Re-Evaluating Your Contract Manufacturing Partnerships
December is always a great time to take a step back with your Contract Manufacturer and review the past years’ events and prepare for the following year. If you’ve been following the articles I have written throughout the year, you should already have a good idea of what to look for, I’ll review those items below. Since 2020 has been one of the most challenging the supplement industry (and all industries for that matter) has ever faced, many of the things we would normally do with a Contract Manufacturer just have not been possible. That’s why it is so important to conduct these year-end reviews and set the stage for a prosperous 2021. The pandemic has taken its toll on many a Brand Owner/Contract Manufacturer relationship, from production slowdowns to lost manpower. I, for one, have just come out of a month-long battle with COVID and the time I had to take just to get back on my feet and ‘get back to work’ was something I would not wish upon my worst enemies. The precautions your Contract Manufacturers have either had to impose or, taking the higher road, willingly imposed, probably saved you, the Brand Owner, from what could have been an even longer slowdown, and maybe even missed shipments when the economy gets back up and running at full speed.
In short, these past few years have been years that has probably challenged your relationship with your Contract Manufacturers. It is then the perfect time to take out your past year’s documentation and set-up a review with them. Here is how I would set-up that review, the things I would bring to the table, the things they should bring to the table, and how you want the upcoming year to look.
The Annual Product Review
As I stated earlier, if you’ve been following these blogs, you should have a good idea of what the Annual Product Review should consist of. The Review is simply a way for both partners to take a look at the past year’s production and how it turned out against plan. There are three parts to this: Product Review, Process Review and the Quality Review
Product Review
Ideally what you would like to see here is a sample of every batch made during the production year (calendar or fiscal) lined up side-by-side, in chronological order, so you, the Brand Owner can see, smell and if applicable, taste the product to see if any Spec Drift has occurred. If you recall, over time a process will tend to migrate to it’s easiest running state, whether intentionally or not. This could lead to small, subtle changes in the product over the course of the year that can only be seen when they are side by side. For example, let’s say your product is a hot chocolate drink. At the Product Review, the side-by-side samples look like this:
If, as a customer, you received the far-left product in January, then the far-right product in December, would you consider them the same? Maybe, but side-by-side you’d be hard pressed to say they were the same. The Product Review will make these variations stand-out, and will give you and the Contract Manufacturer a chance to discuss what happened, and whether it is a big enough difference to warrant further analysis.
Process Review
As a Brand Owner, even if it is the Contract Manufacturer making the product, you are ultimately responsible for what goes on the store shelf. By reviewing the Master and Batch records from the past year’s production you will get a good feel for the control both the Quality Department and the Operators had over the production process. They will also let you know if a raw material supplier was switched mid-year for whatever reason, and whether you were notified and approved of that supplier prior to manufacture. The Process Review also gives you an opportunity to walk the process floor, either in-person or virtually, to ensure what you saw during production start-up is the same as what you see now.
Quality Review
This section deals with the Quality Agreement you had signed with the Contract Manufacturer at the outset of production. It is your chance to ensure all the Food Safety Certifications are up to date, all inspections have been documented, and all the polices and procedures are in place to ensure your product is produced in a clean, safe environment. Are the correct PPE being worn and enforced? If masks and social distancing are mandated, are the floors clearly marked and is everyone following them? For this section you can supplement the process walk-through with a review of all sections of the Quality Agreement, checking to make sure nothing has shifted over the course of the year or if anything needs to be adjusted to take into account unplanned events that had happened (i.e. the pandemic).
Keep in mind, with all of these review sections, your job as the Brand Owner is not to try and find mistakes or gaps, but to collaborate with your Contract Manufacturer to get the best product you can given the capabilities of the manufacturing process.
The final aspect of the Annual Review is the one section everyone does, sometimes avoiding the Product Review entirely, the Manufacturing Contract. I purposely kept this for the end of the article simply because the Product Review sections are so important if you go straight to the Contract you will miss a valuable chance to partner with your Contract Manufacturer for a deeper, more trusting relationship. Reviewing the Manufacturing Contract is a simple exercise in reviewing what was agreed upon versus what was delivered and adjusting for the coming year.
Were orders submitted and completed as per the agreement? Does there need to be a pricing discussion? Are you ready to ramp-up to higher order quantities? Are you looking to develop new products and/or line extensions? Are delivery commitments being met? Is the Contract Manufacturer looking to bring new suppliers in the coming year? All the logistical questions that define the business side of the relationship are addressed here. I highly recommend you leave this as the last part of the Annual Review. Once both parties have completed the Product, Process and Quality Review any discussions on contracts can then be made with full knowledge of the previous year’s accomplishments, challenges and opportunities.
One word of caution here: if, after going through the Annual Product Review, either party feels the relationship is not going in the direction you had both hoped, negotiating some form of opt-out might be your last step in the review. For this to happen, you’ll need to have vetted an alternate supplier you can move to. While neither party wants to see that happen, having a qualified back-up will give the Brand Owner better options when they sit down for the Manufacturing Contract Review.
In its most basic form, the Brand Owner/Contract Manufacturer relationship should be a mutually beneficial partnership. These Annual Reviews are recommended not as a means to point out what’s wrong, but rather to work together to find solutions. Remember, you chose this Contract Manufacturer based on a thorough vetting process, and the Contract Manufacturer agreed to work with you based on their own vetting process. Trusting each other to review the previous year’s production with an eye on continuous improvement will help both parties develop a deeper, more trusting relationship that will provide years of opportunities for both.
