Contract Packaging Just May Be The Ticket To Growing Your Business
When people hear the term co-packing, also known as contract packaging, there are two questions they ask. “What is co-packing, and how does it work?”
This is an arrangement whereby a firm (let’s call them firm A) allows another firm (firm B) to handle the packaging of its products. Let’s look at co-packing agreements in depth.
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How does co-packing work?
What is a co-pack agreement? Co-packing is an agreement between firm A and its co-packer, firm B. It allows firm B to handle all the packaging processes for firm A.
This contract allows firm A to focus on its specialty, which is production, and firm B focuses on packaging, branding, and logistics. The two companies have to come to a formal co-packing agreement that outlines the nature of their relationship.
Why do firms opt for co-packing?
There are many reasons why your firm might want to consider co-packing as a way of streamlining its business operations, including:
Cost
For most firms that opt to enter into a co-packing agreement, the cost is the main driving factor. Instead of firm A establishing a packaging unit, these costs can be saved by outsourcing the services of a co-packer.
Technology
Co-packers invest a lot of resources in technology that helps to make the packing exercise smooth and time-efficient. Many companies lack this technology, so it is necessary to seek a partnership with a co-packer.
Spike in demand
A co-packer’s services can come in handy if a company is experiencing a spike in demand for its products. This sudden increase may mean the company is unable to meet the packaging requirements at its facility, so they need to enter into an agreement with a co-packer.
Specialization
Specialization is a core principle of economics and running a business. Companies that choose to specialize in one specific task might find the services of a co-packer to be necessary. This may inform their choice to enter into a co-packing agreement.
