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Outsourcing manufacturing by bakery manufacturers
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