More and more small and medium business owners in South Africa are looking to develop bespoke brands in consumer product lines such as health and beauty as a way of creating value and differentiating themselves in a competitive market.
They are answering the call from consumers for unique products that offer alternatives to the international FMCG brands.
This trend is enabled by the rise of a new breed of local manufacturers that have the scale to manufacture goods in a cost-efficient manner, while still responding with speed and agility to the needs of local business owners and consumers.
COVID-19 has accelerated this trend by highlighting the risks and challenges of being over-reliant on global supply chain companies.
Yet, many small and mid-sized distribution and retail companies don’t know where to start when evaluating prospective manufacturers. The risks of getting it wrong are significant: they could include unexpected costs, unreliable supply or poor quality products.
Here are a few questions to ask a prospective contract manufacturer that can help a business avoid making the wrong choice:
1. What are your manufacturing capabilities and what is your production capacity?
One of the best places to start is with questions about the manufacturer’s facilities, and perhaps even conduct a site visit if possible. In product lines where selling price and margins are typically low, entrepreneurs should look for a manufacturer that has the scale to produce units in a cost-efficient manner.
It’s important to ask about turnaround times—the manufacturer should be agile enough to offer just-in-time delivery so that it’s not necessary to carry excessive inventory. Another item on the checklist: what sort of equipment does the plant use? Is it modern and reliable?
The ideal manufacturer should also offer world-class packaging solutions and have a slick logistics and warehousing engine.
2. How can you support us with innovation and R&D?
Small and medium business owners might have a great concept for a new toothpaste or haircare brand, but they won’t have the specialist skills to select the right raw materials, processes, operations and combinations to make it.
The manufacturer should be able to support them with research capabilities that inspire exciting new products. Furthermore, it should be able to partner with clients on conceptualisation, design and testing as part of its end-to-end service.
3. What quality standards and frameworks do you have in place?
Adherence to best international practice in terms of quality, health, safety and environmental standards and management systems is non-negotiable. A premium quality manufacturer should be able to demonstrate compliance with global standards such as ISO 9001, ISO 14001 and OHSAS 18001.
Additionally, a reputable manufacturer should be able to offer advice on regulatory guidelines on approved raw materials for local manufacturing and export markets.
It should be willing to document how its Standard Operating Procedures incorporate quality and safety requirements to govern all processes within the company.
Furthermore, a responsible, world-class manufacturer will be happy to offer transparent information about Environmental, Sustainability and Governance factors like labour practices and carbon emissions.
4. How are you growing the local manufacturing base?
It’s key for Africa and South Africa’s future that we drive industrialisation and bring production back to the continent. Without building a manufacturing base and a strong local supply chain, we will not be able to create jobs and wealth to improve quality of life.
What’s more, local producers can deliver more choice and competition to the benefit of consumers. For that reason, entrepreneurs should ask their manufacturer how it can grow with them in the years to come as well as where it sources its materials and components from.
5. Which customers are you currently supporting?
Find out which customers and brands the potential contract manufacturer works with. This will provide insight into its quality standards and capability. Feel free to ask for references to find out about other companies’ experiences with the manufacturer.
By Vinny Perumal, CEO of KAS Africa, Africa’s leading contract manufacturer of personal, home, baby and oral care FMCG products