A BIT confused as to what contract manufacturing is all about? No problem. As the ‘helpful manufacturing people’ we at Grotech Production Ltd have pulled together this comprehensive guide to contract manufacturing to demystify, inform and point you in the right direction.
Whether you are a seasoned industry professional or just starting out, our guide will provide you with the essential information needed to understand and navigate the world of contract manufacturing.
Starting with the basics of what contract manufacturing is and moving through to a checklist of what to look for when choosing the right contract manufacturer for you, our guide has got you covered. Intrigued? Why not dive straight in and find out what benefits contract manufacturing can bring to you and your business…
What is Contract Manufacturing?
PUT simply, contract manufacturing is where one company asks and pays another to make something on its behalf. This ‘something’ could be part of a product that the hiring company is making, or it could be the whole product itself that the first company then brands and markets.
Also known as ‘outsourcing’, ‘subcontracting’ and ‘toll manufacturing’, contract manufacturing is a key part of the modern landscape of manufacturing in today’s world of business.
Strategic business solution
Contract manufacturing offers businesses a strategic solution to optimising their operations, improving efficiency and enabling them to expand their market reach. Making use of a contract manufacturer is an alternative option to investing in, and maintaining, in-house production facilities and capabilities. Avoiding these upfront costs enables other areas of potential business growth to be prioritised and invested in both financially and with other resources.
Manufacturing specialism
Contract manufacturers tend to specialise in manufacturing processes and / or work in certain industries. Working in collaboration with specialist contract manufacturers in a specific sector gives access to in-depth knowledge, experience and expertise; customers may not have this in-house or welcome the prospect of fresh input and perspective into this aspect of their business.
Likewise, the production facilities and capabilities could far exceed any they could have internally. The contract manufacturer’s advanced equipment and technology could add value in terms of production providing manufacturing services more efficiently and with greater scope than could be affordably achieved in-house.
Delivering what is needed
Flexibility is key to the business of a contract manufacturer. They often offer a range of services and manufacturing processes that can be adapted to the needs of their clients. Some may provide an End-to-End Supply Chain service from product development and other technical formulation support through manufacturing and processing, filling and packaging to labelling and despatch. This may suit some customers while others would rather commission the contract manufacturer to focus on specific elements of the Supply Chain such as blending and filling and carry out other stages themselves. Either way contract manufacturing offers the flexibility to buy in the support customers need when it’s needed.
Organisational flexibility is another advantage. Contract manufacturers are well versed in managing their production schedules, adapting their production capability to the changing needs of their customers. It could be that one customer requires a small volume or trial batches for product development, market testing or Quality Control purposes while another is looking to ramp up production as demand increases. Contract manufacturers have the ability to respond accordingly.
Contract manufacturing services can be found in almost all sectors where production is a factor, catering to the vast needs of potential customers. They can increase efficiency by helping to streamline their customer’s internal operations. They also enable customers to focus on their own particular strengths – maybe marketing and sales as opposed to product development and manufacturing – and could ultimately lead to cost savings. Equally importantly, bringing a contract manufacturer on board can help customers remain agile, competitive and responsive in an ever changing and demanding marketplace which is a must for any growing business.
What to look for
Finding the right contract manufacturer for you is essential and key to a successful relationship and outcome for you both. So, what are you looking out for? Expertise and experience in manufacturing the type of goods or parts that you want making is a good place to start. Their equipment, technology and skills of their workforce are also valuable indicators as are their operational practices or ways of working when it comes to production processes, Quality Control and health and safety. For instance, what is their approach to cleanliness / hygiene when it comes to switching between customer orders? Is all manufacturing equipment stripped down and thoroughly cleaned? Is finished product appropriately stored in segregated areas? Both factors are key to avoiding cross contamination.
Their approach to customer service and how it reflects your own is also important. Do they pride themselves on delivering On Time In Full (OTIF) ie delivering what is needed when it is needed? Are they open and honest, clear about what to expect and will they provide regular progress updates? What’s their reputation like? Do they tell a good tale or live up to their word? What do their existing customers say about them? All these questions are key to finding the contract manufacturer that is right for you.
What Does Contract Manufacturing Involve?
So, having found the right contract manufacturer, what’s next?
