a factory worker

Why Do Companies Use Copackers Instead of Building Their Own Factory?

Every business owner wants to figure out a way to maximize their level of production by optimizing their operations. This is due to the increase in the profitability of the venture when there are fewer bottlenecks during the processes involved. For those who are involved in producing goods and are starting, it can be challenging to gather enough capital to build their own company.   So, these entrepreneurs opt for a copacker as a contractor that will package their products for them. The word “copacker” is short for “contract packager”, indicating the limited yet profitable service they can provide.

Some copackers offer additional services for a more personalized or customized take on their client’s brands by using equipment such as high-quality stainless steel laser engraving machines. By offering a more personalized approach to the branding requirements of their customers, copackers can develop a more loyal clientele and potentially repeat customers. They can also encourage a level of dependency on their services because of the specialized expertise they can offer.

Beyond these reasons, there are several cases why entrepreneurs prefer copackers over building their own factories:

The Cost of Land and Construction

Purchasing land and funding the construction of a factory through labor and materials can be a costly endeavor. A lot of entrepreneurs will choose copackers over going through the trouble of filing permits, getting government approval, and hiring architects to build their own factories. The cost of land and constructing a building from scratch will create unnecessary stress for the new business owners.

A copacker will offer the packaging needs of the start-up company, while the production of the products themselves can also be handled by a manufacturer. This reduces the need for the entrepreneur to worry about developing an efficient process layout early on in the business, allowing them to focus more on the sales and marketing aspects of the product instead. After all, the initial goal of a company should be to drive demand and have the capabilities to meet those demands.

If a business owner starts to produce more than they can sell, they risk being unable to recover the costs that were used to fund the non-existent purchase orders. On the other hand, using a manufacturer and a copacker will minimize the risk and the investments on the part of the entrepreneur, providing more freedom regarding the level of involvement they are willing to have with production.

This is a useful service, especially for those business owners who are not technologically inclined or have no current interest in purchasing their own land and constructing their own factory. Besides, organizing and managing an office from an empty room is a far cry from building a fully-functional production plant.

Expensive Equipment Use For a Fraction of the Cost

a bottling factory

The equipment involved in the manufacturing and the packaging of products can have various specifications and working conditions. These can be worth anything from a few hundred dollars to hundreds of thousands of dollars because of the usual inability to produce specific appliances to economies of scale. When the apparatus is too expensive, it fiscal sense for an entrepreneur to contact a manufacturer and copacker rather than building their own factory from scratch.

Business owners may not always have access to an unlimited source of capital or financing, making hires or leases a more attractive way of getting their production done without struggling to get the money they need. There are also instances where some entrepreneurs have trouble acquiring loans or financing opportunities for equipment. In contrast, hiring a copacker or manufacturer can provide the equipment they need for a fraction of the cost that purchasing an appliance will entail.

Shared Expertise For a Better Output

Copackers and manufacturers are likely to have experience in their respective industries from dealing with other businesses over time. This means that those entrepreneurs who hire copackers or manufacturers can gain the seasoned expertise of professionals who can offer advice or improvements upon the product design, durability, and cost of production. Furthermore, the determination of the process layout is often iterative, and being exposed to the existing floor plans of their contractors can give entrepreneurs ideas on how they can organize their own factories someday.

Aside from the financial limitations of start-ups, the access to a growing body of knowledge accumulated by copackers and manufacturers over the years is an added benefit. It could mean that business owners who become clients of these service providers stand on top of the shoulders of the enterprise giants that came before them.

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About the Author

Karl Steinfield

As a seasoned entrepreneur and digital strategist with years of experience, Karl Steinfield brings a wealth of expertise to the table. Having built and grown successful online businesses, they understand the intricacies of the ever-evolving digital landscape. Their passion for sharing knowledge and helping others thrive in the online business realm is unmatched. With their insightful articles and practical advice, Karl aims to equip aspiring entrepreneurs with the essential skills, mindset, and strategies needed to navigate the challenges and achieve remarkable success. Join Karl on this exciting journey of entrepreneurial discovery and transformation.
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