Co-Packing & Contract Manufacturing

Co-packing and contract manufacturing are business models that result in significant cost reductions, increased efficiency and higher profit margins.

There are other business models, or terms, you might here that are very similar regarding outsourcing production:

  • Contract packaging or co-packing
  • Contract filler
  • Production manufacturer
  • Private label manufacturing
  • Third-party manufacturing
  • 3PL, or third-party logistics

With decades of expertise in manufacturing and supply chain, Ingredient Supplier provides all of these outsource services at competitive prices. Our production teams are staffed with highly-trained quality control personnel, skilled production teams, lab technicians, supply chain experts and highly-attentive customer service representatives.

We value our customer relationships and proudly offer bespoke solutions to meet unique product and business needs.

Contract Manufacturing: What is it and how does it work?

Contract manufacturing (CMO) is a business model where one company contracts, or outsources, their production to another company – the contract manufacturer.

For example, let’s say the hiring company offers a soap product but is unable to produce it in an efficient way – whether it be time, financial or personnel resources. The hiring company enters into an agreement with the contract manufacturer to produce this product on their behalf.

What is co-packing?

Co-packing, or contract packing, is sometimes used synonymously with contract manufacturing. To use our same example, let’s say the hiring company manufactures the soap product in-house, but finds it more economical to hire a co-packer to package the product.

The hiring company would provide the co-packer with a batch of their already-manufactured soap product and the co-packer would package it down into consumer-ready containers, provide the labeling, seal the containers, and provide all of the necessary packaging steps to make the product consumer-ready. Similar to the CMO model, the co-packer also assumes all of the packaging costs.

What is private label manufacturing?

Similar to co-packing and CMO models, private label manufacturing also involves outsourcing the manufacturing and packaging of products. The finished products are then sold under the primary company’s name or brand. There are significant advantages to this model, including cost efficiency, production efficiency, product exclusivity and higher profit margins.

Since Ingredient Supplier provides services for a wide range of production outsourcing, we often use these terms interchangeably. Many of our customers have unique needs, therefore we value flexibility and bespoke solutions tailored to meet your needs. Each new client will receive a contract with terms agreed upon by both parties. The contract agreement will dictate these specific needs and processes, in addition to the required product specifications.

How To Increase Efficiency and Decrease Costs By Using a Contract Manufacturer or a Co-Packer

If you’re reading this, you probably already know that outsourcing production provides specific advantages to the primary company’s overall business model. Advantages include a significant increase in efficiency, cost reduction, production flexibility, and the ability to maximize in-house resources on core competencies such as marketing, sales and product development. All of these benefits result in overall higher profit margins.

Economies of Scale

Manufacturers benefit from the economies of scale. In most cases, this is the leading benefit for a primary company to outsource their production. Manufacturers produce goods at high volumes and high rates, their cost of goods is often lower. In turn, they can offer lower production prices to their customers – usually significantly lower than what their customers cold achieve in-house. Consequently, the primary company benefits from increased profit margins per unit.

Increased Efficiency

Outsourcing production and manufacturing allows the primary company to focus on its core competencies – enabling smoother internal business processes and the ability to scale more efficiently.

Overhead Cost Reduction

Warehouse space, manufacturing equipment and maintenance is a hefty investment, not to mention the skilled personnel involved in operating the equipment. Some industries, pharmaceutical for example, require highly-trained personnel with degrees and/or certifications involved in production. Outsourcing production to a contract manufacturer who already has skilled staff in-house, production equipment, warehouse and laboratory space results in significant overhead cost reduction.

Production Flexibility

To meet market demands, oftentimes product ingredients, specifications or volumes may require updates. Making these production updates in-house can be a cumbersome process, often involving a change in equipment set-up or even manufacturing plants. By using a contract manufacturer, depending on your agreement, these updates can often happen seamlessly and with significantly less cost than in-house.

How To Select Your Contract Manufacturer or Co-Packer

The relationship between your CMO or co-packer is a crucial partnership, there are many factors to carefully consider. When partnering with Ingredient Supplier to handle your CMO or co-packing needs, customers can expect the following:

  • Communication and attentiveness
  • Timeliness and prioritization of your needs and deadlines
  • Dedicated QA/QC personnel who is involved during all stages of the production
  • Highly trained production teams
  • ISO accredited facility
  • Competitive pricing
  • High manufacturing and packaging volume capabilities for bulk needs
  • Flexibility in customers’ unique needs and product specifications
  • Many low-cost and reliable shipping and freight options

Contract Manufacturing & Co-Packing with Ingredient Supplier

With decades of production, manufacturing and supply chain expertise, our team understands the challenges in finding your production outsource partner and entrusting them with product quality. Across the board, the Ingredient Supplier team prioritizes communication, timeliness and attentiveness to our clients. We have dedicated QA/QC personnel who handle all stages of the preparation and testing processes.

Ingredient Supplier’s ISO Accredited Manufacturing Facility

Our manufacturing facility is ISO 9001 and ISO 22000 accredited with a state-of-the-art laboratory, temperature controlled and sealed production rooms, and over 5,000 square feet of warehouse space.

We have a range of manufacturing equipment to handle small to bulk quantities. Our equipment undergoes routine maintenance to ensure manufacturing efficiency and product quality. Ingredient Supplier Lab Technicians utilize industry-standard processes and adhere to all required testing procedures.

Ingredient Supplier Packaging and Labeling Options

We pride ourselves in a diverse range of packaging options. If a customer does not already have a packaging selected, this can provide efficiency and cost reduction benefits. We also accommodate any packaging that the customer may have selected prior.

Our options include a variety of different LDPE, PET, recycled and glass containers with various sizes and colors. We also have a wide range of different product sealers and lids for different applications. Our commercial grade printing machines allow us to print high-quality, thermal labels. We also provide design services in-house for customers who need label designs.

Related Services and Resources

Frequently Asked Questions about CMO and Co-Packing

What are the benefits of outsourcing my production?

Outsourcing production results in a wide range of benefits. Manufacturers, including co-packers and contract manufacturers, often have economies of scale. This means their production output is so high that they are able to manufacture products at a lower rate than most primary company’s can facilitate in-house. Other benefits include greater quality control, more time to focus on core competencies such as marketing, sales, research and product development.

How do I qualify a contract manufacturer?

The partnership with your outsource partner is important. There are many factors to consider when qualifying your CMO, including production capacity, quality control processes, accreditation, communication and trust.

What products can I outsource to a contract manufacturer?

Virtually, all production can be outsourced. Whether it be electronics, food & beverages, cosmetics, pharmaceuticals, and more.


Partner With Ingredient Supplier For Your Co-Packing and CMO Needs

Are you ready to partner with Ingredient Supplier for all your outsourced manufacturing and packaging needs? To get started, email or call our Houston, Texas headquarters at 832-795-6898.

Inquire Today