The Small Manufacturer’s Guide to Co-Manufacturing and Co-Packing

For many growing manufacturers, outsourcing is the key to scaling up without investing in massive facilities or specialized equipment. Co-manufacturers make this possible, but they also introduce new management challenges.

What are co-manufacturing and co-packing?

Co-manufacturing (contract manufacturing) is when a third-party manufacturer produces goods on behalf of a brand. For small food and beverage companies, this allows them to scale production without investing in their own factory or equipment. The brand typically provides the product formulation and specifications, while the co-manufacturer handles sourcing, production, and sometimes even packaging.

Co-packing (contract packaging), while often conflated with co-manufacturing, is the process of outsourcing only the packaging of products to a specialized partner. A co-packer might receive bulk product from a manufacturer and then fill, label, and package it according to the brand’s guidelines.

10 tips for outsourcing the work but keeping the control

When production or packaging happen outside your walls, how do you maintain control over quality, inventory, and timelines? These strategies will help you stay firmly in the driver’s seat.

1. Choose the right partners

Align on values and capabilities
Your co-manufacturer isn’t just an extension of your production line — they become a reflection of your brand. Make sure they understand your category’s nuances (e.g., gluten-free bakery prep vs. dairy-based sports nutrition) and already operate at your regulatory level. If you’re selling into retailers like Whole Foods or Target, you’ll need suppliers who are retail-audit ready.

What to evaluate

• Certifications and compliance history
  (FDA inspections, SQF/GFSI status, allergen segregation zones, sustainability initiatives, waste handling)
• Equipment and process compatibility
  (batch sizes, filling/packaging formats, mixing methods, allergen control steps, cold chain capability if needed)

Vet with care

• Visit the facility — the floor tells you more than any brochure
• Ask for production logs from other clients (proof of performance)
• Run a pilot batch and compare output vs. spec: texture, fill weights, labeling accuracy, spoilage, etc.

If something feels “off” now, it will be painful at scale.

2. Lock down clear agreements

Good partnerships start with airtight paperwork. Your contract should eliminate assumptions.

Must-cover areas

• Scope of work. Who sources what, who owns freight, who manages packaging defects?
• Quality and testing protocols. Micro testing frequency, sensory checks, retained samples, CAPA procedures (Corrective and Preventive Action).
• IP protection. Ensure formulas, artwork, and brand elements remain your proprietary assets.
• MOQ + lead times. What’s guaranteed? When do you pay? What happens if they slip?

Pro move: Add performance service level agreements linked to real metrics – OTIF deliveries, scrap rate thresholds, response time for deviations, etc. Contracts without concrete KPIs are just wish lists.

3. Set up a clear supply chain flow

You have a choice to either supply ingredients and packaging materials yourself or get a contract manufacturer that does everything for you. This is referred to as toll vs. turnkey manufacturing.

• Tolling: You supply ingredients/packaging, they process.
• Turnkey: They source everything, based on your specs.

If your product relies on specialty ingredients (e.g., organic adaptogens from a single certified farm), tolling makes sense. If it’s commoditized (e.g., PET bottles), turnkey may be cheaper and simpler.

4. Maintain tight quality control

You can outsource everything except responsibility. Ensuring that your co-manufactured products follow strict quality guidelines helps you prevent loss of reputation and business.

Define QA/QC expectations upfront

• Inbound ingredient checks (COAs, allergen statements, supplier approvals)
• In-process controls (fill weight, viscosity, metal detection, pH checks)
• Finished goods tests (shelf-life validation, sensory testing, packaging integrity)

Don’t skip oversight

• Conduct scheduled and surprise audits
• Review batch sheets and traceability logs regularly

5. Use an ERP to coordinate

Managing third-party manufacturing without a digital system leads to chaos.

A lightweight MRP/ERP system helps you:

• Track raw materials and finished goods
• Schedule production batches
• Forecast material requirements and reorder needs
• Maintain traceability for recalls or audits
• Share real-time data with subcontractors or 3PLs

6. Plan around lead times and delays

Co-manufacturers and co-packers often serve multiple clients, and you’re likely not their top priority.

• Build in buffer inventory and time.
• Use a production calendar and lock in runs in advance.