Agreements and discussions
Before any sharing of information and detail goes ahead, there generally needs to be a non-disclosure agreement (NDA) drawn up and signed to protect the interests of both parties.
This means more detailed discussions can now take place. The customer can share their exact requirements with the contract manufacture safe in the knowledge that their ideas, intellectual property (IP), formulas and processes will remain confidential.
Customers need not be concerned about sharing their confidential product information with a reputable contract manufacturer. Confidentiality is ‘in their blood’. They are the silent business partner of most of their customers to the extent that most product consumers don’t know they exist and assume the customer has manufactured their own product. NDAs are part and parcel of the process and contract manufacturers expect to sign one.
From the contract manufacturer’s point of view, the NDA also gives them the chance to weigh up the operational and cost implications of taking on the work: now they have access to the formulas, will they be able to manufacture the product satisfactorily? Do they have the facilities needed to handle the product and ingredients? Are they able to perform the necessary QC tests that ensure that they have made the product within the customers specification? What about the packaging? This should be agreed at the get-go. How does the customer want their product packing (into bottles, boxes, pallets?). Are there any requirements of the contract manufacturer to source such packaging materials or will they be provided by the customer ?
Overall, it allows both parties to understand each other better, giving the customer a fuller insight into the professionalism and capabilities of the contract manufacturer they could be working with and the contract manufacturer a fuller understanding of the customer’s requirements.
At the end of this initial process, the customer and contract manufacturer will agree what to expect for both parties in terms of what is to be made and how, quantity, quality, budget and lead-times. It is crucial to get this right as it sets the tone for what is to come.
Information transfer
With the framework of what to expect agreed, the process of sharing the precise detail can begin. This sees the customer providing the contract manufacturer with the information they need to produce the goods including design and formulation specifications, raw materials (where the contract manufacturer isn’t sourcing them directly) and any specific, perhaps even bespoke, production processes that may be required.
Where Intellectual Property like trademarks, utility models and patents are concerned, the customer will also license the contract manufacturer accordingly so that they are legally able to use them.
Trial run
The best way to learn about the properties of the ingredients and manufacturing the product is to undertake a trial production run. A trial run facilitates the testing and validation stage ensuring the product can be successfully made as required and flagging up early on any potential problems.
While product specifications and formulations will have been provided upfront by the customer, making it work is the responsibility of the contract manufacturer. Quality control checks backed up by a stringent Quality Management System will be key to ensuring the product consistently meets the customer’s specifications.
Fulfilling the brief
That’s the formalities done and dusted plus the product and manufacturing processes tried and tested, so full production can begin. Here the product is not only made to the exact quantities and, in some cases, variations required, but it is also packaged and labelled as specified and duly despatched.
For some this may be the end of the line but often contract manufacturers and customers establish ongoing arrangements to their mutual benefit. Working together on a long-term basis means the contract manufacturer gains a thorough knowledge of both the product they are making and the customer they are making it for. This can strengthen and develop the relationship between the two parties with added value in terms of consistency of product, product development, manufacturing methodology and more of a partnership / greater collaborative relationship.
Product development
While trust and the spirit of collaboration are important where existing products are concerned, a good working relationship is fundamental when it comes to developing new products.
Not all contract manufacturing arrangements relate to products that are already in use in the marketplace. Many customers also turn to contract manufacturers with development briefs to explore the options for creating new products. Working with contract manufacturers specialising in the product range or sector the customer is interested in moving into means they can take advantage of specific expertise, technology and equipment they may not have available to them otherwise.
Bringing in this outside resource also provides space to develop, prototype, review and refine new products without having to take time out from and tie-up the customer’s in-house production plan and facilities.
Depending on the terms of the development brief, when it comes to collaborative working on new products, ownership and control of all Intellectual Property generally remains with the customer to do with what they wish.
Keeping lines of communication open
As with any partnership working, keeping those lines of communication open between those involved is essential. This is important not only at the beginning of the relationship when agreements are being made, but during the subsequent trial and production stages also.
Regular updates, quality control measures and adherence to the agreed timetable are fundamental to ensuring all expectations are successfully fulfilled. The contract manufacturer is your production department, communicate with them as you would your own team.
Effective communication is especially important where more than one contract manufacturer is working with the customer on the same product. For instance, one contract manufacturer could be producing the packaging while another is manufacturing the contents. All parties need to be communicating regularly to ensure the customer receives their finished product – filled and packaged – as specified.
