What is Contract Manufacturing?

A contract manufacturer provides manufacturing services for companies that sell products versus services. Contract manufacturing (or co-packing) is a form of outsourcing that continues to be in demand, especially in the food industry, where the projections are for even more solid growth.

The reason for the growth is due to the numerous advantages food contract manufacturing provides. Companies are freed to invest their cash and other resources in product development and brand building or maintain necessary reserves versus building or updating facilities. Companies that want to maintain at least some responsibility for their own manufacturing can utilize contract manufacturers to cover short term demand increases versus having excess capacity that sits idle most of the year.

Contract manufacturers assist companies in product development by producing pilot runs for test marketing before setting up full-scale production facilities. In this way, new products can be launched into the market place faster. Additionally, companies in the food industry are able to have products processed under certain standards such as kosher or gluten free or organic that they may not be able to process in their own facilities.

Contract manufacturers are by nature very skilled in a focused area of manufacturing, allowing companies to take advantage of skills they may not possess. A co-packer’s equipment has generally been developed specifically for this area and their labor has been trained and is skilled in it. That offers the opportunity for not only reduced quality rejects but also cost reduction through efficiency gains. More advantages accrue in the area of labor from the shifting of costs associated with wages, training, and benefits.

Due to all these advantages and more, contract manufacturing is definitely here to stay in the food industry.