Where do things get made?: In-House vs Co-Packing

 


All over the world, of course- in factories, in living rooms. Not in minds, though- things are tangible. In my opinion.


And it’s my blog!


Anyway- we could look at this from a myriad of angles, but here is one of many, near and dear to my heart: 


In house or with a co-packer.


Now, I hear you ask, what is she actually talking about? Doesn’t everything I can buy in a store come from a factory, specifically for that widget? 


Probably not. 


And there are many good reasons for that- let’s get into it.


Most items (especially smaller items) such as components of finished products, finished products (tools, clothing, shipping materials, electronics, food) are made by general manufacturers or ‘co-manufacturers’ (I call them co-packers. Many people do.). They offer services for manufacturing certain products, based on the equipment they have available, or, may invest in equipment for a client, if their contract is attractive enough to warrant the investment. 


Here’s an example- and it takes us into our alternative to working with co-packers, so this is an applicable transition in the blog post.


When I first started Zimt, fresh out of fancy business school, I had no concept of manufacturing. In my mind, if you wanted something made, make it yourself- exactly how you want it. 


And this is how I started Zimt, in my childhood kitchen. And then moved to a variety of commercial kitchens to produce for Zimt, as needed, as years went on. 


Then, volume got to a point where I had another option- I could meet a manufacturer’s minimums, without destroying the business’ cash flow. It requires a large up front investment in materials, because, they require certain volume to achieve economies of scale. Most ‘makers’ do not achieve any real economies of scale- we don’t have the equipment for that. 


Anyway- we had the volume (... almost…) and to be perfectly frank, finding commercial kitchen space in Vancouver or anywhere close by was a slight nightmare at the time- there were not commissaries to start you off, so I worked out of some creative places. So we weren’t about to grow into our own facility- doing so is also incredibly expensive, and hence, intimidating. You have to be a special kind of crazy to do something like that, especially without any investors. Who would do something that horrendously stupid. 


So, we got a co-packer. And- that was pretty great.  I basically didn’t have to lift a finger- other people were doing my heavy work, and I just had to pay them to do it- an agreed upon price. Money is a lot easier than manual labour- and I know that one can buy the other, but it just never seems like enough. (As in, the amount of work that goes into making something, and then selling it- the amount for which the widget is sold does not take the whole picture into account). Again, there is automation- but still, not everything. There is lifting. 

However- without going into too much detail- some of our stuff is way more labour intensive than the co-packer was willing to take on. So I did have to lift a finger. As did my staff. But not many fingers. 


This brings me to my next point- I think we have a bit of an unconventional relationship- it isn’t super business-y.  Never have- it is family run and a small operation, but has been around for a long time, so, the equipment is there. I prefer the more personal relationship, but, there were some challenges 


NDA- none. 


Route back to in-house. This first looked like renting a room in a warehouse to store our stuff/package our sealed bars in, as well as renting a table in a commissary several days a week (funny story- the HVAC did not work at all and basically all our stuff got ruined. It was so cold.).


Then, a big investment in equipment and a blessed spot in which to operate, that happened to look like a meth lab, totally off the grid. No settled lease. Were we going to get kicked out for whatever reason some day? I had no idea. 


Now- at our current spot. Clark Drive- very fancy and pretty. So much money went into that space- when we got it, it was a disgusting, fecally contaminated hole. I don’t own it at all, but I put a lot of money into it. There’s a lease- which is great in a lot of ways, but I wish the person I had hired to read through it had had a better idea. 21 pages or something like that. But the space is clean, somewhat large enough for our purposes, and I can bike there because I sure can’t afford work auto insurance these days- so perfect. A few things are not perfect but that may be for another time.


Here is why manufacturing in house is good- that’s right, it isn’t all horrible!


  • More control over process (usually, financial health dependent) 
    • Not only what do we want to make, but what are the finer details about how we want to make it? It isn’t just the bottom line- it is the triple bottom line. And when you make stuff in house, you have more say over that. 
  • More control over final product
    • This can be good and can be bad. Often, we have neither the expertise nor the equipment to create the optimal outcome, if we are not coming from a similar manufacturing background. 
  • Quicker pivots/turnaround
    • Everything is happening in real time! You are working on the floor. You don’t need to wait for someone’s schedule to free up so that you can work toward changes.
  • Control over production schedules
    • This is funny because, I kid you not, every single week- I make a production schedule. And every single week, it goes not according to plan. Somewhat, yes, but the amount of bizarre to mildly devastating occurrences at the factory each week really put a kink in our (production) plans!
  • Prioritizing our own process
    • Who else? Unless you take on co-packing yourself (and people have asked me. And I always say no. Absolutely not.), you are not vying for the next spot up in line. 
  • Better understanding of the product and raw materials
    • This is cool and is something I will delve into further, at some point in the future. But when you are in it, when you are doing the thing, you notice patterns, little intricate details. You just know more. 

But wait- there are actually a lot of cons to manufacturing in house. Here we go!

 

  • More equipment
    • Which is ridiculous. Why? It is highly unlikely every single plant manufacturing a similar product is operating at capacity. Why invest in that capital if it is already out there? (Well, see the ‘pros’ above). I mostly think of this from an environmental standpoint- I don’t want to add demand for more equipment if I don’t have to. But I sadly have to. 
  • Huge overhead
    • Rent- it is now yours. Entirely. Fixed. Look, things go wrong in manufacturing all the time, and when that happens, the lights have to stay on for longer to get it done. That’s variable. But adds to the cost of the good, nonetheless. So one bar of Chocolate Nib’d may cost 15% less to make than another bar of Chocolate Nib’d, depending upon efficiencies in manufacturing. 
  • Very variable costs
    • Like above. Nothing is stable- especially as has been my experience. Things go wrong all. the. time. If things go well, amazing- what a bonus that a giant disaster was not entirely inevitable. I know this isn’t the case for all manufacturing, but, some products are more fickle than others. 
  • WAY MORE RESPONSIBILITY
    • Oh yeah. Everything’s on you. Product recalls? Check. Unhappy customers? Check. Coordinating raw materials, labour, machine repairs, building upkeep, and probably many more things? Checks.
  • HR
    • I’m not going to lie, there was a good chunk of time there where I absolutely just wanted to replace everybody with robots. You may find that disgusting, but you know what? Are you me and were you there? No. So take a seat.
      People are sometimes great. Sometimes, they are not. Sometimes, great people have really bad days. That does not mean that things don’t have to get made. Personal days for others mean that, as a small manufacturer, it all especially lands on you to get the day done. So do all the everything and then make stuff, too.
      Finding smart, reliable, actually hard working people especially perhaps in this city is no small feat. It’s like everybody wants to be instafamous instead of lifting a bucket? Bottom line- if you have an ego, you are useless in this line of work.

Also bottom line: if you are great, you deserve more money for your work. It is hard work.



That’s my experience, in a nutshell. 


And also- I find brands who just have their product made and have zero idea about how much work goes into it to be really disingenuous. Seriously- if you are the CEO of Nike, get into your co-packers sweatshop, ask the five year old chained to the sewing machine to step aside, oh wait they can’t, and learn how to make a pair of airs. 


It isn’t yours until you have made it with your own hands.



Emma of Zimt


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