Co-Packers - Definition & Meaning
What is Co-Packers?
A co-packer which is another way of referring to a contract packer, is a company which undertakes the task of manufacturing and packaging of food and other products for its business clients. The co-packer works under the contract signed with the recruiting company to produce goods as though they were manufactured by the recruiting company itself.
They are very similar to a contract manufacturer in industries like aerospace and automotive. They usually come into picture when the producing company does not have the requisite resources, money, machinery, knowledge and packaging capacity to manufacture the product itself.
Deploying co-packers by the manufacturers, gives them two major advantages:
Expenses: The manufacturer does not need money to buy equipment, build a facility, buy permits, or hire employees.
Regulations: Dealing with numerous laws, rules and regulations is a cumbersome and tedious process. Seeking provincial, federal or municipal regulations can be every complex and time consuming.
But there are some disadvantages associated with this too:
• Using co-packer leads to higher costs and loss of control over your product
• Considering all the aspects of co-packer, it can prove to be a favourable option in case of a new venture of expansion of the company beyond present contours
There are three main steps involved in selecting a co-packer:
Step 1: Create a list of what you expect from a co-packer
It involves establishment of needs, instructions and product distribution requirements. It includes assessment of the legal and insurance needs.
Step 2: Evaluate possible co-packers
This step involves creating a list of processors who can produce the product. Further, it involves conducting a site visit with multiple potential co-packers. Also, it is imperative to gather records concerning the past performance and feedback of the co-packer verified.
Step 3: Create a Contract
Once co-packer is selected, a contract is to be framed which specifies the responsibilities, record management and agreement terms.
Hence, this concludes the definition of Co-Packers along with its overview.
This article has been researched & authored by the Business Concepts Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.
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