NEW EVENT! Cutting-edge Trends for Every Industry at PACK EXPO Southeast
Discover packaging & processing solutions for all industries at the all-new PACK EXPO Southeast in Atlanta, GA, March 10-12, 2025
LAST CHANCE! Register ASAP for $30

3 Principles For Creating A Successful Relationship.

Base decisions on total cost, share responsibility, and implement performance measures to optimize the results in working with a Contract Packager.

Pw 9084 Adalis 01

Consumer packaged goods (CPG) companies—from nationally known brands to private labels—rely on contract packagers for a number of reasons.  In addition to manufacturing and packaging the product, contract packagers may also participate in creating the goods. But like any business relationship, finding the right contract packager and building a foundation for a productive and successful partnership takes a lot of due diligence.

If you are a manufacturer looking to bring a contract packager onboard, there are a few fundamental areas to analyze and assess before engaging in a partnership. The successful relationships are those that embrace three principles: total cost, partner responsibility, and performance measurement.  They are all equally important in developing a solid foundation for a strong and healthy partnership.

Making decisions based on total cost

Competitive market environments have prompted companies to take a variety of cost-cutting measures to protect their bottom line. When entering into a relationship with a contract packager, cost factors—both tangible and intangible—need to be considered.  Just because one contract packager has cheaper labor rates or faster, more modern equipment does not make it the most cost-effective or suitable partner for your company. Why? Because until you calculate the total cost of doing business, you cannot fully understand whether your decision to choose one co-packer over another was smart. Let's take a look at an example. 

A large conglomerate purchased a beverage company in the Midwest. Cost reduction was an important initiative for the new management team, and soon after the acquisition, the company began soliciting bids from suppliers to lower costs.

Midwest Services Warehouse Inc. (MSW) had been the beverage company's packaging partner for the last several years and decided that it would leverage the total cost approach to keep the account.  It had developed a solid reputation in the company prior to the acquisition. With the support of the company's internal staff, the contract packager urged the new management team to look beyond the cost of service and consider other factors, such as the level of service and quality.

MSW had a higher price point, but this was partly because it deployed an automated system for managing and producing a wide range of volumes, depending on demand.  The automated system helped streamline many areas and provided consistency, quality, and on-time delivery.  Its competitors offered attractive lower rates, but their manual operations could not keep pace with the level of throughput that the customer was used to receiving.  In the end, the beverage company's new management team realized that quality, experience, and expertise offset the slightly higher price point.

CPG companies that look beyond just one or two factors have a better understanding of the consequences of their decisions.  What do you need to do in order to look at the total cost?  Most expenses for working with a contract packager can be organized into the following basic formula:

(A) What are the costs per package piece and labor?

INTRODUCING! The Latest Trends for All Industries at PACK EXPO Southeast
The exciting new PACK EXPO Southeast 2025 unites all vertical markets in one dynamic hub, generating more innovative answers to your production challenges. Don’t miss this extraordinary opportunity for your business!
REGISTER FOR $30!
INTRODUCING! The Latest Trends for All Industries at PACK EXPO Southeast
New e-book on Flexible Packaging
In this e-book, you’ll learn key considerations for vertical and horizontal f/f/s and how to choose between premade bags and an f/f/s system. Plus, discover the pitfalls to avoid on bagging machinery projects.
download
New e-book on Flexible Packaging