Startups must decide whether they want to invest in processing, packaging and warehousing (to have control over the operation as well as secure any proprietary technology) or to partner with a contract manufacturer, a.k.a. a co-packer.
More time than not, entrepreneurs and smaller manufacturers choose to partner with an expert to manufacture their products. There are many reasons why this is the smarter option.
The most obvious reason is that this option reduces capital investment and assists with cash flow, freeing up dollars for marketing efforts to build brand awareness. Co-packers are also experts at what they do. This frees up man power and brain time, reducing energy spent on learning the process and troubleshooting common production issues.
Before you begin interviewing potential co-packer partners, it is paramount that you identify those criteria that are non-negotiable and those where there’s flexibility. Keep in mind, co-packers vary in capabilities. Decide if you want to source ingredients and packaging, or if you prefer the co-packer do this for possible bulk pricing benefits.
Speaking of pricing, determine your cost structure. Discuss potential hidden expenses.
Set quality standards. Identify product and package specifications, including shelf life requirements, as well as certifications such as allergen-free lines, kosher, organic, etc.
Safety, quality and record keeping are not negotiable in this day and age. Do your homework. Evaluate the co-packer’s safety and sanitation procedures. Do they have a HACCP plan? Are they compliant with the Food Safety Modernization Act? Is the manufacturing facility regularly audited by an accredited firm? Is the co-packer prepared to properly handle a recall?
Ask for referrals. Find out how reliable the co-packer is for scheduling production. How far in advance do you need to confirm schedules?
Then there’s that gut feel we all have when doing business. Do you feel that the co-packer will work with you when issues arise? Troubleshoot with you? Communicate in a timely manner? In general, the more transparent a co-packer is willing to be, the more trustworthy the partnership will be. This is even more important when proximity is an issue.
Remember, if you are prepared and do your homework, it will be easier to identify the best co-packer for your innovation. Your chance of success increases.
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