RODNEY STEEL, Chief Executive of the British Contract Manufacturers and Packers Association talks outsourcing for start-ups and scale-ups…
You’ve come up with a brilliant idea for a product. Your friends think it’s great. You’ve probably produced quite a few and even gone into small scale production. Sales are beginning to build – exciting stuff. But what next? Some bright spark says: “Well now you need some premises, a modest packing or filling machine, maybe even a second hand fork lift truck!” “Hang on a minute,” you say. “I want to be selling my product, not working seven-days a week in a warehouse.” So the ‘light bulb’ moment directs you to the British Contract Manufacturers and Packers Association. One of their members could do all the practical stuff, leaving me to get on with exciting bits like marketing and selling.
YOUR CUNNING PLAN
So what does it mean to outsource and what homework do I need to do before befriending a contract manufacturer or packer? It may
sound obvious, but putting together a well thought out business plan is the essential next step. What are you trying to achieve? Is there really a market for my product? What’s the competition? How many do I need to sell to make my project viable? How much is it going to cost me and can I afford it? Can I make a profit? Having answered those and many other questions in your business plan, how can you lend credibility to your new venture? Not only to convince potential customers but also your chosen contract packer that they are dealing with a professional business. For example, have you developed a website? A well-produced holding page would be better than nothing. Is your email address email@example.com? Doesn’t look very business-like, does it?
You may think that all start-ups will have already addressed these points, but from experience we know that many have not. The co-packing industry has an excellent reputation for helping businesses get off the ground, but they are not the Dragons Den. They need to be reassured that you have thought the project through and that you have the wherewithal to make it grow.
THE STARTING POINT
Where do you go to get your hand lotion blended, your chilli sauce bottled or your imported bicycle parts repacked and bar coded? A visit to the search facility on the BCMPA website will be a good start, where you can hopefully shortlist members with the capabilities you
require. Or, alternatively, you can use the online enquiry form which the Association can circulate free of charge to all their 140 plus members. It can save you a lot of leg work.
It’s one thing to contact a BCMPA member, chat through the project and get a quote, but visiting their site and seeing their facilities in the flesh (see map of members on the BCMPA website) will give you a much better insight into what’s involved in producing or packing your product and provide a valuable appreciation of the whole supply chain process.
For example, explore the range of manufacturing processes or packaging formats and understand what dictates minimum order quanties. Does your product have a sell-by date and if so, are you confident that you can sell the whole batch before the expiry date? And how about quality assurance? Is your hand lotion safe? You may have tried it on your friends but might it produce an allergic reaction in a wider market? What regulatory issues might impact on your product. Your friendly contract packer will be able to advise.
For more established businesses, the outsourcing model still applies and healthy dialogue with your contract manufacturer or packer can be invaluable. For example a subtle redesign of a gift pack outer might save hours for the hand-packers on the production line. Or sales of products currently filled into bottles might increase dramatically if they were packed in stand-up pouches.
ONE STOP SHOP
Much of the co-packing industry is moving towards offering a ‘concept-to-completion’ service ranging from new product development
through to logistics, including warehousing, pick & pack and distribution. Many e-commerce companies, often with no in-house facilities of their own, rely totally on the the ‘contract packing industry’ to provide order processing, fulfilment, despatch and returns handling services.
Your aim at the end of the day is to develop a profitable business but remember it’s got to be worthwhile for the contract packer too. A visit to their site will clarify how you can work together to achieve your objectives in a way that works for both parties.