Many companies outsource the filling and packing of their products to specialized service providers. While the profile of such a contract packer was previously limited to packaging alone, nowadays companies look for experts who can supply an all-in-one service. Co-packing has become more demanding. From automatic packing (with film technology such as shrinking, sleeving or sealing, for example) to assembly, labeling, coding, logistics and even raw material and packaging sourcing, a contract packer must fulfill versatile tasks.
Many co-packers offer the whole service chain from one source: from blending powdered foods and nutritional supplements to a comprehensive package that includes the purchase of raw materials, product development, quality assurance, co-packing in retail and industrial packs, warehousing and delivery. Customers can take advantage of the full service or choose individual modules, depending on their requirements.
Outsourcing is an option for small firms that intend to expand but do not want to make additional investments in their own plant, which ties up capital, space and personnel. Large companies, on the other hand, often want to restructure their production and outsource just part of it.
According to a recent market report by Mordor Intelligence1, the global contract packaging market was valued at $40.65 billion in 2017 and is expected to reach a value of $78.14 billion by 2023. This growth is mainly attributed to the changing preference of manufacturing firms toward contract packagers because they are increasingly focusing on cost optimization and their core businesses — like research and development or marketing and sales. Contract packers release capacity so that companies can concentrate on their own competences, and research shows that operational costs can be reduced by 7 to 9 percent as a result of this strategy due to reduced machine maintenance and labor costs.
Overall, the primary driver for using a contractor remains cost management: Third-party operators already have the expertise, resources and necessary staff in place. Particularly during times when there is a shortage of skilled labor and temporary workers are hard to find, service providers can help companies to handle spikes in demand or maintain a regular supply. For example, a manufacturer might receive an inquiry for an unusually large quantity, but its own packaging lines are already working to capacity. Rather than having to turn down the order, a co-packer could step in and pack the goods to the usual level of quality. Supply bottlenecks can be avoided this way.
Frequently, outsourcing partners also take on the manufacture of products that cannot be integrated optimally into a customer’s own production process. For instance, a company may want to launch a new food product that needs to be packed in a protective atmosphere because it includes a sensitive ingredient. The manufacturer itself might not have the facilities, but it could deliver the product to a co-packer who could pack it in pouches with the appropriate mixture of gas.
The Right Packaging
Besides cost savings, another reason for outsourcing is the additional knowledge that can be gained by working with specialist partners. A co-packer’s expertise is not necessarily limited to filling and packing. They may also be well versed in the design, sourcing, procurement and management of packaging, which can lead to overall improvements for the manufacturer — especially if they have experience with transportation too. Co-packers can also offer guidance on current trends and advise clients on packaging solutions that are in line with market requirements.
For every product on the shelf, attractive packaging is an important success criterion. Packaging has to be cost-efficient and convenient, and it must stand out from its competitors. As the industry grows and shelf space shrinks, the need to differentiate oneself becomes greater. This is no easy task, but co-packers can offer invaluable support.
Seamless Quality Control
The hygienic, safe and gentle treatment of the products being handled by the contractor is also of prime importance. Sensitive goods such as food, pharmaceuticals and dietary supplements are especially subject to strict regulations. Whether it’s managing allergens or complying with current good manufacturing practice (cGMP), just as is the case in a company’s own facility, professional quality control is one of the most important criteria for the contract packer. Contractors must be cGMP-compliant, and potential customers should ask to see their certification documentation. Making a same-day or unannounced site visit to the contractor’s premises is absolutely reasonable because being GFSI (Global Food Safety Initiative) certified does not mean being compliant on audit days only; it means being compliant 24/7.
A company has to be transparent, especially in the face of today’s growing international competition. Deciding which contractor to go with is not just about price; it’s also about entrepreneurial performance and a company’s internal processes must be documented for all to see without any gaps to show their worth. This includes taking care of quality management and the storage of goods in a suitable environment within the right temperature range.
Partnership Is the Key
Of course, brands cannot wholly shift their responsibilities for product quality onto a co-packer. The brand owner is ultimately responsible for selling a safe product to the market and would also be the first party contacted if there were a product claim or recall. This makes it even more important to work with only reliable partners who have in place established and certified quality management systems of the highest level.
Customers must be able to trust their contract partners, so all aspects of safety, quality and production should be discussed openly and transparently. Finished product marketers and contract manufacturers should share with each other all information related to product quality and requirements to provide and sell a safe product. Activities should be regularly coordinated, even at the planning stage. This creates the basis for a good, long-term business relationship.
One of the reasons companies take advantage of co-packing is that product life cycles are becoming increasingly shorter. On the one hand, products have to be market-ready faster. On the other hand, market conditions change quickly. Specialized service providers can meet these demands with the necessary expertise, equipment and variety of packaging solutions and sizes needed, whereas companies themselves often find it harder to react to rapidly changing market situations.
Global Contract Packaging Market - Segmented by Packaging, End-user Industry and Region – Growth, Trends and Forecast (2018 - 2023), Mordor Intelligence, March 2018.
Illinois-based contract manufacturer SternMaid America offers the latest production methods and a thorough knowledge of ingredients. From compounding, filling and refilling to raw material sourcing, product development, warehousing and logistics, the company can provide tailor-made solutions for all kinds of different requirements. This is backed by interdisciplinary R&D expertise gained from its position in the Stern-Wywiol Gruppe, one of the leading enterprises in the world of food ingredients.
For more information visit sternmaid-america.com.