checking in on a company’s past: How long have they been in this industry? What do former or current customers talk about them? Who is running this business at this time?

    Taking a look at a company’s legacy is crucial, but perhaps not make or break. A long-standing co-packer will better understand the entire process and likely have a broad skillset than a new start-up. This is not to say that new co-packers can’t be trusted; everyone comes from zero. 

    Some co-packers agree specifically in food and filling, with little else thrown in. Suppose you’re finding a co-packing company, who will not only get your product done but make its appearance look better than you could and even get involved in the distribution process.

    Reviews are another factor in evaluating a company’s reputation, so listen to what people are saying. Then, talk to a co-packing specialist to see what their facility is about to ensure your needs match. It would be best if you were confident that this company you are trusting would maintain the integrity of your product.

    The company’s name isn’t the only thing that should matter, and it’s crucial to look into the faces as well. The people who take over the line at the co-packing facilities are the ones you need to interact with and give trust. So do some digging into the requirements for leading employment at each facility. Are specific training or certifications mandatory?

    Co-Packer Services

    This must be more of a primary step when it comes to finding a co-packer. If a co-packer’s services don’t meet your needs, there’s no need to look into their pricing and location.

    As we mentioned above, co-packers aren’t always a one-stop-shop; services and specialties will vary. For example, if you are in the beverage industry, a place like Tan Do would be best for you—but not if your brand is medication or cosmetic.

    Co-packers supply multiple different services. At Tan Do, we take care of the whole packaging process professionally. Rather than simply filling orders for our goods, we are dedicated to creating products in such a way that guarantees safety and appeal.  

    The last thing to look out for is giving a clear state about volumes or minimums that might be far too much for your company to deal with. Confirming volumes and minimums are a mandated quantity of your product put down by your co-packing company. These quantities control can vary depending on the size of the co-packer you go with if they have them at all.

    Confirming volumes are something of a blessing and a curse. If your business is in a place where it can accommodate offloading a 1,000 unit shipment, then it won’t be a problem—but it’s always an easy way to bite off more than you can chew.

    Before you consider what it will cost or where to look for a co-packer, you have to know precisely what it is you’re looking for. Figure out what is a fixed point and what can be negotiated beforehand.

    Co-packing Agreement

     The well-prepared agreement will lead to a better and more transparent relationship in the long run

    Once you have found a co-packer, the next step is setting out an operating agreement. However, any beverage entrepreneurs don’t put their minds to this step much or let the co-packer conduct an agreement. This is such a bad idea because a co-packing deal directly affects your finished product benefit and relationship with your relationship with the co-packer.

    Thus, a well-prepared agreement will lead to a better and more transparent relationship in the long run. While agreements will differ based on the relationship, there are some key components to think of: 

    Formula Ownership 

    At the beginning of the co-packing relationship, clarifying who owns the recipe or formula is essential. In some cases, co-packers will adjust things to scale and then feel that they should hold or co-own that recipe. 

    As a food or beverage brand, the formula is a key piece of the IP portfolio. Even with produce processing changes developed by the manufacturer, the recipe is still yours, which should be clear.

    Product Quality Assurance 

    There should be a mutual understanding and confirmation of how the final product should look, feel, and taste. This assurance protects the co-packer from unrealistic expectations and your brand from poor quality. 

    Liability Insurance 

    Insurance varies based on the actual situation. However, brands need to be added as additionally insured on the producer’s liability insurance. 

    Agreeable General Production Lead Times

    Managing production and distribution are crucial to managing cash flow. But, first, there needs to be an understanding of how long it takes to receive your products after you’ve handed over a purchase order.

    Co-packing at Tan Do Beverage company

    Tan Do have had more than 23 years of experience in the beverage industry.

    Co-packer beverages by Tan Do have had more than 23 years of experience in the beverage industry; thus, we have great confidence in the in-depth knowledge and services that we bring to our dearest clients. Tan Do’s co-packing/OEM (Origin Equipment Manufacturer) is the service that creates new drink formulas and specifications depending on the idea brief or the blueprint provided by the customers.

    The final beverage is based on customers’ requirements, including formula development, ingredient sourcing, beverage manufacturing, labeling and packaging. 

    Tan Do co-packing service offers five optimal solutions, include:

    • Cost-effective: Building your manufacture may be costly because you have to prepare things like buying equipment, setting up the infrastructure and plant facility, … Thus, using a beverage OEM/co-packer helps you allocate the money to other aspects of your firm. 
    • Knowledge: In the manufacturing industry, long-standing experience is the key term to success. We are so proud of our precious experience in manufacturing and packing different beverage types, which will help us avoid potential risks and achieve the best results.
    • Scalability: When your beverage volume grows, outsourcing your increased workload to an OEM co-packer is the ideal decision. Also, you can offer attractive prices to your customers thanks to volume discounts.
    • Lead time: Working with the right co-packing partner, you can use their precious experience to reduce the learning curve and lead time. So, it’s easier to fulfill your orders much sooner.
    • Regulations: Using a co-packer, you can save the time and effort required to directly tackle regulation and certificate issues. 

    Conclusion 

    Finding the right co-packer can be daunting, and it will take time and effort to make the proper choice for you and your firm. However, once you’ve found the right partner, the only thing that’s left to do is keep your business growing, something a co-packer can help with leaps and bounds.                             

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    Lilian Nguyen
    Lilian is an expert in oem, odm, private label beverage industry with 8 years of experience. I believe that it is crucial for companies to focus on the benefits which the product provides to their target customer and what does it mean to the community. When i am not working, i run a blog on making healthy snacks & drinks and join in a hiking club.

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