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4 Tips for Successful Co-Manufacturer Management

November 7, 2019 Advisory

Oftentimes a start-up or lower middle-market company will have its product made by another company, usually a larger, specialized manufacturer. In many consumer packaged goods categories this use of a Co-Manufacturer is quite common.

As both a former Co-Manufacturer and customer of Co-Manufacturers, I can appreciate the complexity inherent in relying on production assets that are out of your direct control. Over the past decade or so I’ve seen some best (and worst) practices. Some may strike the reader as common sense, but we all know that common sense appears inconsistently across the human population (business leaders included!) so read on for four tips that can significantly improve your manufacturing business.

Plan. Then Plan Again.

The worst thing you can do to a production facility is catch them by surprise – it usually only takes the most basic of MRP information (forecasts, inventories, purchasing and production plans) to avoid surprises. The brand owners I have worked with who were best at this were companies that did some of their own self-manufacturing, those who were not so solid were “asset light” companies who did not have manufacturing expertise. If you cannot hire an Operations Manager who has lived in a self-manufacturing world, at least find a board member or advisor who has. He or she can help you and the co-manufacturer set up a process that details what to communicate, when, how, and what actions can be taken if a deviation is noted. Good co-manufacturers want to be responsive to your customers’ needs, but a lack of planning on your part does not constitute an emergency on their part.

Ask for (and Analyze) Quality Data.

A good co-manufacturer will recognize the awesome responsibility they have as a steward of your brand, but ultimately you still own the reputational responsibility for sending safe and high-quality product into the marketplace. Make sure you agree on quality data required up-front (ideally before the contract is signed, so it can be detailed in that document). Make sure it is sent to you on a frequent enough schedule that you have time to hold back any lots that are questionable before they hit the market – knowing you have sent sub-par product out after the fact doesn’t help you or your customers. Again, having an Operations Manager or an advisor with manufacturing experience is a good first step to making sure someone on your team can interpret and react to the data.

Look for R&D Expertise.

I have lived both sides of this equation: being frustrated when looking for a co-man who could help me develop a product in a segment we were entering and in which we had no expertise, and managing co-manufacturing business that had outstanding internal R&D teams. Even if you have a formula that you think is ready to go, having a co-manufacturer’s R&D team take a look at it and run a small-scale trial is usually worth the time and expense. The benefit of this approach is of course amplified with increased uniqueness of the production process and/or novelty of your particular offering.

Plan. And Plan Again.

Yeah, I know. Redundant and repetitive. This time I mean product launches, though. You should have a very good idea of your target launch date before approaching the co-manufacturer, as it is probably driven by a customer’s timeline or an important market-wide event (e.g. trade show). Get that in front of your co-manufacturer, and work together on a timeline. Some co-manufacturers love full-blown project plans, some just work from checklists, but get something documented that outlines key actions with dates and responsibilities attached. Stress-test the plan by asking the co-manufacturer to postulate what could go wrong at each critical point, what he/she would do to recover, how much time that would add to the whole project, and where that time could be made up elsewhere in the plan. It sounds like a lot of work, but think of it as launch insurance.

A good co-manufacturer can be a huge asset as you enter new markets, but ultimately you have to own responsibility for making sure the relationship adds value to your brand and company. Many companies have benefited from an exterior set of eyes as they are working through some of these challenges. Need help? Reach out.

About the Author

Gunther Brinkman, Managing Director at Fahrenheit Advisors, is an agile senior manager with extensive experience developing and continuously improving operational processes. Gunther brings with him documented success in turnaround and fast-growth environments, for both publicly traded and private equity sponsored companies.

 

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