Improve Contract Manufacturer Performance Via Timely Forecasts and Purchase Orders

11/2/2018

Unhappy with your contract manufacturer? Looking for ways to improve your relationship with your co-man or co-packer?

This article is the first in a series of posts addressing the many issues that affect relationships between food companies and contract manufacturing plants.

Why Your Last-Minute Orders Are Hurting You

Food manufacturing plants need advance notice and plenty of time and details. If you are submitting last minute orders, your relationship with your co-man is going to suffer. Here’s why.

Plants need to plan ahead. They want to know how much product you need, and they want to know this far in advance so they can manage everything from inventory, ingredient sourcing, cash flow, mix, pricing tiers, etc. They want the flexibility to maximize production line employment, pricing of ingredients, and the ability to produce exactly the amount of product required with the least amount of waste.

Improve Prediction and Lower Costs

Imagine you are in the plant and you get a last-minute order. Now you’ve got to find ingredients, and the price of that unique ingredient that makes your product so special has sky-rocketed. If you could have ordered the ingredient last week, when it was on sale, or in bulk, at a lower price, you wouldn’t lose money on the deal. But the customer put in a late order, and know you’ve lost a bunch of your profit margin thanks to the late notice. How would you respond to that customer?

You’re Not the Only One

Keep in mind that the plant is not just managing your orders. In most cases, your co-man is juggling multiple customers. If you don’t give sufficient notice in the ways of accurate forecasts and purchase orders, you may force the plant to have to decide whether to use the machinery for your orders or a competing customer’s orders. When put in that position, the plant will choose the customer who have given them advance notice, consistent business and the best profit margins.

Give Them What They Need

Your co-man wants to know exactly how much product you need a month from now. Two months from now. Three months from now. Your co-man needs to know all the details so the plant can prepare for your demands.

If you don’t comply with the agreement in your contract regarding forecasts (90-120 days) or purchase orders (4-6 weeks), you can’t expect the plant to perform. You have to give adequate notice if you want top performance.

Need Help?

Forecasting and managing orders can be tricky, as can ingredient sourcing and managing plant relationships.

Over the past two decades, I’ve worked with food contract manufacturers of all sizes and across multiple product types. I’ve also been the customer, owner of a small food product company (sandwiches), working with a small contract manufacturer. I’ve represented companies that were just scaling up from the test kitchen and were the smallest customer the co-man was working with, and I’ve represented companies where their products were the bulk of the co-man’s business. I’ve worked with large and small co-mans and co-packers; it’s safe to say I’ve seen it all.

Read more articles in this series of posts about improving your relationship with your contract manufacturer. If you have a specific issue you’d like to address, need help with your existing contract with a co-man or want help approaching co-mans for a new food product, give us a call to discuss your situation. We’ll be happy to help!