Many economists may have never spent time inside a contract packaging facility, but they understand on a deep level why outsourcing can create a superior value proposition for a goods producing company. They will anchor their case in one of the irrefutable laws of economics: comparative advantage.
Often used in analyzing gross domestic product (GDP) outputs between countries, this fundamental economic principle asserts that a nation should specialize in producing and exporting goods (and services) which it can produce more efficiently – in terms of opportunity cost – than other goods and services that it could import. For those who may have missed Econ 101, opportunity cost simply refers to the price one must pay in producing something as compared to the cost of foregoing an alternative opportunity.
Stop and think about that concept as it relates to value-added manufacturing, distribution, logistics and inventory management. Are you struggling with the operational headaches and administrative burdens of bringing your product to market? Or, are you gaining competitive edge by practicing the law of comparative advantage?
The world’s best and brightest companies do. While many may have the internal resources to take on non-core packaging functions, they opt for outsourced solutions. They recognize that sustained profitability and growth stems from their company led initiatives in research and development, new product introductions, line extensions, and process-related enhancements that increase throughput and maximize efficiency. In other words, they’re profiting from their core. And now they’re being joined by a wave of e-commerce companies that have made similar strategic decisions.
PAC Worldwide, which has long provided our protective packaging customers with outsourced packaging and fulfillment, recognized its value proposition years ago. We’re also investing in its growth through our new 216,000 square-foot CoPAC facility in southwest Ohio, enabling us to serve a broader spectrum of the market.
According to research from respected firm Research and Markets, contract packaging will grow at nearly 10% annually through 2021. A forecast of the retail e-commerce segment helps explain the bullish outlook. In 2017, the industry generated some $13 billion in packaging volume, based on data from Future Market Insights. By the end of 2026 that number will soar to an estimated $21.4 billion.
Admittedly, services like gift wrapping, package assembly, sorting, kitting, point-of-purchase, light assembly and inventory management may not have the same cachet as mechanical engineering or chemistry. Those aforementioned services are also more labor-intensive – which is precisely why many companies avoid them.
It’s one thing to make a great product. It’s another to bring it to market with the same level of expertise, efficiency and experience a contract packaging and fulfillment specialist offers. At CoPAC, that means more than 200 years of collective experience.
That’s the power and profitability of comparative advantage. Are you seizing it? If not, perhaps it’s time to contact your CoPAC representative and ask them to show you how.
