March 25, 2024 Co-Packers: Modernize Today

Technology can empower contract packagers, manufacturers and 3PLs to address uncertainties and build resilience in an unpredictable landscape.

Supply chain providers can’t seem to catch a break: geopolitical tension, the continuing rise of e-commerce, inflation, environmental, social, and corporate governance (ESG) demands–the list goes on and on. Just as contract packagers, manufacturers and third-party logistics (3PL) providers get a leg up on one form of disruption, there’s another waiting around the bend. And if this year’s news headlines are any indication, this level of volatility isn’t abating any time soon.

Approaching twists and turns at breakneck speed can be exhilarating – if you’re at a theme park. But in your daily operations? Not so much. And, to add insult to injury, being caught unprepared can damage customer relationships, drive up costs and make it difficult to remain competitive in a crowded market.

If recent trends have taught us anything, it’s that solving for yesterday’s challenges isn’t an effective way to ensure long-term success; nor can we pull the wool over our eyes and continue with business as usual. The best way forward is to accept that uncertainty and market volatility are the new normal, and to adopt dynamic solutions that enable us to adapt just as quickly as our customers’ ever-changing needs.

Why Modern Technology is Critical for Contract Suppliers

If you’re a strategic partner in a brand’s external supply chain, such as a contract packaging or manufacturing provider, you understand all too well the need for your business to be nimble. Operating in the last mile of a customer’s external supply chain, any shift in order demand or customer requirements leaves little margin for error for providers such as you. Time is a precious commodity, and so it is of utmost importance that you execute with precision and efficiency.

Many contract manufacturing and co-packing providers, however, have failed to modernize their production operations with the same level of technological sophistication as their warehousing and finance functions. WMS and ERP systems are commonplace, yet many co-pack operations still run on spreadsheets and paper-based workflows. At best, they are running a homegrown system that they have likely far outgrown by this point. None of these solutions offer the data visibility or responsiveness needed to collaborate with brand customers at the speed of today’s market. On the contrary, the lack of speed and data fidelity poses business risks that many businesses are unaware of.

Plus, as the CPA reports that the co-packing and contract manufacturing industry is growing at a 5-year CAGR of 9.4%, there is no doubt that competition in the market will continue to be fierce. This level of market competition, combined with the global volatility that external supply chains must contend with, means that co-packers and contract manufacturers must seek any competitive edge they can to maintain strategic partnerships with brand customers—including modernizing the systems that support their production operations.

How Purpose-Built Software Offers a Competitive Edge

By digitalizing a co-pack operation with a modern software solution, production data is recorded and tracked in real-time, enabling the flexibility and responsiveness to solve order issues immediately when they arise. More specifically, a modern software solution can enhance operational areas such as:

• Inventory Management: Tracking inventory movement and consumption on the production floor is done in real-time, and predictive analytics makes it easy to maintain healthy yet efficient inventory levels for upcoming orders.
• Production Planning: Multiple customer orders requiring varying amounts and types of components can be easily managed in-app, through the use of advanced production scheduling and materials ordering features. Labor allocation and production performance can also be tracked and managed digitally, ensuring maximum line uptime and performance as well as opportunities for continuous improvement.
• Customer Relationships: The data visibility enabled by a modern purpose-built software solution can also ensure strong customer relationships built on trust, as all parties work from the same source of information. Further, strong data-based workflows and opportunities for collaboration demonstrate qualities of a high-performing strategic partner to brands.

A Modern Solution to Today’s Supply Chain Challenges

There’s no way to know with certainty what the next disruptive event or market shift will look like, but we do know that change is coming. Is your organization ready? Are your business and production operations agile enough to respond to change in any and all forms with speed and efficiency?

As a contract manufacturing or co-packing service provider, you need high-fidelity data to effectively manage your production and plan for future business success. You also need this data to better collaborate with your customers to manage the volatility of the market.

In a hostile economic landscape, where spending has tightened and labor remains scarce, one  of the single most effective investments you can make is in technology that can amplify your existing workflows and resources. As co-packers, contract manufacturers and 3PLs navigate the ever-changing landscape of customer demands, they may feel like they’re strapped into a never-ending rollercoaster ride. Each twist and turn presents new obstacles, but can also present an opportunity for growth and continuous improvement.

By embracing the dynamic nature of the market and choosing tools that are equally dynamic, businesses can prioritize agility, visibility, responsiveness and ultimately thrive in a landscape defined by uncertainty.

Kevin Wong is the Chief Operating Officer and a co-founder of Nulogy, where he has played a pivotal role in shaping the product vision and strategy of the business.

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