Managing Supply Chains and Improving Customer Loyalty: Contract Manufacturing in 2022
• What is your production capacity?
• What is your lead time/lead time?
• How do you ensure process and product quality?
• What is the cost?
The answers to these four major brand and business questions can determine an emerging partnership or a quick “click” on the other end of the phone.
As if the process didn’t already have enough moving parts, when supply chains become as strained as they have been, it can lead to problems with customers that weren’t originally anticipated. How these challenges are met as a team will mean everything when delivering a manufacturing project.
We are entering a period of time in the manufacturing industry where close collaboration with raw material vendors/vendors/brokers must be closer than some of your closest customer partnerships. This can make or break commands. An unreliable supplier can single-handedly keep your process running smoothly or damage it to the point of no return.
This article explains, from a manufacturer’s perspective, how we manage supply chains and work with customers in difficult circumstances.
The last two years, quite frankly, have been crazy. We’ve seen the costs of raw materials like creatine and whey protein hit an all-time high (due to shortages or other reasons). We have seen container ships stuck for weeks, extending delivery times marked “undetermined”.
We realized that in order for us to achieve our goals seamlessly with our customers, we needed to create stronger relationships with our material suppliers. We needed to know their operations up and down, stay in close daily communication, and make sure they provided tracking details and arrival times.
Without it, it doesn’t matter what our sales team would say to a customer, because the materials would arrive when they arrived. And that’s not an answer we’ll ever be able to provide to a customer.
Once we identified this pain point, we focused on refining our purchasing, R&D and supplier relations team. We learned to be a better maker because of that. We learned of areas for improvement. We have learned the type of people who are best suited for our operation. More importantly, we identified our weakest point and fixed it.
You must have trust with suppliers and a synergistic relationship. This involves setting clear ordering expectations early on based on what is realistically possible.
“Always go with a trusted raw material supplier who does their own shipping. Build that relationship and trust yourself to continue your business,” said Betka Kapusta, COO and co-founder of BL Bio laboratory.
It starts with shipping and ends with shipping. Shipping costs have increased significantly in recent years. These are charges that manufacturers should always keep in mind when purchasing materials domestically or internationally, as it can reduce margins. Working with a trusted raw material supplier that provides the proper material documentation (data sheet, certificate of authenticity, etc.), shipping and delivery is vital to success as a manufacturer.
Location is also a key factor in acquiring materials for orders. This has always been an important factor in the process. With shipping costs rising, suppliers who are closer to a manufacturer’s location to order supplies couldn’t be more important when it comes to watching margins. It used to not matter as much if it was domestic in the US, but now it’s starting to be a bigger factor as shipping costs eat into margins more and more.
For manufacturers to effectively manage their supply chains, it is necessary that steps are taken early to identify potential problems before they arise. This includes monitoring different aspects of the production process, such as quality control and testing of various materials used during production so that there is no chance that materials ordered and acquired for production runs are contaminated or compromised in any way.
While companies can spend considerable sums testing materials early on, there is often a much higher price to pay if defective products make it past the final stages of production. Updating orders halfway or more into production could hurt your partnership with your customer.
Testing is done by requesting material samples from suppliers to run R&D pilot batches/samples to validate formulations.
Mitigation of these persistent issues must be done transparently at all times. A long-standing business partnership is cultivated to provide truthful data on lead times, formulation updates and expected documents, while providing weekly updates on order progress.
Customer loyalty is also a team effort. The customer vis-à-vis the manufacturer must be just as invested in the realization of the project as the manufacturer. This may seem like an obvious statement, but in our experience it would surprise you how many customers create lags on purpose due to playing their build too quickly.
Companies can tell retailers or investors that production will be finished at some point and they must meet a strict deadline. As a manufacturer, it is very important to state that we will do our best to meet these dates as long as you provide us with prompt answers when we ask questions to approve items such as labels, packaging, etc. The best relationships are those where both parties are fully invested in completing the project for a specific time frame.
Customer loyalty relies entirely on your ability to communicate effectively with your business partner/customer. Take action, be honest and provide answers. Listening to what the customer expects from the start is a plan to exceed expectations.
Consumer loyalty can be achieved through transparency in action. It is essential to stick to a contract that sets out honest timelines and expectations. Everyone always wants faster. But we’ve realized that our best customers understand what can and can’t be done, and that’s why our relationships with them thrive. Unreasonable individuals simply cannot be reasoned with.
Sometimes even the biggest potential transaction may not be worth the stress if you know your customer is difficult and not loyal to you in the long term. We have found that we can do anything to make a customer happy, but for the next order they may go to another manufacturer who provides the product for $0.10 less. Identify these customers and remove them from your CRM; they are not worth the time. Customers tend to forget the number of moving parts involved when placing an order with a contractor. It is the job of the manufacturing plant sales/customer service team to politely remind them.
Find partners suited to your operation and its needs. Any manufacturer will tell you that this industry thrives on reorders from current customers. Finding the customers who will do this with you is the key to expansion and growth. Once you have a successful customer, be sure to devote a lot of attention to the culture of the orders they place with your company.
It is beneficial for manufacturers to understand their customer base as well as what drives companies to choose one product or service over another. Manufacturers who have strategic marketing in place to refine their approach and seek out good fit clients/projects are also an important factor.
Manufacturers taking on projects that involve capabilities they don’t have in-house may run into problems. On the other hand, manufacturers who know their specialty and focus on marketing these services will experience the most success.
For example, if a manufacturer can determine why consumers are attracted to certain brands over others, it can produce products of similar quality while increasing profits and supporting the growth of that market. Find what works and double/triple your efforts.
The supply chain paradigm has changed dramatically over the past few decades with the advent of new technologies that have enabled more efficient communications between partners within a company’s network. At one time, there was little sharing of information between suppliers and manufacturers, which led to increased costs and dysfunction associated with the transportation of goods.
This problem has been solved by the implementation of advanced technology as companies now have more accurate information about their suppliers’ needs, allowing them to better manage their inventory and the flow of goods within the supply chain. Manufacturers can also set up internal systems to check and track stock levels and have a direct feed with suppliers. This can help manage process flow.
Increased transparency between the parties involved is directly linked to improved customer satisfaction. This relates to how manufacturers are able to connect with customers on a more personal level and create lasting business partnerships. This allows customers to provide feedback on what they want in various products as well as recommend features that may have been overlooked.
Key takeaways from this article include:
• Strong links with qualified suppliers who ship their own materials are essential;
• Set clear expectations with your customers regarding delivery times;
• Manufacturing success relies on replenishments and long-term partnerships with customers;
• Be transparent in your actions internally and externally.
BL Bio Lab is a contract manufacturer of dietary supplements and skin care products in Clearwater, Florida. The company focuses on manufacturing capsules, tablets, powders, liquids, serums, creams and more. For more information and for information on custom formulations and pricing, visit www.blbiolab.com.