Cutting co-packing costs

Slashing the price of packaging goes well beyond simply signing a contract packaging contract. These tactics can lead to significant savings.

Pw 6720 All S M

The costs of oil and energy are skyrocketing, making it imperative to justify every penny spent anywhere in packaging. Most all of the costs have been wrung out of internal packaging operations, but there are still places to become leaner when it comes to getting winning results in working with a contract packager.

For the most part, additional savings are possible for product manufacturers that do their homework, especially during the process of qualifying a co-packer. Cost reductions are possible by taking simple steps such as visiting a potential co-packer’s facilities and inquiring about a packer’s areas of specialization and winning economies of scale through turnkey operations. Finally, savings can result by looking at both the product and the package holistically.

Make inspections count

If you’re a product manufacturer looking to reduce costs, a good place to start is by conducting a site visit to qualify a co-packer—before you sign a contract, says Jack Ampuja, president of Supply Chain Optimizers    (www.supplychainoptimizers.com), a management advisory firm specializing in supply chain efficiencies and logistics. It may sound obvious, but because of location and general day-to-day business demands, this step often gets overlooked—and the neglect can prove costly, Ampuja says.

“Look at the site. View product quality. See how many people are on the production line, and watch them make product,” Ampuja notes. “You don’t want to hire someone sight unseen. Consider sending a quality engineer in there to do an audit and make sure the co-packer can hit the specs and standards.”

Optimize your personal inspection of the facility, Ampuja adds. Walk the co-packer’s facilities with a detailed scorecard. This additional step enables you to check what you find in the facility against your list of must-haves. It doubles as a formal and impartial measurement system for product-reject rate and damaged-goods rate. Consumer packaged goods (CPG) companies working with perishable items also should ask to see stock-rotation records and—if they’re packaging a frozen product—freezer-rotation rates, Ampuja says.

The questioning should go even further. Ask about the co-packer’s line flexibility. How long does the packer require to change over production lines from running one product to another? How many products does the company routinely package? Is the packer experienced with unusual packaging configurations or products?

Even co-packers that pass muster at this stage will need a try-out period. Offer them small jobs initially.

Seek out specialization

A second area that’s fruitful for cost-cutting is specialization. A CPG company need not invest in special equipment or learn new packaging processes for each new product it introduces. If specialized equipment or expertise is needed, a brand owner can save costs by turning to a contract packager with expertise in that area, says Tom Golubinski. He’s manager of contract packaging for Novartis, Suffern, NY, where he directs external packaging operations for the healthcare product company’s prescription and over-the-counter products.

Novartis packages many products in-house. But if the company can’t cost-effectively package its own products, a co-packer gets the job, Golubinski says.

Annual Outlook Report: Sustainability
The road ahead for CPGs in 2025 and beyond—<i>Packaging World</i> editors review key findings from a survey of 88 brand owners, CPG, and FMCG readers.
Download Now
Annual Outlook Report: Sustainability
Conveying Innovations Report
Editors report on distinguishing characteristics that define each new product and collected video demonstrating the equipment or materials as displayed at the show. This topical report, winnowed from nearly 300 PACK EXPO collective booth visits, represents a categorized, organized account of individual items that were selected based on whether they were deemed to be both new, and truly innovative, based on decades of combined editorial experience in experiencing and evaluating PACK EXPO products.
Take me there
Conveying Innovations Report