There’s a very good reason why China has become the world’s largest manufacturing country. China is able to offer inexpensive yet efficient labor, along with a cheap exchange rate. For consumer packaged goods (CPG) companies, that’s a tempting combination.
However, a China-based production and packaging process brings its own set of costs and challenges. And those issues may actually underserve your customers. In fact, if you distribute through Walmart, Costco, Target, or any of the other big box retailers, you could face some serious issues if you rely solely on a China-based production process.
A more effective method may be to blend overseas production with domestic packaging and distribution.
Increasingly, big box retailers are using their buying power as leverage to demand faster delivery times, custom packaging, and quick responsiveness to regional or temporary promotions. When your product is coming from China, you may not have the flexibility needed to meet those demands.
For instance, assume that you produce in China to take advantage of low manufacturing prices. However, to realize those prices, you have to order in large quantities and provide significant lead time. Now assume that Walmart, your largest retail partner, has made a last-minute alteration to their holiday promotions. They want changes to your packaging.
You have a huge order that just left the Chinese facility. Unfortunately, it’s in the old packaging that no longer meets Walmart’s demands. That inventory may be obsolete. Even worse, it’s going to be nearly impossible for you to turn around a new order in time to meet the retailer’s deadline.
The risk? Walmart could refuse the delivery of the products that are in-transit and you may have a hefty chargeback on your hands. Even worse, you might lose your coveted spot as a preferred vendor.
These are real issues that CPG companies face when their entire production and packaging process is based overseas. Fortunately, there’s an alternative solution that allows a CPG company to take advantage of lower overseas production prices, but also retain the flexibility to meet retailer demand.
A more effective method may be to blend overseas production with domestic packaging and distribution. For example, at Deufol, we work with many CPG companies who base their production in China, India, South Korea, and other Asian countries. We then accept those bulk product orders from overseas and store the inventory onsite in our warehouse.
When a retailer places an order, we’re able to quickly produce the needed packaging, no matter how custom it may be. We then package the products and get the order out the door and in the retailer’s receiving bay.
The benefits to this model are obvious. The production is still based overseas, allowing the CPG company to take advantage of low labor costs and exchange rates. The inventory is kept in our facility, so the CPG company doesn’t have to take on any additional warehouse space.
And when the order comes in, we’re able to produce the packaging on the spot. Walmart wants different colors for back to school season? Perfect. We can do that. Home Depot wants your package to be transparent and show off more of the product? Sounds great. Target wants to take your product in smaller batches? No problem.
That’s the flexibility that comes with a blended model of overseas production with domestic packaging and distribution. You’re able to meet retailer demands, which helps you stay on their preferred vendor list and acquire additional shelf space.
You can take advantage of lower pricing overseas and retain the flexibility of domestic packaging and distribution. You simply need the right packaging partner to help you do it. To learn more about how we can help you achieve a blended distribution model, schedule a conversation with one of our consumer packaging consultants.