In general, contract manufacturers are actually optimized to produce different types of products quickly and efficiently. However, this focus on low manufacturing costs often leads to very large batch sizes and therefore indirectly to very long lead times for production.

If the choice of contract manufacturer is based solely on "cost", it is very easy to get caught up in a vicious circle of very large manufacturer lots, long replenishment cycles and the resulting lack of flexibility in production. Which company can predict the sales figures for the year after next with a high degree of certainty?

In most, if not all, companies, short-term rescheduling, changes in sales volumes in various markets due to regulatory changes or price changes, for example, or simply changes in the priority of products are the order of the day.

Overall, you are therefore usually better off with CMOs that can offer shorter replenishment times. Although the manufacturing costs are higher as a result, the risk of the goods already losing a large part of their value in the warehouse (due to the limited shelf life) is significantly reduced.

It often happens, for example, that packs have to be adapted due to regulatory changes. If you then still have large quantities of your product in stock because your contract manufacturer only produces competitively in very large batch sizes, you will of course make a large loss here.

Manufacturing costs, batch sizes, minimum order quantities, flexibility in production planning are a very delicate mix that has to be redefined for each product and each contract manufacturer.

When transferring an existing production to a new supplier, costs are incurred that are usually not directly attributed to the transfer but should be considered for the overall profitability. These include, for example, the costs of technical batches at the new supplier, the adaptation of the manufacturing method to the equipment and procedures of the contract manufacturer, costs for validations, costs for changing the registration dossier and the largest cost item:

the duration of the transfer project including the costs of all departments and persons involved. Costs are incurred twice during the project period. Once in the company's own production, which has not yet been transferred, and the total transfer costs including trials in the new production facility. This period in particular, together with the associated activities, is a key factor in determining the total costs of the production transfer and the success or failure of outsourcing.

It is therefore of paramount importance to plan such supply chain management projects carefully and implement them quickly. The difference between a quick, clean production transfer and a relatively complex, multi-year project could quickly exceed the million mark.