Season 1 Episode 8 –
30 years and still learning - Having spent most of my career post leaving the Royal Navy working in consumer goods, primarily in the perishable food sector. I find it fascinating that I still learn every day, sometimes it’s a reminder of what I have forgot but for the most part, I learn something new every day… Today’s episode is about Production Options.
What production options do I have?
There are 4 main ways you can produce your product, at least in the early days.
1 Invest in equipment and facilities to produce your product, from start to finish, with your own team.
2 Produce the bulk product and outsource the packing and finishing.
3 Outsource the bulk production and you pack it off and finish the product yourself.
4 Outsource the whole thing from start to finish.
Which is the best route to take?
There really isn’t a best route answer, it depends on too many factors, not least how much working capital you have for buying equipment, leasing or buying a facility.
What are the differences?
Here they are in simple terms:
Option 1 – many products, brands, companies have started by being made in a domestic kitchen, selling to friends and neighbors and have slowly moved to their garage, or outside building, using their profits to slowly build up to a facility and larger equipment as sales have grown, until you have a large enough business to expand that facility.
The standards have changed over the years and it’s not so easy to start that way anymore, growing from a kitchen production to a real facility. Therefore, unless you are lucky enough to have access to early stage investment, or you can find a shared production space this will not work. This option the most financially challenging way to start a food production business.
Option 2 – If you can locate a shared food production space, you could produce the bulk product to the standards and recipe of your choice, then send your WIP product out for packing to a local co-packer, they return your finished product to you or your chosen warehousing partner, warehousing and logistics will be covered in another episode.
Option 3 – Is a reverse of option 2, this is driven by your ability to find the right space to do which ever part of the process you can do yourself, for example on this one we will stick with cheese, some cheese brands, have the initial cheese made by someone else and at a very young age they take title to it and put it into their own affinage, French word for aging space/room, to mature the cheese to how they want it, maybe wrapped in some leaf or wash the rind with some beer and so on, then when full matured it gets packed off, branded and sold as something else. I won’t give an example, as I like the mysteries of the industry to stay that way unless the parties share it themselves. Usually less expensive than option 1 or 2.
Option 4 – The least expensive of all from an investment perspective, you basically specify what you need making, you can either source the ingredients or get the co-packer to, then you have 1 bill to pay and you own the product in your warehouse facility, therefore only needing working capital to handle the inventory position and pay for the finished product.
What controls do I have over outsourced services?
You have as much or as little control as you need or want. Personally, I would want as much control as possible to ensure the finished product is to the standard and quality my brand stood for. The best way to ensure you get what you want and need is to negotiate up front what you expect from your outsourced partner, they will expect this and if they are worth their value they will appreciate your passion, remember as mentioned previously don’t let your passion get in the way of doing the right thing.
Where should my production partners be located?
Where possible chose partners that are not far from all your facilities or each other. The cost of moving product around must be factored in, so the closer you are the less it’s going to cost and the easier it will be to find options for moving the product.
What if my product is made in another country?
All the above points apply wherever your production is in the world, however, the added need for internationally produced products is the facility they are made in needs to be registered with the FDA before you can import the bulk or finished product into the US.
International production sites need to be registered with the FDA, check out the FDA website here https://www.fda.gov/home
Now it’s all clear as mud, need more, please ask.
In our next episode, we will be talking about Market Evaluation, thanks for reading and continuing your journey from Creator to Consumer.
Interested in reading or finding out more about selling your passion or our Creator to Consumer series please visit our Chatter page at www.beachcitysales.com/blog and click on Creator to Consumer or our general site at www.beachcitysales.com, for more direct interaction please e mail us at info@beachcitysales.com
Remember, whatever you know “good luck keeping up”