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Exploring Outsourcing—Challenges and Opportunities

By: Marie Alice Dibon, PharmD
Posted: June 5, 2009, from the June 2009 issue of GCI Magazine.

Outsourcing manufacturing is a long-standing industry tradition. Both small and large brands outsource some aspect of production, whether they have in-house operations or not. Sometimes less expensive, often more innovative, definitely more agile, contract manufacturers and private labelers are a great alternative in many instances. However, choosing and then properly managing outsourced manufacturing presents many challenges. Knowing where to go, what to ask for and what to expect are essential to succeed.

Managing the relationship is also paramount to be a successful contract manufacturer. New tools and new technologies allow the strengths of both sides of the partnership to be optimized and minimize the difficulties in forging these partnerships.

Today, it is also important to source novel ideas from outside of the company, and even outside of the beauty industry—looking to industries that develop technologies that can be applied to the creation of beauty products.

Consider the challenges of outsourcing from both the perspective of contract manufactures and brands looking to outsource innovation.

Challenges on Both Sides

As anyone who’s been involved on either side of contract manufacturing, brand owner or manufacture, can tell you, smooth runs are often the exception, and frustrations can run high on both sides of the equation.

What are the grievances heard most often? From the manufacturers’ standpoint, clients may have unrealistic expectations for anything from quality and pricing to delays. The proper, needed information may not have been communicated and the people given manufacturer interface responsibilities may not be qualified to be the communicator.

From the buyer’s standpoint, manufacturers quality standards and the number of other jobs they have running—impacts on-time delivery—are among the most frequent complaints. So, where is the truth? Why is a practice that is so old, so used and so beneficial for both parties, as clearly evident simply through its continued employment, still plagued by so many complaints and mishaps?

“Many customers come into this relationship without really knowing what to expect,” says George McLarty, head of operations at Tritech Laboratories—a contract manufacturer based in Virginia. “When you source private label manufacturers, you really need to do a solid due diligence about who you want to work with, and then ask the right questions, making sure you are on the same page with them”.