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by Robert Huckels, Ivie Asia

Most Western fast moving consumer goods (FMCG) companies, and retailers with large private label portfolios, will eventually reach a point where they evaluate whether to keep artwork production in-house or to send it overseas, typically to China or India.

The pros and cons of keeping things in-house versus out-of-house needs to be weighed carefully. Both success stories and horror stories abound. It’s key to note that there are multiple ways that offshore teams become engaged, and there’s quite a bit of difference between the traditional connotations of “outsourcing” and a shared production services (SPS) model.

A lot of outsourcing firms have their own project management software, processes and ways of doing business that are foisted on clients. When you outsource packaging production, you’re entrusting a third party with your brand as well as related work processes. Surrendering this much control sometimes gives outsourcing a bad name. Furthermore, companies that force clients to adopt proprietary software lock in their clients and tie their hands by making it extremely hard for the client to expunge them should the client later decide to end the relationship. This “stickiness” is good for the outsource company, but can be a real pain for the client.

On the other hand, SPS models involve an agency that has a team of specialists who offer a suite of packaging services (creative, production, pre-press, print management, & printing). SPS organizations work in tandem with clients on a contractual basis. In the SPS model, the client retains their own project management software and their own workflow processes. The SPS agency becomes an extension of the client resulting in:

1.) A melding of work practices with the client’s.

2.) Clients controlling the volume of work with no preset quotas.

If you’re considering moving to an SPS model to help with your packaging needs, you’ll need to evaluate several pros and cons to ensure that the model and agency is the right fit for your brand. Today, we will focus on the former, while our next post will address some of the concerns associated with offshoring work.

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Benefits of the SPS Model

First, FMCG companies and private brands should consider the benefits of shifting packaging production and artwork design overseas.

  1. Labor costs. The most obvious reason to outsource production overseas is cost savings. The reality is that professional services that require genuine knowledge of production methods, especially packaging, can be had for much less in foreign countries like China and India than in more developed economies in North America, Western Europe, Australia and similarly advanced economies. For the same reasons that companies routinely outsource programming, savvy companies choose to leverage shared production services, too.
  2. Faster turn times. Depending on where you’re located and where your SPS firm is located, you can effectively create a 24/7 work cycle. It’s common for companies in the U.S. to upload files at the end of their workday so that while they sleep, production teams overseas can continue working on the files. In the morning, files have been completed, and the whole process starts over.
  3. Staffing flexibility. Many companies experience seasonal peaks and valleys that make staffing decisions difficult. By outsourcing artwork production, companies can retain a core team within their headquarters to oversee workflow, while focusing more on strategic issues and less on executional tasks. The SPS production agency then takes the responsibility for the ups and downs of staffing to meet seasonal demands. SPS agencies work on multiple accounts simultaneously, so it’s easier for them to add or subtract staff as needed.

Of course, if the decision to go out-of-house was all positive with no negatives, every brand would do it. We’ll explore some of the biggest potential pitfalls and how to mitigate them next week.

About Ivie Asia’s SPS model: Ivie Asia takes great pride in working diligently with our clients to ensure that we provide the best packaging services possible, starting with a thorough onboarding and discovery process to fully understand the brands that we work with. If you are considering going out-of-house for packaging production, but have questions or concerns you’d like to discuss, you can contact the author of this post at robert.huckels@ivieinc.com.cn

To learn more about Ivie Asia’s SPS, download our brochure: SPS Brochure

Questions or Comments?