02 Jun Do What You Do Best – Why Co-Packing Is Important
All companies – the good ones at least – have things they are good at. If they didn’t they probably wouldn’t be around. Manufacturers make, and retailers sell, but this doesn’t mean they have to be great at everything.
This is a basic reality of business and sticking to core competencies is usually a sound strategy.
After all, companies often get into trouble when they lose focus and try to take on operations and functions beyond their “core”. Knowing the time and place to strategically outsource or partner with specialists is important. Many times it is just better to work with an expert.
Co-packing (a.k.a. contract packaging) is a prime example of something that is not a core competency for most manufacturers or retailers yet can be effectively outsourced to a 3rd party. Co-packing involves working with an outside vendor to help make products shelf-ready by doing things like adding outer packaging or kitting multiple products together for sale.
Contract packaging has become an important competitive strategy from a merchandising perspective for companies in the Food and Beverage, as well as Health and Wellness markets. Since these types of operations are very labor intensive and project oriented, co-packing is popular as a way to tackle large projects without the cost of hiring additional staff and adding specialized equipment.
Aside from those hard cost benefits, companies gain greater flexibility in their available options for improving on-shelf product presentation.
Co-packers can save money in less obvious ways than labor and equipment. Being experts in packaging, the right partner will make sure your packaging design is not over-engineered. Having too much packaging means you are paying for materials and higher shipping costs unnecessarily. Furthermore, the right partner can provide an end to end solution to help with packaging – design, sourcing, procurement, order fulfillment, and shipping are other related services.
Remember, creative packaging is a not a core competency for you, but it is for co-packers.
When you are evaluating a co-packer make sure to consider their location. Saving on labor and packing materials is fine, but if those are more than offset by higher shipper costs from an undesirable location then it’s clearly not a good choice.
Smart managers build quality teams by adding people with complementary, yet diverse skills. Smart companies do the same by understanding their core competencies and working with partners with specific capabilities that compliment what the company itself does best.