Unfortunately, in the cosmetic industry, product formula ownership is often used as collateral by manufacturers to force client loyalty. Therefore, if a business would like to switch co-packers due to elongated lead times or other production issues, they may have no other choice but to stay because they do not have rights to their own formula.
Switching manufacturers can be stressful and overwhelming. The biggest challenge that many businesses often face is obtaining their product formula from their current co-packer. While companies can attempt to reverse engineer the formula to determine the ingredients. However, this route is expensive and not always accurate. Some manufacturers require their clients to purchase their formula and many have found that they are incorrect due to:
Incorrect ingredient percentages
Lack of compounding information
Therefore, before you choose and start working with a manufacturer, be sure to sign an agreement that gives you rights to your formula, in case you want to switch co-packers in the future.
Reasons you may want to switch manufacturers…
If your business has your product formula but is experiencing issues with your current co-packer, it may be time to start looking around. Common signs you need a new manufacturer include:
Poor Quality Assurance
One or two mishaps are bound to happen in production. However, if you are experiencing regular complaints about your product quality, it is time to start seeking out a new manufacturer. Quality issues can be costly, as it often leads to customer refunds, product replacements, and other expenses.
Lack of Capacity
Another issue that many businesses find when partnering with a smaller manufacturer is their limited capacity. When you partner with a co-packer, the end goal is to sell products and expand. This means you are expecting batch sizes to grow and, therefore, the manufacturer should be able to fulfill larger orders. If your co-packer cannot increase production due to capacity limitations, you are now also limited. When looking for a new manufacturer, ensure that they are able to scale to your current and projected capacity.
Just like refinancing a house, it is always a good idea to keep a look out for other manufacturers that offer better prices. If you are experiencing inflated production costs or have recurrent additional expenses, it’s time to consider a new co-packer.
Supply Chain Issues
While cost and product quality are easy to track and act on, supply chain issues can often go unnoticed until it’s too late. It is time to take action if you frequently notice:
Elongated lead times
Lack of raw materials
If the past few years have taught us anything, it is that businesses need to have an emergency plan in place and ready to deploy. Many manufacturers were not prepared when COVID-19 hit, which led to a severe supply and demand imbalance. The pandemic has since forced businesses and co-packers alike to have a backup plan in case of dire circumstances.
Ready to take the next step in selecting a manufacturer?