Contract Packaging – New Frontier in Cost and Quality Management

The global fluctuations in the oil prices have not made anything easier for manufacturing. Producers have to develop ways to manage their costs for profitability to be realized. Outsourcing of the non-core functions such as packaging is one of the best ways to reduce costs.

Emergence of Contract Packaging in Manufacturing

According to market analysts, contract packaging accounts for over 20 billion dollars and continues to grow globally. Medium and small scale enterprises are releasing the packaging sections to more specialized packers while they concentrate on increasing the quality of products. Contract manufacturing for bottle filling, capping and even sleeving relieves manufacturers the burden of package quality maintenance while allowing the company to increase their production levels.

Contractor Obligation

A high level of coordination is required while outsourcing packaging technology. Lack of attention to detail on the part of the contractor can be disastrous for the company. In contract manufacturing for bottle capping for example, poor sealing of product can lead to spillages and loss of appearance quality, which can lead to loss of market share. Similarly, poor bottle labeling translates to poor quality of product.

Subcontracting For Greater Specialization

The advantages of contract manufacturing are obvious and include; Increased access to the market of products, innovation arising from using expatriates to handle the packaging of products, some contract manufacturing organizations handle logistics, which enhances distribution of products.

Smaller businesses unable to invest in packing technology benefit immensely from contract manufacturing.

Cost Negotiations for Specialized Operations

While undertaking contract manufacturing, cost of the process is a critical consideration as it ultimately affects the final price of the product. Location and distance to the market must be factored in while negating for a suitable price. Period of contract also influences the cost. Contract manufacturing involves extended periods and both parties must assure this commitment.

Success factors

A manufacturer looking to contract manufacturing must seek qualities such as;

• Prior experience in the industry, good enough to allow them to handle all technical issues that may arise during processing
• Size and capacity to handle increasing volume; the contractor must be flexible enough to handle varying package designs and processes.
• Demonstrated Commitment to quality is paramount in sub contracting, as this is crucial to marketing.
• Financial stability is important as is shows a stable organization which is thus able to deliver more effectively.

Commonly contracted packaging processes

Contract packaging for bottle filling, capping, labeling and sleeving are some of the best processes to subcontract. For most manufactures, filling of different sized containers or tubes require constant recalibration of equipment or even the packaging material. Specialized management of these services therefore serves to increase efficiency and productivity of the company and deliver greater profits.

Conclusion

Contract manufacturing for processes such as bottle filling, capping, sleeving and even bottle labeling lines have become integral in today’s production and processing. Cost reduction is a major factor driving manufacturers to contract manufacturing. Contractors are obligated to ensure maximum quality of the final package as well as cope up with increasing volumes of production. Contractors must have sufficient capacity and stability for packing to guarantee efficient delivery of services.

This article is posted by Arjun Rao – CEO of Multi Pack Machinery Company.