The world’s changed. The days of manufacturers running as vertically integrated operations – with every stage of production under one roof – are over. Instead, brands increasingly rely on co-manufacturing solutions.
Co-manufacturing is a way for companies to produce goods by sharing resources and facilities. It’s not a new phenomenon. It’s been around since the 1960s. But it’s become more popular as manufacturing costs climb in countries like China and Mexico because of increasing wages and labor shortages. As a result, co-manufacturing has been snowballing; by 2023, analysts expect the global co-manufacturing market to grow to $2.7 trillion.
The trend is a win-win for brands and manufacturers. Brands get access to global supply chains at a lower cost, while manufacturers can expand without investing in additional capacity or recruiting more workers.
Problems facing brands in today’s market
A growing crowd of problems stands in the way of brands, many of which stem from the fact that brands struggle to find ways to keep up with demand. This can hurt brand loyalty, so many companies look for new ways to boost efficiency and cut costs while maintaining quality.
Some of the problems that push brands toward co-manufacturing include:
- The need to expand capacity. With the increasing demand for their products, brands want to increase capacity. However, this can’t be easy when you’re a company already at maximum capacity. One way brands have expanded capacity is by co-manufacturing with other companies. This allows them to work with another brand with more space and resources than to create more products. It’s an excellent option for brands looking to expand without spending money on new facilities. It can also be an ideal way to keep costs down while maintaining high manufacturing standards.
- Brands must innovate quickly. Innovation is an age-old concept, but it’s becoming more critical than ever. In today’s competitive marketplace, brands must innovate quickly, which means testing new products, responding rapidly to consumer demand, or pivoting in the face of emerging trends. That’s where co-manufacturing can help. This approach lets brands take advantage of economies of scale and save money on raw materials. It also allows companies to complete existing production orders. If there isn’t enough demand for a particular product, then no raw materials are wasted through overproduction while maintaining inventory at appropriate levels. As a result, they don’t have excess stock to sell their goods faster. Less waste means lower costs — so brands can keep prices low without sacrificing quality or style. But there’s another benefit: faster turnaround times mean shorter innovation cycles.
- The need to use fixed assets more efficiently (like plant floor). Brands want to use their fixed assets more efficiently. In the case of the plant floor, for example, one can use it to produce more products or more complex products at higher volumes with lower costs. This is the essence of co-manufacturing, which is why this model has become so popular in recent years. In addition to using fixed assets more efficiently, brands can save money by sharing them with other manufacturers. For example, several manufacturers might share resources such as facilities and raw materials if they work on similar projects or compete against each other (think Apple vs. Samsung).
- The need to address labor shortages. As the need for skilled labor grows, many companies are turning to co-manufacturing to address this problem. Co-manufacturing is the process of delivering products, services, and technology components through joint operations between two or more separate enterprises. It can work in any industry requiring specialized expertise or resources to produce goods effectively. By working together, manufacturers can save money by sharing resources such as facilities, raw materials, and labor.
The problems with co-manufacturing
Brands often figure they can solve most of their problems by working with a co-manufacturer or operating as one. However, co-manufacturing isn’t a cure-all. It can help you save money by sharing raw materials and facilities costs. But, it won’t solve other issues, such as poor quality control or a lack of expertise in critical areas.
There’s also a huge chicken-and-egg problem with them: you can’t have one without the other.
Additionally, co-manufacturing isn’t always the best option for companies of all sizes. For example, you might need to consider outsourcing if you’re a start-up and don’t have much money to invest in infrastructure. This can be an easier option. It allows you to focus on other aspects of your business while letting someone else worry about how to make finished goods more efficiently.
Co-mans often take a long time to make decisions, and the coordination between different teams can be complex when they’re in various places. For example, managing multiple relationships is expensive, time-consuming, and can lead to conflicts of interest.
Can TraceGains be the co-manufacturing solution?
But what if there was a solution that helped you streamline sourcing and manufacturing processes? What if a solution allowed you to use your existing data and integrate it with other systems? Wouldn’t it be great if there was a solution that made it easier to manage multiple vendors and products at once, helping you scale better by making it easier to make faster decisions based on the most updated information?
How would it affect your overall company performance? The answer is simple: it would have a huge impact. And that’s what we do at TraceGains.
If you’re a brand that’s decided to outsource the production of a portion of your product or service, then TraceGains has the solution. Companies today have incredible market power and must constantly demonstrate that they can deliver on their promises and requirements.
TraceGains is a cloud-based platform that enables brands to manage their supply chain more efficiently. It helps companies find the right co-manufacturing partners, manage relationships with multiple suppliers, optimize manufacturing processes and costs, track shipments and payments, collect invoices from suppliers — and much more.
Our Networked Finished Goods solution streamlines this process by letting brands share a single view of their relationships and supply chains. Ultimately, this allows them to spend time where it matters most: creating innovative products that delight consumers worldwide while staying ahead of competitors’ innovations (whether they’re actual competitors or not).
● Super convenient reporting that declutters the mess that co-man relationships can cause. Information is current and actionable.
● Single views of specifications protect the business from producing goods that fail to meet standards.
The tools that TraceGains provides are an excellent way for brands to manage their supply chain. The software allows brands to view the entire process from start to finish, which can help them avoid mistakes and make better decisions about where they want to manufacture their product.
TraceGains also makes it easier for suppliers to communicate with each other, which reduces errors and increases efficiency throughout the entire manufacturing process. In addition, it gives brands one unified system to streamline their co-manufacturing supply chain.
If you’re a co-manufacturer who wants to take your traceability management to the next level, reach out to learn more about how we can help your business.