Contract Manufacturing: Maintaining a Competitive Edge
Contract manufacturers in the dietary supplement industry must work diligently to maintain a competitive edge. There are many factors to consider, including equipment, keeping on top of trends and technology, producing high quality products and establishing trust between the company and the client. Contract manufacturers must also consider the integrity of production lines, what they can do to assist buyers in getting up and running, and how to bring products from the concept stage to the final, market-ready form.
Tablets, powders, gelcaps...every contract manufacturer has its own specialty or focus, but a general theme exists within the industry: equipment must be maintained and updated to provide the client with the best, most innovative production facility. Mark LeDoux, founder, president and chief executive officer of Natural Alternatives International (NAI), said that ultimately, customers are concerned about the integrity of the product--from visual appearance to the content. "To that end," said LeDoux, "we invested in two high-tech HPLC apparatus with advanced sensing capacity for use in our labs. That's in addition to several HPLCs that were already in-house as well as atomic absorption and other equipment. That helps validate content uniformity and stability."
Validating content uniformity and stability is just one aspect of maintaining excellent equipment. Developing proprietary processes is another. It's key to being known for new and innovative equipment, and also for establishing brand identification through the printing of the product, according to John Barbee, senior vice president of Nutritional Sales and Marketing at Banner Pharmacaps. Barbee said Banner has developed a proprietary process called the soflet dosage form that allows for gel coating of both tablet and caplet cores in single and two-tone color combinations.
A contract manufacturer must also have adequate packaging capabilities. Don McDaniel, president of Valentine Enterprises Inc. (VEI), said VEI recently added a state of the art fluid bed agglomeration facility to make dietary supplement powder agglomerates. The equipment significantly increases the company's production capacity. By adding more capacity, a company can successfully attract larger customers.
Part of a contract manufacturer's commitment to the customer includes helping him create line extensions. It's very common for a customer to come to a contract manufacturer with nothing more than a concept; the contract manufacturer must learn how to take concepts to the final stage--a completed product.
It is up to the manufacturer to provide the customer with ideas and suggestions based on current market knowledge and an understanding of his own capacity and the customer's needs. "The manufacturer should be able to supply market trends, technical product data, lead times, production minimums and innovative new products," said Barbee.
Sometimes, said McDaniel, line extensions can be as simple as new skus. "[They can stem from] a container size change or variations of a successful product," McDaniel said. "For example, we package pure creatine powder, but we also developed creatine plus, creatine drinks and other variations that are added to the line."
When a customer comes to the manufacturer with a concept, whether it is a line extension or a completely new product, the manufacturer has to overlay it with a variety of disciplines, according to LeDoux. Factors to consider include what the nature of the business is, what the demographics of that business are, and what cost profiles the business caters to. "For example," LeDoux said, "if somebody is servicing a group of people on fixed income and they have nominal free cash capability, they're going to have to get products that may be less avant garde. Contrast that with somebody very sophisticated that understands that what they're looking for is results and they're willing to pay for those."
According to LeDoux, it depends on the ability of the customer to articulate who his customer is and what he understands about his customer. In addition, noted LeDoux, "We would like to understand the customer; we'd like to visit them." It's important for marketing and development people to tour prospective clients' places of business in order to understand the target market. "Once we know what the target market is," he said, "we can then deploy the scientific evaluation and make the raw material selections that are necessary to bring products to the market that meet or exceed everyone's expectations."
According to McDaniel, "A buyer should look at the current products and potential future needs, not just the short term. They should be with a company that is interested in and capable of a long-term relationship that provides formulary capability, quick order processing, quality control and flexibility."
Predictions for the Future
Each contract manufacturer may make different predictions for the future, but the underlying theme focuses on a commitment to quality. Maintaining a quality facility and producing a quality product can be the manufacturer's most recognized asset, but maintaining internal quality is just as important. "Responsive account management and customer service are vital in order to keep customers updated on marketing trends, raw materials, changing technologies and regulatory issues," said Barbee.
Keeping on top of regulations is a key part of maintaining a high quality facility. "It's not good enough to have a product at label claim the day you produce it," said LeDoux. "The law has changed over the last year to require that if your product, for example, has a two-year dating, you're not permitted to have less than 100 percent of the label claim on any component on that product at the end of that two-year period of time." According to LeDoux, manufacturers must know what they're doing--from formulation and manufacturing to testing. He predicts that an era of mass customization is on the horizon. Customers will want products specifically formulated for particular clients and personalized for target audiences.
In McDaniel's opinion, the future will be marked by a "combination of consistent, dependable service, updated equipment and the flexibility to change with the customer's needs." As long as a contract manufacturer has the ability to present new and innovative products and ideas to customers, said Barbee, it will be able to maintain that elusive competitive edge.