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Contract packaging: Base the decision foremost on adding value

Many factors should be weighed carefully, and the make-versus-buy decision also should include an analysis of whether outsourcing is to be a strategic or tactical measure.

Outsourcing packaging operations has become a popular way for consumer packaged goods companies to reduce costs and gain other benefits. But Thomas Bacon, founder and president of Aaron Thomas Co., a contract packaging service provider, has a message for CPG companies: The real litmus test, when contemplating the decision whether to make in-house or to outsource, is whether having someone else package your products adds value. Bacon, in an article posted on Makingmoneylast.com, argues that contract packaging is about more than merely saving money. It should be a strategic option in CPG companies’ effort to grow their brands.

The decision to outsource can be strategic or tactical, depending on the scope and duration of your needs for a contract packager.

Any decision to use a contract packager is a complex make-versus-buy analysis in which time-to-shelf and other factors are considered. Each factor in the decision should be weighed as part of a risk assessment matrix that focuses on four aspects:

1. How important is the factor?

2. What is the likelihood of failure?

3. How severely would a failure impact business plans?

4. What are the contingency plans if a failure occurs?

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