The October JOLTS report put the level of job openings at the second highest on record (11.033 million in October vs. 11.098 million in July). There’s an undeniable labor shortage. Your company is challenged to find labor, your contract packager (co-packer) is challenged to find labor and so is everyone else in your supply chain.
So what can you do about it?
- Discuss labor and capacity. Labor is a challenge for everyone so if your co-packer tells you that labor is plentiful, question it. Honesty could be the line between success and failure. Ask about their available capacity for both labor and any equipment they use to produce your product. If you’re expecting to grow, ensure that your co-packer is poised to grow with you.
- Diversify your portfolio of contract packagers. If you sense that your co-packer has honest limitations to meet your needs, it may be time to seek out a second or even third source to support your production and growth. You’ll have a steady, established and reliable partner while providing the headroom needed for increased sales.
- Understand the strategies your co-pack partners are employing to overcome labor challenges. In lieu of people power, many companies are turning to automation and flexible co-bots to offset the lack of labor. Let’s face it, some co-packers are very labor driven and their model won’t change. Their resources will be deployed to the company willing to pay the most for them. If you want a chance at keeping costs in line and expanding capacity, look for co-packers who are investing in automation options. Ask to tour their facility and look for signs of robot life they are already using.
- How important are you to your co-packager? If you’ve spent the last several years squeezing your co-packer’s margins or maybe you only send them a small amount of business, you may not be as important as you think to your co-packer. When labor resources are at a minimum, co-packers are going to look for maximum return on those resources. It might be a good time to have a conversation, do a reality check and potentially right size your co-packer.
- Ask for a commitment on paper. Establish a written plan as part of your contract between you and your co-packer. Detail what they commit to producing for your company on a weekly or monthly basis. If they’ve committed their resources to your production, it will be more difficult to pull them away when the next opportunity presents itself.
- Communicate often. You speak with internal co-workers regularly to ensure your business runs well. You should be doing the same with your co-packer. A weekly or monthly call to review successes, challenges, demands, forecasts and needs should be a minimum. Just like in your business, challenges happen, so try and create an environment of open communication where both sides can share honestly and partner together to find solutions.
- Prioritize. Part of communicating with your co-packer should be prioritizing. Everything is important but you need to help your co-packer drive their production to ensure the most important orders get produced and out the door first—especially when labor resources are tight.