Bill McNeil, president of Premier Packaging, advises CPG companies to carefully compare the costs before finalizing a make versus buy decision. He offers the following scenario:
Suppose a contract packager bids the work at 25 cents per unit. The product manufacturer—analyzing only labor costs, overlooks the associated costs of reallocating duties, warehouse incidentals, accounting costs, facility space, equipment, systems, and processes—counters that it can perform the work internally for 14.5 cents per unit. Once CPG companies factor in the true costs, the company’s estimate rises to about 22 cents per unit.
