Case Studies
We’re supposed to learn from our mistakes, but it’s even better to learn from the mistakes of others. Here are four examples of projects that didn’t work out as expected.
Case #1 - Let's NOT Share Information
I’m the customer, and my job is to find an alternate manufacturing source for my big-name employer. In fact, I must find and qualify contract manufacturers for every one of our company’s many products. The timing of the project is interesting. It comes just as the contract between my employer and the manufacturer is due to expire. Plus, there is some ill will towards the manufacturer. My employer gives me 1 year to complete the project.
It is a tall order made taller by the fact that the current contract manufacturer owns all the formulas, a legacy of the early years of the company. So I am flying blind. I have to source and qualify contract manufacturers without giving them the formulas! In fact, I can give them the product only after they sign a confidential disclosure agreement (CDA). Then they must reverse-engineer the product to determine the formula and spend the money to develop that product. And they are supposed to do all of this with no promise of an order. Needless to say, the companies that I approach are frustrated. How can they bid to make something without knowing what it is? Most are scared away, and I resign, frustrated by the company’s withholding the information.
I still don’t know whether my man- agers really wanted to source these products elsewhere. I got the feeling that the company wanted leverage to use in contract negotiations. If that was the case, it was essentially an exercise in how to take advantage of contract manufacturers.
What I learned: If you are not ready to disclose every aspect of your product, formula, bench-top test results, specifications, raw material suppliers, and your potential volume, you are not ready to approach a contract manufacturer
Case #2 - When a Sample is not a Sample
In this example, I’m the contract manufacturer working at a very “can-do” company, and one of our key customers is asking us to manufacture a new product. The customer says that it’s a unique idea and that the product could sell in the millions. The customer expects us to tackle the project with the same “can-do” attitude that we have shown in previous projects. In this case, the customer asks us to manufacture a product that we have no experience with. And they want it done quickly. (Don’t they all?) In addition, the customer needs sufficient quantities to do some pilot- and small-scale production trials.
In asking for that large ‘“sample,” the customer forces us to use our production equipment for the trial run of this unique product. We make more than 5,000 kilo- grams of the product, but the customer takes only 1 kilogram of it as a sample. Then we never hear about the product again or what became of the tests. Soon after, there are a number of personnel changes at the customer, and the project is lost in the shuffle. So 4,999 kilograms of the product sit in our warehouse for nearly 3 years before we finally dispose of it and book the loss.
What I learned: Don’t let the potential for a big-buck contract blind you to reality: If it sounds too good to be true, it probably is. Never agree to go from a CDA to a production run, never. Even if it’s a small bench-top test, you must get a feel for the product before you commit your company’s production time and resources to an unproven entity.
Case #3 - How do YOU View Your Contract Manufacturing Partner?
I’m the contract manufacturer, and we’re exhibiting at a trade show. A hotshot, high- energy salesman approaches me. He tells me that he has customers to whom he can sell anything, as long as it meets specifications. In fact, he claims to have a very close relationship with a key decision-maker at a big, well-known company.
The salesman’s pitch goes like this: If our company will create directly compressible (DC) versions of raw materials that he is already sourcing for his “captive” customer, he will present the DC ingredients to the customer. If we prove ourselves, he will use our company as his exclusive contract manufacturer. We just have to be there for him on a moment’s notice to create all the DC prototypes.
In short, he snows me. I fail to realize the vast amount of time, money, and energy that it takes to keep this salesman supplied with samples. We spend more than $20,000 on his projects and have not one purchase order to show for it. In effect, he uses us as his test lab, and I feel like the monkey. The salesman, of course, does just fine. He sells his customer millions of dollars of materials.
Too bad for us that none of them comes from our company.
What I learned: Do your homework. Some customers view the contract manufacturer as a partner that helps them secure business, while others view the contract manufacturer as a tool to secure their own business.
Case #4 - Beware of What's Behind Closed Doors
I’m the customer, and I’m in charge of sourcing a contract manufacturer to make calcium supplement tablets. As I canvass local manufacturers, I come across a company that is well known for its softgel expertise. I’m not looking for softgels, but I add the company to my list of candidates anyway.
When visiting the manufacturer, the staff learns that I work for a big-name nutraceuticals company. Right away, the tone changes. What had started as, “Who are you?” was now, “You must be the king!” They roll out the red carpet and ply me with food and drink. I also get a visit from company president and what appears to be the entire executive management team. I am ready with my CDA, the product samples, and am now only waiting to see the tableting facility. Instead, they show me the softgel manufacturing plant. When I insist on seeing the tablet facility, the company’s head of quality control comes out to explain all the quality checks they conduct on the softgel line. Now I know something is up. I again insist on seeing the tablet facility, or I will have to leave with an unfavorable recommendation. They relent and lead me to a Quonset hut in the back parking lot of the plant.
As we approach, the level of activity increases, as if I’d kicked over an anthill. Actually, I may have kicked over an anthill because I find myself standing in a room with a dirt floor. There are a couple very old, rusty tablet presses churning out small white tablets, and the V- blenders stand right alongside the presses. There is absolutely no separation of products. I now understand their reluctance to show me the facility. To this day, I ask myself why I never reported this company to the FDA.
Lesson learned: Always see the equipment that the contract manufacturer plans to use to make your product. Get your quality control department involved in a preliminary audit of the facility to unmask bad actors before you get involved with them.
