For many companies, the decision to outsource and place the responsibility of production into the hands of a third party can be challenging.
But, the overall advantages should not be underestimated; it creates a certain amount of “elbow room,” whereby contract manufacturers release capacity so that the customer can concentrate on their core competences, such as research and development, marketing or sales. Other reasons for outsourcing can be cost-saving, rapid growth or better quality, and the additional know-how acquired by co-operating with specialist partners.
Reduced workloads and greater flexibility
The first step towards collaborating with a contract manufacturer is often taken when firms realise that, by outsourcing certain functions, they can reduce their own workload and reap additional benefits.
Especially when there is a shortage of skilled labour and temporary workers are hard to find, service providers can help to handle peaks in demand or safeguard the delivery of a regular supply. To cite one practical example: a manufacturer received an enquiry about supplying an unusually large quantity, but their own packaging lines are already working to capacity.
Contract manufacturers can absorb such peaks and package the goods to the usual quality standards. In this way, supply bottlenecks can be avoided. Very often, too, outsourcing partners take on the manufacture of certain products or quantities that cannot be integrated into the customer’s own production process.
A further example is when steps are being taken to modernise a production plant, which are likely to take some time.
While the work is being done, production can be outsourced to a service provider. The most important aspect in any situation, though, is long-term planning by the contract manufacturer: customers expect flexibility and reliable, on-time delivery. Even short deadlines have to be met at the right time with top quality product.
If a company’s plant breaks down unexpectedly and a contract manufacturer is asked to take over, production must be able to start in a very short timeframe. As well as technical readiness, the regulatory aspects of this type of procedure should not be underestimated.
The complete package
Nowadays, there is often a demand for specialists who can supply an “all-round-carefree” package that is precisely geared to the customer’s wishes.
SternMaid, one of Europe’s leading contract manufacturers, has decades of experience in the contract production of foods, ingredients, food supplements and pharmaceutical excipients in powder form and offers the whole service chain from a single source. The spectrum of service ranges from blending and processing to a complete package that includes raw material purchase, copacking, warehousing and delivery.
Customers can either make use of the whole package or choose individual modules to meet their particular needs. For example, many customers welcome the Wittenburg company’s delivery service. It enables goods to be dispatched straight from the contract manufacturer to the final recipient, thus saving transportation charges — an important consideration in view of the increasing pressure to reduce carbon emissions.
More resources, less investment
What might be a fairly secondary activity to an outsourcing customer is the service provider’s core competence. By outsourcing processes, customers also hope to benefit from the technologies, project experience and expertise of the external service provider. In most cases, specific expertis is difficult to build up or maintain at the required high level, and takes a long time.
Sometimes, the production process requires special technologies that are not available to the company or cannot be introduced quickly enough at its own facility.
SternMaid’s fluid bed technology is a classic example: because of its diverse applications, made possible by top and/or bottom spraying and continuous or batch operation, this technology has established itself as an important process step in the food and pharmaceutical industries. As it permits drying, coating, agglomeration and granulation, it is possible to adjust and standardise the product attributes.
As the drying temperature can be specified, the product is only normally subjected to a moderate heat (30–50 °C), which makes fluid bed technology ideal for processing heat-sensitive ingredients such as enzymes, flavourings and vitamins. Heatable blending containers with different types of mixers, a high-pressure homogeniser and both a cooling and a heating chamber round off the technical possibilities.
Moreover, the Wittenburg plant has eight different blending lines to meet a host of different requirements. They include a modern counter-current container blending unit that is suitable for mixing vitamin compounds and has been officially certified according to Part II of the EU GMP Guide. It enables sensitive substances to be blended, processed and filled according to stringent regulations.
In this way, customers can make use of the latest technologies without having to invest in new equipment. The installation of large, commercial-scale plant needs to be well considered these days. Faster innovation cycles are shortening the lifecycles of products. With novel or niche items, it is wise to be cautious.
Who knows whether the production line for a particular dry beverage base or food supplement will still be working to capacity in a few years’ time? Specialisation and the grouping of orders often enables contract manufacturers to produce more cost-effectively than a company could achieve “in-house.”
Mark Riemer, Commercial Director, SternMaid
A matter of trust
To lean more about SternMaid’s contract manufacturing business, Nutraceutical Business Review’s Dr Kevin Robinson caught up with Mark Riemer, Commercial Director, to discuss the company’s outsourcing solutions.
NBR: For many companies, outsourcing is no easy decision. How does your company deal with that?
Riemer: Above all, our customers must be able to trust us. So, it’s important for us as a service provider to demonstrate our expertise and competence as soon as the first enquiry is made. Our offer begins with consultancy. We arrange a personal meeting to explain the most efficient ways of integrating our services into the customer’s production process. We co-ordinate activities regularly, even at the planning stage, which creates the basis for a good and lasting business relationship.
NBR: Who can benefit most from contract manufacturing?
Riemer: First of all, outsourcing is an interesting option for small firms that plan to expand but do not want to make additional investments. After all, owning plant binds up capital, space and personnel. Large companies, by contrast, often want to restructure their production and outsource just part of it.
Some of our customers only make temporary use of our production capacities, such as when they have to make up for machine downtime. However, most of them outsource production for the long-term because some products, or even the production process as a whole, do not fit into their core business operations. Focusing on key competences has made many of our customers highly successful in the market, and that, in turn, contributes to SternMaid’s dynamic growth.
NBR: How can you help your customers?
Riemer: In many cases, the amount of certain raw materials ordered by a small company are not large enough for the supplier to offer the best terms. In that case, we can procure the goods, or we can provide them ourselves from some 800 raw materials in our own range.
That is where our large warehouse capacity comes in. We have the necessary space, so we can respond very flexibly to customer wishes. It quite often happens that containers from our customers arrive at our factory although their own customer, who is to process the goods further, has not yet called for them. That is no problem to us; we just make sure they are stored properly in the meantime.
NBR: How is SternMaid set up to meet future requirements?
Riemer: We are investing in the latest technologies and continuously enlarging our production and filling capacities. Since February 2017, for example, we have had a filling line that can handle ready made three- or four-edge seal bags or Doypack bags. Last year, we invested in a PET tub packaging line. In September 2016, construction work started on a second production facility in Wittenburg to deal with the continuously increasing use of our capacities.
In the first phase of construction, a complex with an area of 5000 m² will be built opposite Plant 1. As far as possible, the two plants will work independently of each other.
Plant 1 will focus on products intended for further industrial processing, whereas Plant 2 will manufacture retail items such as food supplements and products for athletes. Separating the two types of production will ease the logistic situation on the site, which has become difficult because of the increasing volume of goods handled.
