By Jeff Sawyers with contributions from Hector Leon
What lies below the surface is oftentimes reality. Being a contract packager is a great example.
On the surface, we package goods for customers. It sounds simple enough. But there are complex trends sweeping healthy food manufacturers — from small start-ups to multinational CPGs.
As head of operations for GreenSeed Contract Packaging, I have a front row seat to what lies below the surface.
What used to be a 60-day window is now 10. No one wants to sit on a million dollars worth of inventory. We’re seeing increased pressure to ship to trade, shorter delivery times, and just-in-time production. Brands want to go to market faster — and rightly so. Competition is stiff. The number of ways consumers can buy products has exploded. Like a baseball game in extra innings, there is no room for error in the supply chain.
The problem co-packers solve there is flexibility and supporting food manufacturers’ desire to be responsive to the market rather than reactive.
At GreenSeed, we’ve built single lines in isolated production rooms to accommodate more changeovers and allergen controls in addition to a second facility. While the capital investment was expensive, these measures have given us the flexibility to package different products in different rooms.
The changes we’ve made are inspired by what we see unfolding in the industry. Smaller runs are a way of life. On the surface, this might seem like a good thing.
The fact is, however, small runs lead to higher yield loss. Running SKUs multiple times in a month emphasizes short-term gain. As an example, running 10 SKUs in a day produces twice as much yield loss than longer runs. As a contract packager, short runs mean we change our schedule more frequently and work on weekends or on overtime to meet demand.
This is where ideation in the supply chain becomes powerful. Rather than being order takers, open discussions with supply chain partners create a “let’s make it better” opportunity. As in baseball, teammates help one another play better.
The problem co-packers solve is conserving capital for food suppliers by serving as a knowledge center for customers and exploring what-if scenarios.
A made-to-order philosophy, the continuing labor shortage, and supply chain software with inherent thresholds drive the need for greater collaboration between manufacturers and contract packagers. This is an easy, sometimes untapped, solution. Many food suppliers experience high turnover which leads to loss of historical knowledge. Supply chain partners can fill those gaps.
For us, culture inspires people to care. When people care, ideas flourish and sharing knowledge becomes a way of life. This directly impacts our customers. Respect and inclusion is more than values on a wall. When we do time-consuming changeovers, for example, we don’t send people home. We find them work and absorb the costs, which builds a culture of success for everyone. This shows up in the quality of our work and an overall feeling of positivity.
The problem to solve there is rooted in culture which, we believe, is paramount to running a customer-centric, socially responsible company. People are excited to come to work. Team members are respected and heard. What has long been a transactional relationship with contract packagers (getting the job done and out the door) transforms into one where relationships matter (being committed to others and their missions).
As for the future of co-packers and the problems we solve within the manufacturing ecosystem, here’s what we’re seeing. By 2025, much of what we are now experiencing will become the new normal. The impact of Amazon shipping finished products out the door, sometimes within hours of an order, has impacted all of us. Aging millennials followed by Generation Z will continue to increase demand: “You make it because I need it now.” The way the market has shifted with private labels will also put more pressure on large CPGs.
All this circles back to contract packagers. On the surface, we package goods. Below the surface, we are problem solvers and agile business partners to savvy food suppliers and CPGs that recognize the market’s shifting sands.
The way I look at it is this: We are in extra innings here. If we play to our strengths and play as a team, we will win. The new normal in food manufacturing leaves no room for errors.