How To Manage Your Co-Packers

March 30, 2018 by in category Fishbowl Inventory, Food Manufacturing, Inventory Management with
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Fishbowl-Inventory-Tips-when-working-with-a-co-packer

In food manufacturing it is common for brands to have the actual manufacturing done by contract manufacturers known as “co-packers.”

You order and pay for the raw materials, often having them shipped directly to the co-packer, and then place an order for a set amount of finished goods (which may or may not use up all of these raw materials).

On the positive side, working with a co-packer eliminates the need to build and run your own manufacturing facility. But this does not come without cost, as it forces you to give up a certain amount of visibility and control, which can make planning difficult.

Luckily there is a solution: Set things up so that you are paralleling your co-packer’s inventory levels and production inside your own Fishbowl installation. This way you can easily see what raw materials the co-packer is storing on your behalf, your scrap rates, your finished goods inventory, and more. This visibility not only gives you the data you need for planning purposes, it also creates accountability.

Here’s how to use Fishbowl to monitor co-packers and other contract manufacturers

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Set Up Your Fishbowl Inventory File

Create all of the following:

  • A part representing the service the co-packer is going to perform (I recommend that you use the “Non-Inventory” part type)
  • Raw material parts that you will be supplying to the co-packer
  • Finished product parts for each part that the co-packer will be producing
  • Bill of Materials defining the materials and services that will be consumed to create the finished product
  • A location group for the co-packer (keeping in mind that in Fishbowl terminology a “location group” can refer to a single location, such as a co-packer’s facility or a physical warehouse)

Manage Your Raw Materials

In a co-packer environment you are typically purchasing materials and having them shipped to the co-packer. To track and manage this you need to:

  • Create a Purchase Order in Fishbowl to order the items from your raw materials vendor; Use the co-packer’s address as the “ship to address.
  • Create a process that uses the co-packer’s signed-off report of the items and quantity received to receive raw materials against this Purchase Order in Fishbowl. This internal control step is important because you don’t really know if your vendor sent the right items and quantity to your co-packer. You want your co-packer to sign off on it—and it’s in their best interest to do so, because they don’t want to be held responsible for “losing” materials that never actually arrived.
  • Resolve discrepancies between your vendor’s ship notice and your co-packers received count. This task usually falls to the Accounts Payable clerk.
  • Reconcile the bill following your normal Accounts Payable procedures.

Manage Your Purchases From Your Co-Packer

In creating the finished product, the following tasks do not have to be done in this exact sequence, but all have to be done:

  • Create and issue a Purchase Order in Fishbowl to the co-packer for the service that the co-packer is providing.
  • Create and issue a Manufacturing/Work Order in Fishbowl for the finished product, just like you would if you were making the product yourself.
  • When the co-packer notifies you of completion, receive the quantity completed against the co-packer Purchase Order in Fishbowl.
  • Fulfill the Manufacturing/Work Order in Fishbowl to consume raw materials inventory, put the finished product into stock and roll up the costs of the inputs to the finished product.

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Need Help with Your Fishbowl implementation?

Not sure about the right way to do things in the Fishbowl/QuickBooks world? Wondering if something that can’t be done in QuickBooks can be done in Fishbowl? Give us a call! As Fishbowl Inventory Super Heroes, we’re here for you.[ish_button el_text="Contact Us" url="url:http%3A%2F%2Fwww.tarabyte.com%2Fcontact%2F|||" size="medium" align="left"]

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Jeanne Tarazevits
CPA, QuickBooks Maven, Fishbowl Guru

As a Top 100 QuickBooks ProAdvisor and Fishbowl Inventory Super Hero, Jeanne helps businesses change the way they do business by getting their inventory management, accounting and manufacturing systems all working together seamlessly. In providing these services Jeanne draws upon her knowledge as a CPA, her previous experience as an Auditor with Ernst & Young and long-time CFO of a publicly-traded medical device manufacturer, and the expertise gained in the 10+ years she has been working with Fishbowl Inventory.

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