Dealing with the fluctuations in demand – A contract manufacturers perspective

Every customer has their own individual needs, whether they are a large multinational or a small start-up...

Every customer has their own individual needs, whether they are a large multinational or a small start-up, all will need a unique approach in order to effectively satisfy their requirements. I’m sure that many people from the contract manufacturing industry will agree with me when I say that we all long for the day when all customers will provide us with a specific brief, detailing all aspects of their product range(s) and simply place their purchase order with a healthy lead time. How simple our working lives would become… But then again do we really want this? Wouldn’t it get a little boring if everything was easy to plan with nothing to keep us on our toes? Therefore in my opinion, ‘us’ contract manufacturers need unique customers who all have their own requirements, because at the end of the day this diversity in the industry is what keeps us proactive and ensures that ‘we’ as a business continually improve.

I have often thought to myself, what is the greatest challenge to the contract manufacturing industry? It’s certainly not dealing with customers or the actual manufacturing of the goods. At the end of the day these are fundamental components to our industry and should come as second nature. After a long hard think… and a couple of beers… I came to the conclusion that one of the greatest difficulties that faces the contract manufacturer is the ability to effectively manage the fluctuations in demand that occur throughout the year. No matter what industry you operate in, in Expac’s case this being the personal care and cosmetics industry, majority of your customers will want stock around the same time. For Expac this will be three key times; at the start of the year to replenish stocks after the Christmas break, the build up to Easter and the build up to the Christmas break. Whilst outside of these periods the demand for goods remains pretty steady, during these periods the enquiry level and demand for production goes through the roof. Therefore having adequate resources in place that enable Expac to deal with the highpoint in demand is vital in order for us to provide the service that is expected by our customers.

When it comes to dealing with changes in demand there are two key factors that must be taken into consideration before making any further decisions. The first and most obvious being, do you have the available capacity on your production lines to produce more stock within the required lead time? If not then your decision is quite simple, if you don’t have the capacity you can’t take on any further work. However, if you do have available capacity on your machinery then you are 50% there, the next big question is whether you have the available resources/staff in order to manufacture the goods. Staffing levels are a much trickier area to contract manufacturing; you don’t want to have too many staff, because during the quieter periods of the year you don’t want to be struggling to find work for them. However, you also need an adequate number in order to deal with the day to day running of the organisation. Having tried various different approaches to the conundrum of dealing with changes in demand, Expac have managed to find a solution that works well and may also be a solution that other contract manufacturers from within the industry have adopted. Whilst Expac ensure that we have available capacity within the production facility at all times, the company maintains a base level of staff. A base level being an adequate number of staff to operate up to 50% of our production capacity. During busy periods, demand often exceeds 50% of the company’s capacity which, in turn, means that we need extra staff in order to cope with this. In order to address this issue Expac have developed a partnership with a local recruitment agency and together a solution was proposed for the unique fluctuating environment of the contract manufacturing world. Expac will at all times have enough agency staff on file, ready to work that will allow Expac to run at 100% capacity should it be required. Not only this, but all members of agency staff that work at Expac will have been trained to Expac’s compulsory standards prior to starting work. This way Expac are able to be flexible at all times and react to the fluctuations in demand which are common within the contract manufacturing industry.

Taking all of the above into account, it is important to remember that the changes in production demand throughout the year are more than likely going to be temporary. There are very few contract manufacturers within the industry that operate at 100% of their capacity all year round. Therefore the best way to deal with this temporary change in demand is to remain flexible and have a temporary solution to the problem. In Expac’s case the solution is to have a pool of agency staff trained and ready to work, this allows Expac to scale up from manufacturing at 50% or below of their capacity to 100% the following day should it be required.