- Contract Packaging
- Leaders in Packaging
Article | November 30, 1997
Materials and container development lead outsourced functions
Development of packaging materials and containers and the graphics that go on them are the functions most often outsourced, say Packaging World readers. However, packaging machinery selection, packaging line design and integration all make the Top Ten.
Outsourcing of business functions seems to have replaced re-engineering or downsizing as the business management trend of 1997 particularly as a way to cut costs. To measure its effects specifically on the packaging function Packaging World surveyed its readers this summer.
Responding to a mail survey more than 120 readers from a randomly selected list detailed the types of functions their companies were contracting for with outside vendors. Overall about two-thirds of respondents indicated that their companies were outsourcing one or more of 15 packaging responsibilities identified in the questionnaire; some respondents checked as many as 12 of these. The survey was conducted with the assistance of Market Research Support Services (Roselle IL).
Perhaps just as interesting as the level of outsourcing in some companies nearly one in three respondents (29.8%) reported that all of the 15 responsibilities were still being performed in-house by employees. Judging by comments made by some respondents at least some companies are aggressively moving in the opposite direction bringing outsourced jobs back in-house.
Related Sponsored Content
In this first of two reports PW will indicate the functions most often contracted out and identify which types of vendors most often perform them. In the second part survey respondents will explain whether outsourcing has grown in the past year and what changes are planned for the future. The report will also look at outsourcing's effect on company efficiency the establishment of partnerships with suppliers and the levels of performance these vendors provide.
Package development leads way
Of the 70.2% of respondents who reported at least one packaging function being handled outside the company package or container development was the most often mentioned this by 67.8% (Chart 1). Graphic design followed closely behind on 65.5% of respondents' lists. Frankly PW had expected that package graphics would lead the way since companies both large and small often farm out this function judging by the reports on packages that regularly appear in the pages of PW.
It's possible of course that "container development" is a term that not only reflects a formal arrangement with one or more suppliers but also the "informal" adoption of package suggestions that were offered by a supplier. That seems more likely to be the case for smaller companies whose container volumes would restrict their use of custom packaging.
The next tier of responses were led by outsourcing of actual product packaging new materials research and packaging line design. Each was mentioned by 46% to nearly 50% of respondents with companies that outsource.
The final five of the Top Ten were all mentioned by 31% to slightly more than 39% of respondents whose companies do some outsourcing. These included design of secondary packaging package or container inventorying packaging machinery selection packaging line integration and label copy responsibilities.
The outsourcing functions that didn't make the Top ten include: compliance with government regulations international labeling regulations bar-coding requirements new machinery control language and new quality control standards.
Incidentally the results did not follow the "top of the ballot" voting techniques. The third most often mentioned answer product packaging was listed 10th on the list of 15 functions.
Who is doing it?
In a boxed grid on the questionnaire the survey also listed nine types of outside sources and a column for "other." That last answer "other" was cited far more frequently than expected for a variety of functions. For example "others" were said to be responsible for high percentages of several functions.
In fact it was the answer cited the most for those respondents whose companies seek outside help for label copy requirements (Chart 4). Similarly those companies that outsource the inventorying of packages or containers reported the vendor as "other" nearly 20% of the time (Chart 10). For some of these functions that answer might represent container distributors or brokers which was not one of the nine answers specified on the questionnaire.
Most of the vendors listed frequently as performing outsourcing responsibilities were the obvious choices (e.g. marketing consultants for graphic design container suppliers for container development). Other answers were more of a surprise. PW editors expected that packaging consultants would be a frequent source for recommending label copy. However those consultants were identified only 8.3% of the time.
Similarly for companies outsourcing packaging machinery selection (Chart 7) line integrators were used just 4.8% of the time while materials suppliers were the choice for 7.1%. In addition 15.7% of respondents reported that container suppliers were used for packaging line design (Chart 8) far more often than line integrators at 9.8%.
Occasionally the reverse was reported. While marketing consultants were seldom mentioned as the source for package and container development (Chart 2) machinery suppliers were named 7.7% of the time.
Heavy role for CPs
The survey results also point to a growing role for copackers and contract packagers in taking over packaging responsibilities. Since the survey was conducted Sara Lee Corp. and other companies announced a shift away from manufacturing instead using outside companies to make their products for them.
CPs and copackers were the obvious choices for those that outsource their product packaging at 29.8% and 25.6% respectively. Still packaging consultants container suppliers and materials vendors are each responsible for about 10% of packaging that's outsourced as reported by PW readers whose companies are involved in outsourcing.
Also expected copackers and CPs do nearly 10% of the outsourced package or container inventorying (Chart 10). When copackers and CPs were combined they were the sixth most likely source for package development and graphic design (Chart 3). They also registered among the top six sources for secondary package design (Chart 5) and played smaller roles in packaging machinery selection (Chart 7) and in packaging machinery line integration (Chart 9).
Outsourcing for efficiency?
Responses varied to the question of whether outsourcing has increased plant efficiency. Most reported improved efficiencies particularly citing longer packaging runs reduced inventorying and tighter focus on a narrower range of skills (see sidebar p. 29).
