Viewpoint: Web Industries lays out the case for contract manufacturing at a time when flexibility, speed and product innovation are necessary to achieve low costs
February 11, 2021
WILMOT, NH, Feb. 11, 2021 (Nonwovens Markets) - When the emergence of a global pandemic forced medical institutions and ordinary people to scramble to source facemasks and other personal protective equipment (PPEs), manufacturers throughout the PPE supply chain were confronted by a challenge they had never prepared for: how to scale production capacity and, in many cases, move into new product areas.
More recently, companies and governments have wrestled with a new problem: how to ensure surge capacity to make products with demand that is high initially, but which might decline quickly and not be necessary until the next emergency.
What they do for a living. For a company like Marlborough, Massachusetts-based Web Industries, this sounds like a perfect illustration of the need for a contract manufacturing organization (CMO).
Most of the time, Web Industries is not helping companies deal with global emergencies; a more typical situation is where a brand owner or original equipment manufacturer (OEM) decides it wants to launch a product or family of products or change its geographical distribution but isn't capable of doing the work internally.
Enter the contract manufacturer.
Nonwovens Markets recently spoke with a team of executives from Web Industries, who made the case that outsourced manufacturing can open new opportunities for brand owners and other customers for the right situation.
In the conversation were Ed Martins, vice president, Industrial &Consumer Division; Dante P. Ercoli, director of sales and business development, and Ken Sheets, plant manager for the division's Fort Wayne, Indiana site.
Making a big difference. The Web Industries executives pointed to a few areas where their company can make a big difference for its customers.
Most obvious is having the equipment and trained staff to quickly manufacture a new product. Others include relationships with equipment vendors and raw materials suppliers to make decisions and implement them quickly, and product design and engineering capabilities to allow for quick and cost-effective scale-up and commercialization.
A related area is their ability to take the lead in brainstorming product development ideas with customers, often extending to the supply chain to ensure that risks and opportunities are highlighted before final product manufacturing and marketing decisions are made.
Examples from PPE supply chain. While the value a contract manufacturer brings to customers was the main topic of the interview, the global drive to strengthen the PPE supply chain and onshore production provided numerous examples of how CMOs play a vital part in the rapid deployment of domestic PPE manufacturing. The executives noted that the increased demand for facemasks was unexpected both domestically and internationally when the COVID-19 virus hit. They pointed out that in many cases CMOs had the equipment and the ability to ramp up production without having to design, order, install and test new production capacity.
Trained staff already exists. They also said, "Our customers realize more value in the operational and intellectual knowledge and infrastructure we bring. So, while a CMO has the equipment needed for scaling production rapidly, they also have the trained staff prepared to operate it.”
They pointed out, a company like Web Industries also has the materials science and engineering knowledge in-house that is relevant to manufacturing the brand owner’s products.
In-house engineering. In some cases, when a new product development effort is required, the CMO will supplement the brand owner’s in-house engineering capability when it is insufficient to develop and commercialize the product. In fact, using a contract manufacturer often allows a customer to avoid the investment in a large engineering department.
Additionally, the contract manufacturer will have established relationships with equipment vendors and raw materials suppliers and be able to bring them into the development discussion.
In the words of one team member, "Many times [following] our early on conversations with customers, the product looks very different by the time it is commercialized as opposed to the initial concept. So, the CMO’s flexibility proves to be key in those situations."
Testing and certification labs. The interviewees commented that they have had jobs where the brand owner was working with multiple contract manufacturers. In that situation, a brand owner may not have the experience to bring staffs at multiple locations up to speed on technical issues. "How do you bring the knowledge level of those other [contract manufacturers] up to where they need to be in order to continue at the speed-to-market that's important?"
A contract manufacturer like Web Industries has established relationships with testing and certification laboratories, which is extremely important for speed-to-market. Without those relationships, the lead times can really slow down the process and the pace.
Risk mitigation. Another issue for a brand owner, according to the executives, is risk mitigation. When a brand owner thinks about potentially investing in the infrastructure, to bring a new product to market or enter a new sector, there is a lot to consider. And it's not just capital investment. Every aspect of an organization is in play: "You need to have the confidence you can scale at a pace that meets market demand and needs. CMO’s are used to this and can help to mitigate this risk for a brand owner or OEM."
Simplify the task. Personal protective equipment is often meant to be a temporary project. Many companies are questioning what the addressable market will be for any one of the different products, e.g., masks, gowns and headgear post pandemic.
In a case where a customer believes an operation will be short lived, the contract manufacturer can greatly simplify the task of scaling the business and then backing out if the demand goes away.
Imports versus domestic. Another question is the role of imports versus domestic supply in the PPE supply chain. With the onshoring initiative many countries have undertaken to strengthen their domestic capability if another pandemic were to occur, using a contract manufacturer allows a PPE maker to scale fast and develop a longer-term strategy.
Even if a new business is permanent, often contract manufacturer's customers may have a corporate philosophy emphasizing large volumes and minimizing complexity in their operations. A contract manufacturer allows outsourcing of this operational complexity.
Example of velocity. Certainly, velocity is one thing many people think about when looking at contract manufacturers. The executives cited an example from their own past where speed-to-market was a key issue.
"Approximately 10 years ago, one of our major customers approached us about a pipeline process for a product that involved nonwovens that went into a toddler training pant. They had worked this out on a pilot scale and approached us because of our development capabilities, speed to market, and ability to scale their product.
"They transferred their technology and knowledge to us, and requested that we develop the production scale to meet their anticipated commercial demand. It was only three months from issuing a purchase order for equipment to running go-to-market qualification trials. Well, we've continued to run this product for 10 years, and their comments back to us [are that] they come to Web for these kinds of things because there's no way that they could have gone through their bureaucracy to scale this up and staff it and commercialize it as Web did. There's just no way. That's why they turn to Web, because they know we can get things done quickly like this."
The executives also said that speed-to-market and fast change of direction are arguments for using a domestic contract manufacturer, rather than going offshore looking for low variable costs at the expense of reduced flexibility and a longer, more rigid supply chain.