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Reevaluating contract manufacturing partnerships

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Brand owners should periodically meet with contract manufacturing partners to review product, process and quality expectations, as well as the manufacturing contract.

The close or start of a year is a great reminder to take a step back with one’s contract manufacturer and review the past year’s events while preparing for the year to come. The Natural Products Insider articles I wrote in 2020 provided a good idea of what to look for, but a review follows.

As 2020 was one of the most challenging years ever faced by the supplement industry—and all industries, for that matter—some of the steps and procedures that would normally occur with a contract manufacturer just were not possible. That’s another reason it is important to conduct year-end reviews and set the stage for the next chapter. The pandemic took its toll on many brand owner/contract manufacturer relationships, from production slowdowns to lost manpower.

I, for one, experienced a monthlong battle with COVID, and the time I had to take just to get back on my feet—let alone back to work—was something I would not wish upon my worst enemies. The precautions that contract manufacturers either had to or willingly imposed probably saved brand owners from what could have been an even longer slowdown, and maybe even missed shipments until the economy gets back up and running at full speed.

In short, 2020 likely challenged many contract manufacturing relationships. Now is a good time to take out last year’s documentation and set up a review with them. The following recommendations can inform how to set up that review, what each party should bring to the table, and what to expect 2021 to look like.

The annual product review

The annual product review is simply a way for both partners to take a look at the past year’s production and how it turned out against plan. Three parts are involved: product review, process review and quality review.

Product review – Ideally what a brand owner wants to see here is a sample of every batch made during the production year (calendar or fiscal), lined up side by side in chronological order, to be able to see, smell and if applicable, taste the product to see if any spec drift has occurred.

Over time, a process will tend to migrate to its easiest running state, whether intentionally or not. This could lead to small, subtle changes in the product over the course of the year that can only be seen when various samples are side by side. For example, if the product is a hot chocolate drink, the side-by-side samples might look like this at the product review:

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If the far-left product was delivered in January, then the far-right product in December, are those considered the same? Maybe, but side by side, one would be hard-pressed to say they were the same. The product review will make these variations stand out, giving the brand owner and the contract manufacturer a chance to discuss what happened, and whether it is a big enough difference to warrant further analysis.

Process review – Even though the contract manufacturer is making the product, the brand owner is ultimately responsible for what goes on the store shelf. Reviewing the master manufacturing record (MMR) and batch production records (BPRs) from the past year’s production will provide a good feel for the control both the quality department and the operators had over the production process.

The records will also reveal if a raw material supplier was switched mid-year for whatever reason, and whether the brand owner was notified and approved of that supplier prior to manufacture. The process review also provides an opportunity to walk the process floor, either in person or virtually, to ensure what was seen during production startup is the same as what is seen now.

Quality review – This section deals with the quality agreement the brand owner signed with the contract manufacturer at the outset of production. It is an opportunity to ensure all the food safety certifications are up to date, inspections have been documented, and policies and procedures are in place to ensure the product is produced in a clean, safe environment.

For example, is the correct personal protective equipment (PPE) being worn and enforced? If masks and social distancing are mandated, are the floors clearly marked with everyone following accordingly? For this section, the process walk-through can be supplemented with a review of all sections of the quality agreement—checking to make sure nothing shifted over the course of the year, or if anything needs to be adjusted to take into account unplanned events that had happened (e.g., the pandemic).

Additional considerations

With all of these review sections, the focus of the brand owner is not to try and find mistakes or gaps, but to collaborate with the contract manufacturer to get the best product possible, given the capabilities of the manufacturing process.

The final aspect of the annual review is the one section everyone does—sometimes avoiding the product review entirely—the manufacturing contract. I purposely kept this for the end of the article simply because the product review sections are so important; if one goes straight to the contract, a valuable chance may be missed to partner with the contract manufacturer for a deeper, more trusting relationship. Reviewing the manufacturing contract is a simple exercise in going over what was agreed upon versus what was delivered and adjusting for the coming year.

Considerations include:

  • Were orders submitted and completed as per the agreement?
  • Is a pricing discussion warranted?
  • Is it time to ramp up to higher order quantities?
  • Is the brand owner looking to develop new products and/or line extensions?
  • Are delivery commitments being met?
  • Is the contract manufacturer looking to bring in new suppliers in the coming year?

All the logistical questions that define the business side of the relationship are addressed here. I highly recommend leaving this as the last part of the annual review. Once both parties have completed the product, process and quality review, any discussions on contracts can then be made with full knowledge of the previous year’s accomplishments, challenges and opportunities.

One word of caution: If, after going through the annual product review, either party feels the relationship is not going in the right direction, negotiating some form of opt-out might be the last step in the review. For this to happen, a brand owner will need to have vetted an alternate supplier to move to. While neither party wants to see that happen, having a qualified backup will give the brand owner better options when sitting down for the manufacturing contract review.

In its most basic form, the brand owner/contract manufacturer relationship should be a mutually beneficial partnership. These annual reviews are recommended not as a means to point out what’s wrong, but rather to work together to find solutions. The brand owner should remember it chose the contract manufacturer based on a thorough vetting process, and the contract manufacturer agreed to work with the brand owner based on a vetting process of its own. Trusting each other to review the previous year’s production with an eye on continuous improvement will help both parties develop a deeper, more trusting relationship that will provide years of opportunities for both.

Kurt Schneider is the president of Tech Bridge West and has worked in the consumer goods industry since 1986, including in product/process development, quality/regulatory and manufacturing/operations.

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Producing quality products with your contract manufacturer, 100% of the time

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Contract manufacturing: Using positive communication to vet a partner

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