Co-Packing: Who Benefits?

Co-Manufacturers can save significant money on labor, materials and other expenses related to production and overhead. So long as the company maintains appropriate oversight, contract manufacturing can permit a company to lower its production costs, maintain the quality of its production, and increase its profit margins.

Companies are finding many reasons why they should outsource their production to other companies. Cost savings being priority. Companies save on their cost of capital because they do not have to pay for a facility, and the equipment needed for production. They can also save on labor costs such as wages, training and benefits. Some companies look to contract manufacture so they can cut out there over head expense and bring up their profit margins so they can focus more on marketing.

Mutual benefit to co-packing is setting a contract between the manufacturer and the company it’s producing for that may last several years. The manufacturer will know that it will have a steady flow of business until then.

What are the benefits of co-packing for bakery & food manufacturers? Greater product visibility, increased management of costs, flexibility and environmental benefits are just some of the benefits food manufacturers can derive from the process. The primary driver is managing costs, because third-party operators already have the expertise, resource and staff in place.

With co-packing, companies can take advantage of skills that they may not possess, but the contract manufacturer does. The contract manufacturer is likely to have relationships formed with raw material suppliers or methods of efficiency within their production. Contract manufacturers are likely to have their own methods of quality control in place that helps them to detect counterfeit or damaged materials early. With co-packing companies can focus on their core competencies better if they can hand off base production to an outside company.

Contract manufacturers have multiple customers that they produce for. Because they are servicing multiple customers, they can offer reduced costs in acquiring raw materials by benefiting from economies of scale. The more units there are in one shipment, the less expensive the price per unit will be.
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