Increasing the Bottom Line
Does your company only offer your adhesive or specialty chemical products in bulk containers? Do you rely on selling more poundage year after year to increase your profits? Are you seeing shortages and higher pricing for your raw materials? Are you looking at a significant capital investment to increase your capacity to produce more pounds? Are you looking for a way to differentiate your product offering from that of your competitors? If your answer to any or all of these questions is yes, then you may want to look at offering your products in smaller, more customer convenient packaging.
Selling your adhesive in smaller convenience packaging can greatly increase your profit per pound and eliminate the need to continually increase your poundage production and sales. Table 1 illustrates how an adhesive manufacturer supplying a 1:1 ratio epoxy system in 5-gal pails (100 lb net weight per kit) can increase its sales and profitability by providing its product in smaller packages. Selling your product in even smaller packages (e.g., 3-30 cc premixed and frozen syringes, or 3-30 g two-component pouches) would further increase your profits.
The increased profit holds true for one-component packaging as well, though less dramatically. The smaller the package, the greater the improvement in sales, profit per pound and total bottom line profit. However, this scenario does not fully account for the higher margins that can be realized by supplying differentiated convenience packaging.
Getting StartedIt is possible to start enjoying higher profits with little or no financial risk through the use of a qualified contract packager. You must choose a packaging partner that is willing to work with you through a sequence of start-up steps. The first step is for the contract packager to provide samples of various packages for evaluation in order to determine the best package options. Intermediate quantities of the new package will then need to be provided for market introduction or launch. Finally, the contract packager will need to be able to quickly deliver larger volumes as the new package gains market acceptance.
You could decide to offer convenience packaging on an individual, case-by-case basis, or you could add the package as a standard product offering. In either case, using a contract packager eliminates your investment in packaging equipment, as well as the need for packaging materials. In addition, little or no investment in finished goods inventory is required.
Taking advantage of new opportunities with a quick production turnaround is vital. A contract packager should be able to provide you and your sales force with small-run quantities (for customer testing) on demand. The contract packager should also be able to respond quickly with quotes and samples for new opportunities, and offer short turnaround times when the custom packages are ordered. Packaging to order reduces shelf life risks and inventory costs, which are common in small-run situations.
Before adding new convenience packages to your line, a market analysis or customer survey can be used to determine what packages your customers would like. Convenience packaging can provide customers with significant cost reductions through processing savings and/or reductions in waste by sizing packages to match their usage patterns at an assembly station. Customers with small usage patterns on one or many workstations profit by using adhesives packaged in containers that are scaled to their operations.
You may have customers that are buying from you in bulk and “down-packing” the product into convenience packaging. In those cases, the value-add that you can provide for your customers through pre-packaged systems is significant. Down-packing from bulk to convenience packaging requires specialized equipment and techniques that are typically outside the core competencies of manufacturers using adhesive products.
Contract Packager QualificationsProviding adhesives and other specialty chemicals in convenience packaging can entail risks, particularly at the beginning. Will the product have the same shelf life as its original bulk counterpart? Will customer complaints increase due to packaging and dispensing issues? These risks can be minimized by partnering with a contract packager that has experience and expertise with your product chemistries in the same (or similar) convenience packages. The contract packager can assist with accelerated shelf life studies and help avoid the potential pitfalls surrounding a new package. In addition, the contract packager can help you choose the right package for an application and provide testing to ensure that the product dispenses properly to meet your customers’ needs.
The contract packager must also have a robust quality system, with ISO 9001:2008 certification as a minimum requirement. This ensures that the packaging specifications you jointly develop are followed for each and every package, and your customers can rely on consistent quality. A thorough on-site audit of your prospective contract packager (with a three-batch qualification process) is recommended for any potential contract packager.
Lead times and freight costs should also be considered when selecting a contract packager. Variables could include lead times for supplied material to the contract packager, as well as the geographic location of the contract packager relative to your customers and sales channel (especially if drop shipments are contemplated).
It is important that the contract packager has technical experience and longevity in the marketplace; look for positive indicators such as solid growth and financial strength. In addition, they need to be current on regulatory compliance and have the ability to provide all of the required documentation and certifications. The contract packager should have the technical expertise needed to provide product support, with a staff that includes engineers and chemists along with testing lab capabilities. Finally, the packaging partner must provide top-notch sales support and customer service to help meet delivery requirements.
Profit BoostSelling your adhesives or other specialty chemicals in smaller convenience packaging can be an excellent way to improve your top and bottom lines with little to no risk or investment. You can increase profits by adding customer value through packaging without capital outlays and resource allocation to a packaging operation. As your packaging needs grow, choosing the right contract packager is key to a quick and successful product launch, as well as an ongoing, on-time supply of quality packages.
For more information, contact KitPackers at N117 W18711 Fulton Dr., Germantown, WI 53022; phone (866) 322-8322; fax (262) 253-5919; or visit www.kitpackers.com.