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Working with contract manufacturers or “co-packers” can be incredibly valuable for a food brand, it might even be what catapults your brand into mega success. However making sure that you have the right partnership is INCREDIBLY important, as a poor partnership can be devastating to your brand.
We have put together a list of 5 Helpful Hints we believe every entrepreneur should think about when looking for that perfect contract manufacturer:
1) Clearly Define The Terms & Conditions
When entering into a new partnership, negotiating a contract will be the first step in sending you on your way to first production. It’s important to:
- Find the right balance between your “wants” and “needs”
- Make sure both parties walk away from the deal feeling like they’ve “won”
- Ensure that both businesses are set up for a successful and profitable path forward
The best approach to quickly and successfully finalize a contract is to clearly state your needs at the first opportunity. Prior to entering into the initial stages of a contract, formally work through a letter of intent (LOI) and nail down the key terms. Make sure you feel comfortable with what has been presented and agreed upon before moving into contract negotiations. If neither party is willing to be flexible during the LOI process, than it’s probably time to call it quits and move on. If key terms can be easily agreed upon with the LOI, contract negotiations should be a breeze!
Don’t settle for something that doesn’t set you up for success!
2) Understand Their Capabilities & Make Sure They Can Scale With Your Business
- What is it that you produce and how much of it will you need throughout the next 1, 2, and 3 years?
- What does your manufacturing and distribution landscape look like?
These are important questions to ask yourself before looking for the right partner. Make sure you clearly understand what your product needs are and if the potential co-packer will be able to scale with your business.
Understanding your current landscape and how this new relationship will impact it, is key in making the right decision. Having multiple sources and diversity in manufacturing is important, but make sure it supports the business, both at the product and financial level. Be strategic and look to the future needs of the business, but don’t pigeonhole yourself into something that only supports your short-term needs.
3) Make Sure Communication Is As Important to Them As It Is To You.
This is one of the most important and overlooked aspects of setting up your relationship for success. When working with a contract manufacturer, in most cases, you won’t have eyes and ears on the ground. Relying on your partner to produce the highest quality product, following internal and external processes, and delivering on cost targets can be a difficult pill to swallow. Build the relationship from the beginning by promoting transparency across all functions of the business.
Create an environment in which both parties feel equally important to the success and growth of the product. A good way to do this is by having weekly check in meetings to discuss progress and make sure production is still on track as planned. And remember, it is a partnership, it takes both parties to bring the product to life.
4) Quality Quality Quality!
A brand will never be successful without a great tasting, high quality product, period. Understand what it is that satisfies your company’s quality standards and find a contract manufacturer who can support it.
Perform a full facility inspection, review quality process and documents, and get a sense of the importance of quality to both employees and management. Even though quality programs may be in place, it takes a strong team of people to ensure the guidelines and policies are followed. Don’t ever settle for someone who does not meet your quality expectations. Quality should be the MOST important aspect of your product development.
5) Look For A Forward Thinking and Like-Minded Team
Managing a contract manufacturer relationship can be difficult, as most brands are usually a plane ride away. Daily, weekly, and monthly processes play an important role in not only the success of production but also minimizing the amount of issues that arise along the way.
When searching for the right partner, meet the team (not just management), as these are the people that will managing the day to day. Get a sense for how they work, discuss flow of the supply chain and how each team member’s role directly and indirectly impacts it. Give them an understanding of your overall process and how each team member would play into it. It is important to discuss this upfront, as finding a way to manage the business after the fact can lead to many unexpected issues and frustrations.
Finding a like-minded team that shares in the same goals is crucial to the growth of your brand and future success for both parties.