Collaborative synergy of contract manufacturing allows customers to access professional external resources availing themselves of expertise and technology they might not have themselves or reducing production costs and enhancing operational efficiency without having to invest in or maintain extensive in-house manufacturing capabilities.
Its success however, hinges on a clear breakdown and allocation of responsibilities, effective communication and a shared commitment to quality and excellence.
Why use a Contract Manufacturer?
WHETHER or not to use the services of a contract manufacturer is a strategic business decision.
Ultimately it comes down to the unique goals and needs of the business and whether partnering with a contract manufacturer to outsource manufacturing requirements delivers the desired growth trajectory.
But how does a potential customer know if it’s right for them?
Here are some of the advantages of teaming up with a contract manufacturer and indicators of when it might be time to make that call.
Cost efficiency
Outsourcing production tasks can help reduce operational costs by avoiding capital expenditure. After all, why pay out for production facilities, machinery, personnel and associated training when a contract manufacturer has done that already?
Making use of what they have to offer means customers can put capital resources to better use in other areas, focusing more strategically on their own core competencies such as research, development and marketing.
Such financial and operational flexibility is particularly advantageous for start-ups and SMEs looking to compete effectively in their chosen markets without overstretching themselves but there are also ongoing cost benefits to working long term with a contract manufacturer for all organisations.
Expertise
Contract manufacturers specialising in specific sectors often have a depth of knowledge and experience in target markets, product lines and production processes which surpass that of their customers.
Partnering with a contract manufacturer means businesses can tap into all this, shortcut some of the trial and error often associated with breaking new ground, while also benefitting in terms of improved product quality, streamlined production processes and access to the latest advanced manufacturing technologies in which the contract manufacturer has already invested to maintain their own competitive edge.
Other benefits of calling on the services of an industry expert contract manufacturer include:
- Relationships and capability to provide an end-2-end supply chain service streamlining the procurement process, reducing lead times, minimising disruptions and ensuring a consistent flow of materials for production and end product to the customer.
- Fresh technical input into the product development process to innovate and customise products to meet specific needs or stay ahead of the competition in terms of market trends.
- Access to a skilled workforce experienced in manufacturing the specialised products required. Experienced workers = greater efficiency, higher quality and more consistent production.
- A commitment to continuous improvement in order to stay ahead of the competition including better ways of working in terms of processes, technology and efficiency resulting in a more agile and responsive manufacturing partner for customers.
Flexibility
In the face of fluctuating production volumes or rapid growth in demand, contract manufacturers can be the solution to the need for flexibility / scalability. They can be particularly useful where significant and speedy investment in infrastructure and equipment could otherwise be needed while also mitigating risk associated with maintaining excess capacity or having people and facilities stand idle during times of low demand.
Contract manufacturers are used to scaling their production up or down in line with customer need. They offer an adaptable and cost-effective solution for manufacturing which enables their customer to align their production to market requirements without significantly disrupting their own daily operations.
Quality
A commitment to quality is often a core competency of contract manufacturing. A reputable contract manufacturer will adhere to strict quality control standards, comply with industry regulations and will have the certification to prove it.
Their customers can rest easy that their products will meet the necessary regulatory requirements and will consistently be made to the high quality they expect.
Efficiency
Outsourcing manufacturing allows businesses to focus their attention and resources on their core strengths – product design, marketing or distribution maybe – leading to greater efficiency and improved business performance.
Working with a contract manufacturer experienced in producing the type of product that’s wanted, for a market they are used to supplying, brings a speed to market that’s the ultimate in efficiency. They can hit the ground running; with no need to commission or ramp-up new production facilities, the contract manufacturer can get straight to producing product for market using their existing infrastructure and expertise, establishing a competitive edge in the industry for their customer from the outset.
This partnership also brings risk mitigation. As well as outsourcing manufacturing tasks, some of the responsibility relating to regulatory compliance, quality control and market fluctuations is also passed on. This mitigates risks association with production to help ensure business continuity.
Sustainability
Many contract manufacturers are strategically located geographically to optimise logistics and distribution. This can be good for businesses looking to minimise transportation costs and environmental impact, reduce lead times and improve overall supply chain efficiency.
