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Outsourcing manufacturing by bakery manufacturers

Updated on June 18, 2011

Indian bakery industry

90% of manufacturing is done by contract manufacturers . Big Manufacturers are now cutting down their manufacturing activies and are outsourcing their manufacturing activity .

Maximum number of Bakery product manufacturers are outsourcing their manufacturing activity .It make sense also with overhead cost spiralling up outsourcing becomes the most obvious route . The Big 3 ( PARLE , BRITANNIA , ITC ) all have outsourced their most of manufacturing to contract manufacturers . Contract manufacturers are paid for conversion of raw material into finished product . Contract manufacturers liabilities are labour , legal , land ,maintenance ,utilities and other local laws .This allows these Major players to focus on marketing , brand development , R&D activities . Contract Manufacturers also have business to run OR to run plants full time and can build own brand . This is also termed as Third party manufacturing or private label .
This helped number of factory owners to generate business , give employment to large number of people .
This concepts has also caught attention of entrepreneurs who outsources bakery product with
there own recipes , brand and packaging . Entrepreneurs or businessmen from developed economies outsource products from low cost countries label it and then sell them in their own market .In process make good profit .
For countries where bakery manufacturing is not so much developed ,people  outsource these products from manufacturers ,these could be classic example of trading .

Advantages of Outsourcing manufacturing are

  • No overhead cost( significant cost reduction)
  • No repair or maintenance& repair 
  • No cost of equipments
  • No legal and other statutory obligation.
  • Partners could be changed any time and  terms could be re negotiated .
  • Could be done across the geography .

Its Win - Win  situation  for  both

 

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      Matt Racz 7 years ago

      Sukmrsing - Cool post! I am currently a student entrepreneur in the US trying to start a healthy oatmeal cookie company called Gotta BYOM (pronounced "buy'em"). I am in the process of trying to figure out my operations, and your post definitely skewed me towards finding a contract manufacturer. Thanks for the info!

      Matt