Contract Manufacturing: Maintaining a Competitive Edge

Contract manufacturers in the dietary supplement industry must work diligently tomaintain a competitive edge. There are many factors to consider, including equipment,keeping on top of trends and technology, producing high quality products and establishingtrust between the company and the client. Contract manufacturers must also consider theintegrity of production lines, what they can do to assist buyers in getting up andrunning, and how to bring products from the concept stage to the final, market-ready form.

Equipment-Related Issues

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 updatedto 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 theproduct--from visual appearance to the content. "To that end," said LeDoux,"we invested in two high-tech HPLC apparatus with advanced sensing capacity for usein our labs. That's in addition to several HPLCs that were already in-house as well asatomic absorption and other equipment. That helps validate content uniformity andstability."

Validating content uniformity and stability is just one aspect of maintaining excellentequipment. Developing proprietary processes is another. It's key to being known for newand innovative equipment, and also for establishing brand identification through theprinting of the product, according to John Barbee, senior vice president of NutritionalSales and Marketing at Banner Pharmacaps. Barbee said Banner has developed a proprietaryprocess called the soflet™ dosage form that allows for gel coating of both tablet andcaplet 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 artfluid bed agglomeration facility to make dietary supplement powder agglomerates. Theequipment significantly increases the company's production capacity. By adding morecapacity, a company can successfully attract larger customers.

Line Extensions

Part of a contract manufacturer's commitment to the customer includes helping himcreate line extensions. It's very common for a customer to come to a contract manufacturerwith nothing more than a concept; the contract manufacturer must learn how to takeconcepts to the final stage--a completed product.

It is up to the manufacturer to provide the customer with ideas and suggestions basedon current market knowledge and an understanding of his own capacity and the customer'sneeds. "The manufacturer should be able to supply market trends, technical productdata, lead times, production minimums and innovative new products," said Barbee.

Sometimes, said McDaniel, line extensions can be as simple as new skus. "[They canstem from] a container size change or variations of a successful product," McDanielsaid. "For example, we package pure creatine powder, but we also developed creatineplus, 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 lineextension or a completely new product, the manufacturer has to overlay it with a varietyof disciplines, according to LeDoux. Factors to consider include what the nature of thebusiness is, what the demographics of that business are, and what cost profiles thebusiness caters to. "For example," LeDoux said, "if somebody is servicing agroup of people on fixed income and they have nominal free cash capability, they're goingto have to get products that may be less avant garde. Contrast that with somebody verysophisticated that understands that what they're looking for is results and they'rewilling to pay for those."

According to LeDoux, it depends on the ability of the customer to articulate who hiscustomer 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'simportant for marketing and development people to tour prospective clients' places ofbusiness in order to understand the target market. "Once we know what the targetmarket is," he said, "we can then deploy the scientific evaluation and make theraw material selections that are necessary to bring products to the market that meet orexceed everyone's expectations."

According to McDaniel, "A buyer should look at the current products and potentialfuture needs, not just the short term. They should be with a company that is interested inand capable of a long-term relationship that provides formulary capability, quick orderprocessing, quality control and flexibility."

Predictions for the Future

Each contract manufacturer may make different predictions for the future, but theunderlying theme focuses on a commitment to quality. Maintaining a quality facility andproducing a quality product can be the manufacturer's most recognized asset, butmaintaining internal quality is just as important. "Responsive account management andcustomer service are vital in order to keep customers updated on marketing trends, rawmaterials, 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 ofthe label claim on any component on that product at the end of that two-year period oftime." According to LeDoux, manufacturers must know what they're doing--fromformulation and manufacturing to testing. He predicts that an era of mass customization ison the horizon. Customers will want products specifically formulated for particularclients 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'sneeds." As long as a contract manufacturer has the ability to present new andinnovative products and ideas to customers, said Barbee, it will be able to maintain thatelusive competitive edge.