Contract Packaging and its Implications on the Supply Chain - The Case of a Contract Packager

Abstract: In trying to get products out to the market in promotional or display packaging, companies have the option of turning to a contract packager. The purpose of this thesis is to present the area of contract packaging, specifically discussing the internal factors that make a contract packager an attractive actor to outsource packaging of products to and also to find out how a contract packager can affect the supply chain of the company outsourcing to such an actor. The questions posed in this thesis are: - When is it appropriate to outsource? - Why is a supplier of contract packaging successful? - How is the supply chain affected when outsourcing to a contract packager? In addressing these questions a systems approach has been used, because a systems approach allows the researcher to see properties of the whole, rather than seeing the sum of parts as the collective properties of a system. The empirical data were collected through a case study of one company performing contract packaging. Literature was studied in the areas of outsourcing, supply chain/supply chain management, third-party logistics and contract packaging. Each of the questions posed was answered through the papers appended in this thesis. The first paper uses complexity theory in order for managers to be able to view outsourcing situations from a balanced perspective, providing guidance from two important functions – relative power and interface complexity. The conclusion reached in this paper is that in order for an outsourcing situation to be appropriate, the outsourcing company, vis-à-vis the supplier of the activity/process, needs to have high relative power while keeping interface complexity low. V The second and third papers discuss why a contract packager is successful and how it affects the supply chain of the company engaging it. In reference to the contract packager, it is ascertained that important activities to offer, besides the packing of products, are design and manufacturing of packaging and warehousing of the product of the customer. In using a contract packager, the company engaging it can utilize certain characteristics of contract packaging. The characteristics displayed by contract packaging are the “one-stop shop”, flexibility and warehousing. These characteristics give an outcome in the supply chain that can be used by the company to achieve effectiveness — from manufacturing of the product to the delivery of the product in display packaging to the store. The company’s supply chain is enabled to reduce uncertainty, reduce time-to-market of the promotions, and increase responsiveness. The company can also realize other benefits including consolidation of products and postponement of manufacturing of packaging and packing.