Working with contract manufacturers that prioritise sustainability in their own operations can impact and reduce customers’ own environmental performance and carbon footprint. This can not only help them reach their own sustainability goals but can also help meet consumers’ expectations for eco-friendly products.
Looking ahead
An established long-term relationship between contract manufacturer and customer can be to their mutual advantage. Continuity over multiple projects leads to better communication, understanding and synergy between customer and manufacturer which ultimately improves efficiency and the success of the partnership.
What can a Contract Manufacturer do for you?
CONTRACT manufacturers can be found operating in any sector where businesses require a third party to produce components, ingredients, or even entire products on their behalf.
A key part of the modern landscape of manufacturing today, contract manufacturers are generally sector specific and specialise in manufacturing processes that give their customers a competitive advantage in terms of operational efficiency, cost effectiveness and / or innovation.
In the fast-moving world of general chemical and agrochemical manufacturing, businesses often find themselves navigating a complex web of challenges and many turn to the expertise of chemical contract manufacturers to help.
Specialists in their sector, these contract manufacturers can provide a range of services, backed up with in-depth knowledge, experience and advanced technology, from which customers can pick and choose, as required, in a bid to streamline their operations and focus on their core competencies.
The ‘shopping list’ of services that a typical chemical contract manufacturer has to offer includes:
Blending expertise:
Chemical contract manufacturers are specialists in precisely blending raw materials to create the optimal formulation their customers require for their custom blended agrochemical applications and specialty chemicals. Attention to detail, experience and the right facilities are a must to achieve optimal results during an often intricate blending process.
Customised formulation:
With a focus on the bespoke, one of the key strengths of chemical contract manufacturers is their ability to develop customised formulations. A reputable chemical contract manufacturer will work closely with the customer to understand their specific requirements and bring their own expertise and experience into play to provide inspirational and innovative solutions without the need for extensive in-house research and development.
Precision packing:
The very nature of chemical products means they can become volatile in certain conditions so need careful handling during the packing process and to be filled into packaging that suits its contents. Experienced chemical contract manufacturers will use packing processes best suited to the product and the right kind of packaging to maintain the safety and quality of the goods during transit, storage and application.
Quality control:
A contract manufacturer’s reputation stands or falls based on the quality of the goods it makes and the standard of service it delivers. This is particularly important in the chemical industry where ensuring consistent high-quality standards are non-negotiable. Chemical contract manufacturers implement robust quality control measures throughout the production process from advanced testing of raw materials, in process checks during blending and packing to final product and stability testing. Compliance with industry regulations is paramount and should be backed up with relevant certification where appropriate, giving the customer absolute confidence that their products meet or exceed required standards.
Regulatory compliance:
Navigating the regulatory landscape in the chemical and agrochemical sectors can be complex. Specialist chemical contract manufacturers already have the in-depth knowledge and experience needed to be able to guide their customers through the regulatory compliance maze.
Supply chain optimisation:
Well established contract manufacturers often have tried and tested supply chain networks that they can use to their customers’ advantage in terms of optimising procurement of raw materials, reducing lead times and boosting overall operational efficiency. As a result, their customers receive their goods on time and to budget thus minimising production disruption and retaining their competitive edge in the market.
R&D support:
Continuous improvement and innovation are often key to staying ahead in business and for those in the chemical and agrochemical sectors it is no different. Contract manufacturers can actively support the product development process using their expertise and experience to provide fresh input that can spark new ideas to improve existing formulations or lead to inspired new ones. A good working relationship between contract manufacturer and customer can foster innovation, drive industry progression and consolidate footholds in the marketplace.
The services provided by chemical contract manufacturers can go far and beyond just blending and packing. If required, they can provide a complete end-2-end service from concept development to shelf.
A strong working relationship between chemical contract manufacturer and customer can lead to strategic partnerships that unlock new possibilities and drive success in a rapidly evolving market. Forging that partnership may not just provide practical manufacturing and supply support today but help shape the future direction of your business tomorrow.
Key Questions to ask your Potential Contract Manufacturer
SO, you now know what to look for in a contract manufacturer, but how do you go about finding one that’s right for you? By asking the right questions of course!
