Understanding Contract Manufacturing as a Private Label Brand

If you are in the first steps of creating a private label brand, you will likely already have considered the critical concepts of your business, such as your target audience, industry, and company name. But, how will this be possible if you don't yet know how to manufacture your products?

As a private label, you will be responsible for almost all of your business's elements. So, choosing a manufacturer that fits in well with your core values and delivers on their claims is paramount. In addition, for private labels, the manufacturing process is different from how a big brand would carry out their production and usually will be done through contract manufacturing.

In this article, we will take you through the ins and outs of contract manufacturing to guarantee that you have all the information you need to thoroughly understand this manufacturing process and make the best decisions for you and your private label. 

What is a contract manufacturer? 

When operating as a private label, you must find a contract manufacturer to make, package and produce your product ideas. Put simply, this is what happens with contract manufacturing, and this process will allow you to select a manufacturing company to create your product. 

Excellent and professional contract manufacturers will have an expert team available to advise you on the best decisions to make regarding your product. Still, you will have the final say, giving you direct control of your product line and each step involved in its creation. 

Advantages of choosing contract manufacturing services

Choosing this form of manufacturing inevitably comes with pros and cons, but the advantages definitely outweigh the disadvantages. Here are some pros to keep in mind when considering choosing contract manufacturing; 

• You will have more control over your end product. A great thing about this form of manufacturing is that you will be able to oversee the entire process and work with a qualified team to see your own products come to life in the way you want them to. 
• You can negotiate lower production costs when choosing the manufacturer you wish to do your outsourcing with. This will then allow you to generate larger profit margins, creating more sales and customers.
• You can develop your relationship with the manufacturer. It is important to remember that the contract manufacturers you work with will be experts in their industries and will be able to advise you and take you in the right way. Creating this relationship between the business and contract manufacturer will ensure transparency and the best results, product-wise and financially. 
• Finally, you will fully control your packaging, marketing, and brand image. The only part of this process that the contract manufacturing company will be involved in is the production. The rest is up to you, and you will be responsible for creating marketing that reflects the high-quality product made by the manufacturing facility. 

Are there disadvantages? 

Although we stated that there are more benefits to contract manufacturing than negatives, to keep the argument fair and ensure you have a well-rounded view of this process, we will take you through the disadvantages and struggles you may face; 

• As the product production will not be carried out by an in house source, you will not have control over the length of the process. This means that contract manufacturing companies work on their own rota, and your business will be allocated a time within their schedule. Therefore, if they are a busy contract manufacturer, your initial product line may take longer to be produced. 
• Another risk of outsourcing is that it becomes easier for others to steal your ideas. In many industries, agreements will be signed between the manufacturer and the retailer, but if a company isn't educated on Intellectual Property, they may not know how to establish a robust contract basis or understand the importance of contractual agreements. 
• Communication can also be a challenging obstacle to overcome, as you will likely want your product made as soon as possible, but the manufacturer will be on a different timeline with many clients to accommodate. 

How to spot good contract manufacturers 

While the above disadvantages may sound alarming to you, there is an easy resolution which you can put in place; find a good contract manufacturer! As part of this process, you will act as the hiring company and choose a manufacturer that has the ability to deliver what you need.

For example, if you want to sell chips, finding a contract manufacturer that puts food safety, hygiene, and ingredients as their top priority is advisable. Looking out for reviews and the quality of ingredients and equipment that will usually be listed on a contract manufacturer's website will help you to make a well-educated decision. 

As part of the business hiring firm process, you should also look out for the years of experience your contractor has. The top manufacturers will have years of experience in their field, with an extensive range of knowledge that gives you peace of mind that they really do know what they are talking about. 

Another great sign of how experienced a particular contract manufacturing service is by seeing how easy it is to get in contact with the experts on their team. You should be able to get in touch quickly and sense that they have a great depth of knowledge, offering you consultations and even samples to see how good their team is. 

Final thoughts

It is clear that contract manufacturing is a generally great route to go down if you are a private label looking to create high-quality products at a lower cost. But, finding a good contract manufacturer that delivers on their claims is important and will likely take you some time. 

So, we recommend educating yourself on the best contractors in Australia that specialise in your chosen industry. Then, when you have shortlisted a few dependable choices, get in touch and see which contractor understands your mission the best while offering you great deals and high-quality production. 

Frequently Asked Questions 

What is private label manufacturing?

Private label products are produced by third-party manufacturers for a low cost but sold under the private label brand's name. The private label is the retailer in this situation and has control over all of the branding, packaging and marketing elements of their brand, while the manufacturer supplies their product idea. 

What is a private label contract?

A private label contract is used to lay out terms and conditions between a manufacturer and the retailer that will be selling the product. This is a requirement in the food industry and will detail the conditions of one party making a food product and the other party selling it. 

What is an example of a private label brand?

Many brands are private labels that employ a contract manufacturing service to make their product with unbranded materials, to then be sold under their private label retailer name. One of the most famous examples of a private label is IKEA.