7. Create a playbook and documentation

• Standard Operating Procedures (SOPs) for your product.
• Visual examples of the finished product and packaging.
• Escalation protocols for defects, shortages, or substitutions
• Labeling guidelines (to meet regulatory needs in different markets)

Write every requirement and detail down. This prevents miscommunication and ensures you and your partners are on the same page.

Documentation reduces errors and makes scaling easier with multiple partners.

8. Communicate efficiently

Using a co-manufacturer doesn’t mean you get to kick your feet up. You need to communicate with your partners via:

• Weekly check-ins or updates (email, Slack, shared dashboards).
• Shared Google Sheets or ERP portals.

Active communication builds trust and helps avoid finger-pointing when problems occur.

9. Plan for scaling

Although growth is something most businesses strive for, it can become an impediment if your supply chains are weak. Don’t become over-reliant on a single subcontractor:

• Always keep one or two backup options.
• Diversify geographically or by SKU if possible.

10. Watch your margins

Co-manufacturing can eat into your margins if not managed tightly:

• Regularly review actual costs per product.
• Negotiate price breaks as volumes increase.
• Track KPIs like yield, spoilage, OTIF (on time in full) deliveries, and defect rates.

Bonus: Common pitfalls to avoid

• Relying on handshakes instead of contracts. Without written terms, you’re exposed on pricing, lead times, liability, and IP protection. If a co-manufacturer changes a formulation, misses deadlines, or substitutes materials, you have no recourse. Every assumption must be documented: who does what, by when, and what happens if they don’t.
• Not owning your raw material supply chain. If your partner sources ingredients or packaging, you lose visibility into costs, substitutions, and availability. One supplier change can ruin product consistency or certification status (e.g. organic, non-GMO, allergen-free). If a co-manufacturer can’t procure a component, you’re stuck. Brands that control inputs avoid hostage situations.
• No digital system to manage production and inventory. Spreadsheets break the moment you introduce lead times, multiple suppliers, and lot tracking. Without an ERP/MRP system, you risk stockouts, expired materials, incorrect runs, and failed audits. If you can’t see inventory and production statuses in real-time, you’re flying blind.
• Assuming a co-manufacturer will “care” as much as you do. Founders often think, “They believe in my mission – they’ll take care of us.” Contract manufacturers are volume-driven operations. They prioritize bigger accounts, faster turns, and fewer changeovers. Your enthusiasm does not move you up their queue – your organization, forecast accuracy, and data do.
• Failing to plan for growth or redundancy. If your single co-manufacturer gets shut down, changes ownership, raises prices, or drops your brand, you’re offline. The time to qualify a backup is before you need one. Mature brands always have alternatives.

Managing outsourcing with manufacturing ERP

Manufacturing ERP systems like MRPeasy are accessible to even small businesses and startups. As opposed to the traditional giant systems that take years and hundreds of thousands of dollars to implement, modern cloud-based ERPs are user-friendly, easy to implement, and affordable.

ERP features that support subcontracting typically include:

• Assigning vendor-specific bills of materials (product recipes).
• Sending components or packaging materials directly to vendors.
• Defining subcontractors as part of your production routing.
• Tracking outsourced steps, progress, and logistics alongside internal operations.
• Supporting unit conversions where vendors use different measurement systems (e.g., pieces vs. pounds).

For full-product outsourcing, ERP systems help manage material shipments, vendor inventory, and cost accumulation through purchase orders. For partial outsourcing, they enable detailed production tracking by coordinating vendor operations within a larger manufacturing order, even across multiple subcontractors or production stages.

Key takeaways

• Co-manufacturing and co-packing allow small CPG brands to scale efficiently by outsourcing production and/or packaging to specialized partners, eliminating the need for large capital investments in equipment or facilities.
• Maintaining control while outsourcing requires deliberate management, including choosing the right partners, locking down detailed contracts, and defining clear roles in the supply chain (e.g., tolling vs. turnkey).
• Quality assurance is critical. Brands must set strict QC standards, conduct regular audits, and ensure traceability through documentation like COAs and batch records.
• Using a modern ERP system streamlines subcontracting, allowing brands to manage raw materials, production schedules, vendor operations, and inventory tracking in one place, even when using multiple vendors.
• Common pitfalls, like poor documentation, relying on verbal agreements, or lacking digital tools, can erode margins and product quality, so brands must plan proactively, monitor performance closely, and communicate consistently with their partners.

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