Your aim is to find a contract manufacturer that is as closely aligned to the aims and objectives of your business as possible and, equally importantly, is up to the job. Here are the key questions you want to be asking any contract manufacturer you could be potentially partnering with:
Experience and expertise:
This can be hard to gauge but you want to know ‘what is your experience in manufacturing products like ours?’ Ask for examples of similar projects they have successfully completed and maybe inspect some samples of products they’ve made previously.
Capability and scalability:
If you’re looking for a manufacturing partner who will not only meet your requirements today but can grow with your business tomorrow, then ask ‘what is your production capacity, and can you accommodate our current and future needs?’ You may be looking for product to trial now but what about moving forward? ‘How quickly can you scale production in response to increased demand?’ will give you an idea whether yours could be a long-term partnership.
Quality assurance:
You want to be sure that what your contract manufacturer is making for you is of a consistent high quality so enquire about the quality control measures they have in place throughout the manufacturing process. They should also comply with industry standards and have the necessary certification to prove it so ask to see it.
Regulatory compliance:
Regulations around chemical manufacture, packaging and export are complex, so you want to be sure your chosen contract manufacturer has regulatory compliance nailed, particularly how it relates to your business. Direct questions like ‘have you faced any regulatory challenges in the past and, if so, how were they addressed?’ will point to their experience and ability to troubleshoot.
Communication and transparency:
Having entered into your contract manufacturing arrangement, you’ll want to be kept informed of progress and any costs involved so ask about communication, how and when you can expect to receive updates and feedback. Likewise, establish upfront all potential costs and make sure they include any hidden and unexpected expenses.
Intellectual Property Protection:
Non-Disclosure Agreements (NDA) are commonplace in contract manufacturing partnerships and exist to protect the interests of both parties. Don’t be afraid to ask about these confidentiality agreements and other measures that should be in placed to safeguard proprietary information. ‘How do you ensure the protection of our intellectual property during the manufacturing process?’ should provide peace of mind that your ‘secret recipes’ will remain just that – secret!
Supply Chain Management:
Receive an insight into the operational side of your contract manufacturer’s business by asking them about their supply chain, how they manage it and how they prevent disruptions. Relationships with key suppliers are crucial to ensuring production goes as planned so how do they minimise potential risks?
Flexibility and customisation:
Even the best laid plans can find themselves subject to change – how adaptable is your potential contract manufacturer? Do they have the flexibility to accommodate changes to scheduled production runs or incorporate any customisation often required with bespoke products? How do they handle and respond to unforeseen circumstances or a modified brief?
Long-term partnership:
Having found a contract manufacturer that suits you it’s likely you’ll want to stick with them. With this in mind, ask about their approach to building long-term partnerships with their customers and how they’d respond to issues and challenges that may arise during your collaboration.
Environmental and sustainability practices:
Sustainability is a key consideration for many a responsible business. Reducing your carbon footprint isn’t only good for the environment, it can also be good for the bank balance and any sustainability measures adopted by your contract manufacturer contribute towards your own environmental impact as their customer. So, why not ask about the environmental and sustainability practices they have within their manufacturing processes and how they ensure compliance with environmental regulations and reduce their operational impact on the environment.
This may seem like a lot of questions to be asking your potential contract manufacturer but it’s by direct discussion that you’ll get a comprehensive understanding of their capabilities, processes and approach to establishing a successful positive, productive partnership.
Key Questions your Potential Contract Manufacturer may ask you
AS well as knowing what questions to ask when seeking out a prospective contract manufacturer, there are also a few that you need to be prepared to answer. Here are some of the more common questions that could be put to you:
Can we see the Material Safety Data Sheet (MSDS) – also known as the Safety Data Sheet (SDS) – for the product you’d like us to make and a list of its ingredients?
The MSDS will give the prospective contract manufacturer an insight into what’s involved in making the product for you. The contract manufacturer will need to check they have the facilities needed and safety procedures in place to handle both the raw materials and the finished product. They will also need to ensure there are no health and safety risks for their staff.
What is the anticipated annual volume for your product? Is there any seasonality to your product requirements?
Contract manufacturers manufacture and pack lots of different products for many different customers. Having a rough idea of when you’ll need them to manufacture your product for you will enable them to plan this into their production schedule. Effective production planning in this way makes the best use of the contract manufacturer’s capacity and equipment. It means that not only will they be able to supply you with your finished product to your required deadlines but will enable them to do so at a competitive cost.
Is this the first time your product has been manufactured?
