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The state of contract packaging

As manufacturers seek to improve market response time, contract packaging becomes an important production strategy. End users forestall investments in equipment and labor while they test new packages.

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As packagers cope with an increasingly segmented marketplace, one of the fastest-growing techniques to meet that demand has been the employment of contract packagers. When retailers make “speed-to-market” a top priority, manufacturers find that outsourcing of packaging can be the quickest way to compete. It’s not always the least expensive, of course, but it can pay for itself through increased sales. These are just some of the conclusions that have been drawn from an in-depth research project on contract packaging undertaken by Packaging World last fall. Not only were three separate surveys on contract packaging conducted on PW’s Web site, Packworld.com, but additional interviews were conducted with representatives of both contract packagers and the companies that hire them. This overview will discuss the emerging trends in general. In addition, PW will present the findings of its end-user survey. This special report also includes a piece by assistant editor Abbey Lewis-Reinholdt on what contract packagers themselves are saying about emerging trends in the marketplace. The results of a survey of suppliers that sell to contract packagers will be presented next month. Understanding contract packaging is a little like dancing with a ghost. You know it’s there, but it’s almost impossible to get your arms around it. And it’s known by many names: co-packing, contract manufacturing, repackaging, co-packaging, and fulfillment. Although each of those terms represents some specific activities (see “The Analyst,” PW, Aug. ’01, p. 119), the differences are regularly overlooked by many packaging people. In essence, these terms are used almost interchangeably by people in industry. For example, a packaging executive for a major national food processor claimed in a conversation that his company used more than 100 individual co-packers around the country. When the term co-packer was questioned, he admitted that many of those companies didn’t qualify as co-packers, but that his company used that term to denote all companies that did packaging for them. Regardless of the term a company uses, all involve outsourcing of the packaging function. And outsourcing, another broader term that includes contract packaging, is said to be growing at 15%/yr, according to The Outsourcing Institute, Jericho, NY. Once the exclusive province of large companies, outsourcing is now experiencing its greatest growth from smaller companies, those with $10 to $15 million in sales, according to Frank Casale of the Outsourcing Institute.

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