Those who answered "no" to increased efficiency also had some interesting comments. The group leader at a Midwestern maker of household cleaning supplies explained: "The majority of work transferred outside was testing. However the results are obtained slower than if the testing is done in-house."
The director of packaging at a national beverage packer doesn't find efficiency improvements in outsourcing. "They know less about our business than we do so we have to take the time to show them how our business works" he laments. The plant engineer for a national chemical company echoes that. "External contractors are not as efficient as our experienced in-house personnel. It seems we have to spend more time bringing contractors up to speed on what we want" he says.
A section leader at a national tobacco company explains his complaint with this analogy: "When you use a consultant it's like giving them your watch. Then you always have to ask them what the time is!"
A consultant with a national maker of personal care products says the problem is a matter of quality. "Outsourcing generally does not provide the consistent quality that we receive from our in-house production" he states.
A research chemist for a major candy maker says outsourcing of quality-control functions hasn't been successful. "Rather than outside contractors we do as much as possible ourselves. We'll seek temporary help if needed or transfer personnel from other quality-control functions."
Cost an issue too
The economics of outsourcing is also a concern to many companies. "These extra services do show up in the costs of materials more often in some regions than in others" states a senior packaging engineer for an automotive parts maker. The director of research at a Midwest processor of prepared meats agrees. "Going outside is too costly. That makes us less competitive in the marketplace" she says.
For these reasons and probably others some companies are definitely backing off from outsourcing. A packaging engineer for a major national pharmaceutical company simply states "The trend in my company is to eliminate outside help." The packaging engineer for a national maker of pet care products says her company agrees. "We are now in the reverse trend-to bring all functions back in-house." The manager of packaging development for a national dairy says his company has resisted outsourcing. "In general we still do everything internally" he reports.
It's obvious that these readers or their companies feel strongly about not outsourcing. Most of them responded to a survey on a topic that their company resists. But it helps put the issue into perspective. If the survey covered only readers whose companies were involved in outsourcing this report would be far less reflective of all readers of PW.
What companies participated in survey?
The following list of company names both large and small represent a sample of the readers who participated in this 1997 Outsourcing Survey:
ARIZONA NATURAL RESOURCES * RUGGIERO SEAFOOD * PANDUIT * WEIGHT WATCHERS * UNO-VEN * WM. WRIGLEY JR. CO. * QUEST INTL. * CHESEBROUGH-POND'S * ADM MILLING * LEACH CORP. * AMERICAN CYANAMID * BAXTER DIAGNOSTICS * HYDROSOL * HAGGERTY ENTERPRISES * NEBS * AVON PRODUCTS * JOS. E. SEAGRAM & SON * WARNER-JENKINSON * BECTON DICKINSON * DIVERSIFIED FOODS * EXCEL CORP. * COLGATE PALMOLIVE * CITGO PETROLEUM * ALBERTO CULVER * COCA-COLA BOTTLING * CLOROX * KRAFT GENERAL FOODS * OREGON POTATO * WEST CARROLLTON PARCHMENT * ALLIED SIGNAL * SEARLE * WEBASTO * TOOTSIE ROLL * PITTSBURGH FOOD & BEVERAGE * REDMOND PRODUCTS * PLUSH PIPPIN * EST...E LAUDER * FEL PRO * HILLSHIRE FARMS * JEROME FOODS * PHILIPS LIGHTING * HUNT-WESSON FOODS * BORDEN * GEN-PROBE * CALGON VESTAL LABS * EARTHGRAINS * NABISCO BRANDS * ANHEUSER-BUSCH * CHEMSICO * LAFAYETTE INDUSTRIES * EASTMAN KODAK * THOS. J. LIPTON * HARTZ MOUNTAIN * OCEAN SPRAY * JOHN FLUKE MFG. * SUN CO. * TERMINAL PACKAGING * GLAXO-WELLCOME * BAYER * STIEFEL LABS * MONSANTO * WHIRLPOOL * ANDERSON ERICKSON DAIRY * BRAKEBUCH BROS. * AMWAY * PELL-FREEZ BIOLOGICALS * 3M CO. * CIBA CORNING DIAGNOSTICS * AMERICAN CHROME & CHEMICALS * DANNON * DOWBRANDS * ZACKY FOODS * VENTRITEX * LEAF INC. * CONTINENTAL MILLS * PLAYTEX * EVEREADY BATTERY * PHILLIP MORRIS * WAWA * MILLER BREWING * NOSCO * LA TAPATIA TORTILLERIA * HOLLISTER * ANDREW JERGENS * C. F. SAUER * SQUARE D CO. * CADMUS TECHNOLOGY * SUNNYDALE FARMS * BUNGE FOODS * TRACY LUCKEY CO. * BEST FEEDS * NOVO NORDISK * EUCLID CHEMICAL * IDEAL INDUSTRIES.
E-BOOK SPECIAL REPORT
44 Best Package Designs
Sign up to receive timely updates from our editors and download this e-book of our editors’ selections for most innovative package designs of the past year.