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Contract Packaging VS In-House Packaging: Pros And Cons
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By: Nathan Dube on March 30th, 2021

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Contract Packaging VS In-House Packaging: Pros And Cons

When it comes to your supply chain and packaging line, you have two options to choose from. Doing all your packaging in-house or outsourcing to a contract packaging company. Both of these options have their pros and cons.

 

If I had to guess, I'd bet you are currently managing a supply chain in-house. You are weighing your options to outsource this side of your business with the hopes of saving time and money. Or, you could be a start-up trying to identify which route to take.

 

At Industrial Packaging we’ve helped many clients that find themselves asking this exact question.

 

On one hand, we can provide everything you need to run an in-house packaging line. This includes packaging machinery, packaging materials, preventative maintenance programs, automation, and a host of other items required to do in-house packaging.

 

On the flip side of this equation, we can outsource all these elements of your business via contract packaging. We do this with a turnkey solution that will take all the responsibilities off your plate.

 

Let us be clear - we’re not saying we’re the right packaging company for you. But because of our experience, we can help you to understand in-house and contract packaging so that you can choose the right option for your business.

 

In this article, we will compare in-house packaging to contract packaging. We will help you to identify which type of packaging operation is best for your business.

 

 

What Is In-House Packaging?

 

With in-house packaging, you supply the physical space to house your packaging line. You control and finance everything for the supply chain's operation. Warehousing, utilities, equipment, employee training, logistics, materials, and everything in between is under your full control.

 

You hire, train, and manage the labor force that operates your equipment. Additionally, you are in charge of all maintenance requirements for your packaging line. You are the sole proprietor of a fully in-house operation.

 

People who opt for in-house packaging have several reasons for doing so. But, the most common reason for choosing in-house packaging is having full control over the packaging line. Some people want to have full control over every aspect of their supply chain, and that is alright! However, if this is you, contract packaging is probably not a good fit.

 

Outsourcing your supply chain to a contract packaging vendor may save you time, money, and resources. But, you need to be able to feel comfortable with handing control to a third-party partner. For some people, this is not an option, and that is OK.


What Is Contract Packaging?

 

Contract packaging is the complete outsourcing of your supply chain and packaging line. It is outsourced to a third-party vendor, known as a contract packaging company. With contract packaging, your entire supply chain is managed by your third-party partner.

 

These elements include packaging machinery, packaging materials, logistics, labor force, automation, utilities, and all other elements required to manage your supply chain and packaging line.

 

People who choose contract packaging may choose to outsource for various reasons. These reasons include cost and time savings, simplification of their business, reducing warehousing space, and re-focusing on their core capabilities to produce better products in a more timely fashion.

 


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The Pros And Cons Of In-House Packaging

 

Running your own supply chain and packaging line has some benefits. For one thing, with in-house packaging, you are fully in control of your supply chain. And, you can manage these elements of your business as you see fit.

 

When you have full control of your supply chain, you get to decide how to manage your machinery, materials, warehousing space, labor-force, logistics, utilities and every other aspect in-between.In this case, you have full control to produce what you feel is the best possible packaging for your products.

 

In-house packaging has a much higher up-front cost. But, once you pay off your packaging equipment, you may see higher cost savings. Although, this may not be true. It depends on the machinery and materials that you run on your packaging line.

 

Furthermore, with in-house packaging, you have to hire, train, and manage your labor force. You may be able to see cost savings from outsourcing these items to a contract packaging company.

 

The Pros Of In-House Packaging

 

  • Ability to manage many supply chains with one in-house management team.
  • Ability to control supply chain processes.
  • Ability to manage your own labor force.
  • Lower shipping costs.

 

The Cons Of In-House Packaging

 

  •  Higher up-front costs.
  •  Cost of managing a labor force.
  •  Time, capital, and resource-consuming management dynamics.

 

The Pros And Cons Of Contract Packaging

 

Contract packaging has its own set of pros and cons. Using a contract packaging company takes all the elements of managing your supply chain off your plate. Then, you can focus on your company's core capabilities.

 

Contract packaging can save you money in regards to packaging machinery and materials. It can also reduce the costs associated with hiring and managing a labor force.


To enter into a contract packaging agreement, you have to relinquish control of your supply chain. For many businesses, this is a non-starter.

 

The Pros Of Contract Packaging

 

  •  Lower up-front costs.
  •  No need to hire a labor force.
  •  No need to purchase packaging machinery and materials.
  •  Allows you to focus on your company's core capabilities.
  •  No need to purchase and manage warehousing space and utilities.

 

The Cons Of Contract Packaging

 

  •  Must relinquish control of your supply chain.
  •  No control over the labor force.
  •  No control over machinery options.
  •  No control over materials options.

 

Contract Packaging VS In-House Packaging: Which Is Right For You?

 

When choosing contract packaging vs. in-house packaging, you will need to answer a few questions. This will help you figure out which option is most appropriate for your company's supply chain. These questions include:

 

  • Do you want full control over your supply chain and packaging line? - If you answered yes, then you will want to choose in-house packaging.
  • Do you want to focus on your company's core capabilities? - If you said yes, then contract packaging is the better choice for you.
  • Do you want to save money up-front? - If you said yes, you would want to go with a contract packaging solution.
  • Do you want to manage your own labor force? - If you said yes, then you will want to stick with in-house packaging.
  • Do you want to avoid having to lease or purchase a warehouse? - If you said yes, then contract packaging is right for you.
  • Can you afford all of the required packaging machinery, materials, and labor force? - If you said no, then you will want to choose contract packaging.

 

With the information collected above, you should have everything you need. Now, you can decide if in-house or contract packaging is the best choice for your business.

 

Where Can You Find More Information About In-House And Contract Packaging?

 

When choosing between in-house and contract packaging, there are many elements to consider. If you are considering contract packaging, you will want to know how much contract packaging costs.

 

If you are leaning towards in-house packaging, then you will have to understand the up-front and operational costs of packaging machinery.

 

Once you have been able to compare the costs, pros, and cons of each type of packaging, you will be able to make a final decision on which option makes the most sense for your business.

 

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About Nathan Dube

As the Digital Marketing Specialist at Industrial Packaging, I am honored to create content for such a phenomenal company and work with one of the greatest teams in the Packaging Industry. Whether creating a video, writing blog posts or generating other pieces of content and multimedia, I am always excited to help educate and inspire our prospects and clients to reach their highest potential in regards to their packaging processes and needs.