It is helpful to know whether your product has already been manufactured elsewhere, especially if previous manufacturers encountered any production issues during its manufacture. Such information will help your new contract manufacturer to put measures in place to avoid any potential issues that may impact the efficiency of the manufacturing process and to ensure the efficacy of the finished goods isn’t affected in any way.
Are you supplying the packaging for the product? If so, could we have a sample before production begins?
While your contract manufacturer could source appropriate packaging for you, they will be equally willing to use some which you provide. If you are supplying the packaging, expect to be asked for a sample of it. This is so they can check that it is compatible with their machinery and packing process. Doing that will ensure that the production and packing processes run smoothly allowing them to stick to the agreed deadlines and supply your product to you when you need it.
How Grotech could be your Manufacturing Partner
GROTECH Production Ltd has been in the chemical contract manufacturing and packing business for more than 40 years, forging successful partnerships with customers to develop bespoke products, grow market share and consolidate business success.
We make and pack powder, granule and liquid chemical products at our purpose-built manufacturing plant in Goole, East Yorkshire. Specialising primarily in bespoke products for the agrochemical and horticultural chemical markets, we also work with other sectors requiring blending and packaging services other than for Food, Personal Care and Pharmaceutical products.
We work closely with our customers to provide the services and support they require. This could be a complete end-2-end service from concept development to shelf or a simple repack job. You decide!
How we can help:
Specialist blending: We have the capability to process and blend powders, liquids and granules to precise formulations to create the custom blended chemical products our customers require.
So, whether you require, for instance, powder blends and dusts for products containing fungicides, granules impregnated or coated with insecticide active ingredients or aqueous blends of NPKs (nitrogen, phosphorous and potassium) for horticultural use, we can help.
Powders: Our specialist powder blenders can process blends of powders for any industrial or craft application in batch sizes from 50kg to 1,500g, bulk density dependent. We can mix a wide range of raw materials or combine just a few, add liquid to powders via spraying and call on our experience to adapt the manufacturing process as needed, with pre-sieving and kibbling to pre-disperse agglomerates to produce consistent results.
Granules: With a production capacity of around 1,000kg (bulk density depending), we can coat or impregnate granules with powder or liquid active ingredients to create agrochemical products such as fungicides and insecticides or granule products for other industrial applications.
Liquids: Our batch blending capacity ranges from 100 litres to 2,500 litres and spans a simple mix and fill service to more complex processing including:
- Dilution of liquid concentrates with town water
- Powder additions
- Oil in water emulsions
- Emulsion concentrates
- High shear blending of viscous liquids
- Suspensions using in-line homogenisers
Perfect packaging: At Grotech we use filling processes and packaging best suited to the product being packed to ensure product stability, quality integrity and safety during storage, transport and consumption.
We can pack into end-user packaging or bulk and the range of options available – tanker, drums, buckets, sachets, bottles and bags to name but a few – is endless.
If the contents being packed need something special – maybe they become unstable in certain conditions or would benefit from a multi-dosing mechanism – then we can advise upon, source and, on the odd occasion, design and have made, the best packaging for you.
Repacking: You may already have the product, but it’s not packaged how you need it. Grotech provides a repacking service that ranges from taking small packs and emptying them into bulk F/IBCs or, in reverse, repacking bulk product into smaller packs or specially dispensed doses for the customer’s own process including using soluble or pulpable bags. We also repack and/or relabel registered parallel imported products.
Liquids and powders received in bulk returnable 1,000 litre / 1,000kg F/IBCs can be repacked into your chosen packaging ranging from 250ml – 25-litre bottles for liquids or down to 50g sachets and we can source both your primary and secondary packaging. Need to go even smaller? Our specialist precision small packing service could be right up your street.
Formulation and technical support: Our technical experts are experienced in developing bespoke customised formulations from scratch to meet a project brief or can work with you to overcome issues with existing formula and deliver improvements. Likewise, our operations team is ideally placed to ensure your product can be processed to a consistent high standard in our facilities.
Grotech is a reputable, experienced chemical contract manufacturer and packer offering in-depth knowledge and expertise, advanced technology and processing equipment and excellent customer service. After 40+ years in the business, there isn’t much we haven’t seen or experienced and we pride ourselves on using this to the advantage of our customer, adding fresh input and value to their business.
