Summer memories are fading and the holiday season will be soon upon us. At this time of year, we often find ourselves engaged in the science of budgeting. Whether that means we are crafting our own 2012 financial budget to support our operating plan, or that we are working directly with customers to develop an understanding of sales projections and listening to the demands that we will serve, financial planning is one of the most important underlying challenges a co-packer must accomplish.
Each piece of the budget puzzle must properly link to the next, allowing all actions to be supported. Investing in capital equipment, personnel, facilities, and data systems all must drive forward in a cohesive fashion and work together to create a profitable and sustainable business that provides the opportunity to reinvest, grow, and meet our customer needs.
So what are some of the trends that may impact the co-packer’s budget?
One current customer demand remains what has long been known as “turnkey” operations: purchasing and holding customer inventory on the co-packer’s books. This often requires the co-packer to absorb debt and consume cash flow, and develops liability and risk surrounding forecasts, and demands skill in ordering quantities. If managed well, turnkey opportunities will allow you to alleviate the customer’s stress and tasks associated with material procurement and enable you to strengthen your service offerings and your relationship with the customer.
Another trend requires co-packers to have multiple locations across the country to reduce transit cost and allow for greater speed to market. This often equates to multiple leases and the hiring of key personnel, decisions that will require many budgeting choices.
A third trend, creating a seamless data system, often requires co-packers to understand customer systems as well as they do their own, which may require additional technical and programming support. This increased level of technology will enable a co-packer to firmly step out and offer an opportunity to streamline daily communication and supply chain efforts. However, this is a move that can be expensive in terms of both time and capital.
In addition to reacting to trends, many of us are just returning from Pack Expo Las Vegas and have many capital projects to consider. Some may be new technology in hopes of expanding one’s service offering and others may be purchases geared at reducing cost or increasing throughput requirements.
At the end of the day, budgeting is influenced by customers, banks, trends, personnel and individual business vision. It must be well designed, sustainable and led with discipline. It is difficult to feel accomplished without a plan.
A great way to gain insight into your budgeting and planning processes is to attend the 2012 Contract Packaging Annual meeting this coming February. Attendees will hear from a panel of customers including Coca-Cola and Frito-Lay, as well as numerous experts discussing success patterns that will allow us to learn and possibly reposition and reinvent our companies to compete at a higher level.
Our keynote speaker and space shuttle astronaut Mike Mullane will allow our ideas to soar as he discusses his book titled “Riding Rockets,” while teaching ways to plan to avoid your own “shuttle disaster.”
So, as you take good care of your companies and invest time in creating great plans supported by meaningful budgets, also plan time to be involved with CPA’s meetings and committees and “Sail Beyond All Limits.”
Please continue to support the CPA and its initiatives as we work to enhance our industry.
Joe Jaruszewski can be contacted at [email protected].