Getting shelf space at a major retailer is a milestone moment for any consumer product company. A purchase order from a retailer like Walmart, Costco, or Home Depot can give you the revenue and cash flow you need to scale quickly. It can also get your product in front of millions of consumers, potentially opening the door to new distribution opportunities.
A relationship with a major retailer can also bring headaches, though. When you supply to a Walmart or Costco, it’s usually on their terms. They could make specific demands on everything from pricing to sustainability to package design and more.
One of the biggest challenges retail suppliers face is meeting the retailer’s delivery demands.
Many large-scale retailers prefer to hold as little inventory as possible. That means they don’t order until they need the inventory in stock, sometimes giving the supplier a week or less to deliver. It’s not unusual for a large retailer to not only place an order with a tight deadline, but also to make specific requests for different types of packaging shapes and designs.
Of course, while you may have every desire to meet the retailer’s demands, these short timelines put pressure on your process. You might have to order excess inventory from your overseas manufacturer and warehouse it so you can meet retailers’ demands. Or you may need to delay other orders so you can get your major retailer’s order out the door on schedule.
In the worst case, you could miss the retailer’s deadline. That could trigger refunds and discounts that suppress your margins and threaten your cash flow.
The good news is you have options available. One option to consider is outsourced contract packaging. It’s a strategy that many consumer companies use to meet retailer demands in a way that doesn’t threaten cash flow, margins, or processes. If you’re struggling with deadlines from your major retailers, you may want to explore an outsourced contract packaging service.
What is outsourced contract packaging
As the name suggests, outsourced contract packaging involves using an outside partner to fulfill your packaging needs. You work with a packaging company that is able to quickly produce your packaging as needed. The packaging company also warehouses your products in their facility.
When a retailer places an order with a tight deadline, the company pulls the items from the warehouse, packs them, and ships directly to the retailer locations. The packager may handle logistics and management of your shipments, and they may also provide detailed tracking and status information to both you and your retailer.
What are the benefits of outsourced contract packaging?
Not sure how outsourced contract packaging can benefit your business? Below are three of the biggest ways in which contract packaging can impact your retail distribution process:
Many consumer manufacturing companies struggle with tight retailer deadlines because the manufacturer simply doesn’t have the flexibility to fulfill large orders on such short notice. The actual manufacturing may happen in China, meaning it may take weeks before new product actually reaches domestic facilities. The company can’t simply produce new products on the fly to meet Walmart’s demands.
The alternative is to store excess inventory in your facility and keep it on hand for when your retailer does place an order. Of course, that comes with its own challenges. It may force you to use a facility larger than you actually need. You have capital tied up in the warehouse, limiting your ability to grow.
Contract packaging gives you the flexibility you need to meet your retailers’ needs. The inventory is stored at the packager’s facility, allowing you to use your facility space for more important needs.
The packager may also be able to alter your packaging to the retailer’s specifications. If Walmart gives you one week to fulfill an order with unique packaging for their in-store promotions, the packager can simply make the design change, pack the products, and ship them to the retailer locations.
Your contract packager should use technology that gives you and your retailer full transparency into the order status. For example, at Deufol, we use barcode scanning technology to track products and packages as they move through our process. That information is synced to your software so you can view real-time updates on the order’s status.
Obviously, that level of transparency can help you strengthen your relationship with your retailers. You can give them precise delivery ETAs and keep them informed about the order’s progress. That could help you establish yourself as a reliable supplier, which may help you win more shelf space.
Perhaps the biggest benefit of outsourced contract packaging is that it takes the fulfillment and distribution processes off your plate, allowing you and your team to focus on more important priorities.
The inventory isn’t stored or packed in your facility so you don’t have to allocate employees to those functions. The packager handles logistics, freeing up your need to manage that process. Instead, you and your team can focus your energy on producing high-quality products and winning more business.
An In-House Alternative
Perhaps you see the appeal of outsourced packaging, but still want the process to take place in your facility. There’s a hybrid option that could be a good strategy for you. Think of it as “in-house outsourcing.”
Under an in-house outsourcing arrangement, the packaging company still handles fulfillment, packaging, logistics, and all other related functions. However, the entire process occurs in your building. The packaging partner moves their staff, equipment, and other resources into your space and runs their operation in conjunction with your team. It’s an effective alternative if you want to outsource the work, but keep everything under your room.
A relationship with a major retailer can revolutionize your business. However, it can also bring some logistical and operational headaches if you’re not prepared. Consult with contract packaging companies to learn how their outsourced services can help you meet your retailer’s demands and win more shelf space.