On Outsourcing To OEMs, And Dealing With The FDA
More often than not, it is not feasible to build your own factory especially if your volume is not large. A lot of times, we have ideas and want to test the market, but first need to have those ideas built into reality. In most cases, it doesn’t make sense investing time and money to set up a factory. Using somebody else’s manufacturing capacity, you can be up and running tomorrow.
Nowadays, everybody does OEM. If a company has a manufacturing component, they will typically make a product to your specifications, and produce it with your brand and packaging. Most are pretty straight forward- you choose what you need based on what they offer and have it made. The bigger the volume the lower the price. Once you start experimenting with foods or new products however, it gets a little more complex.
Naturally, you will have to provide the raw materials on your own, particularly if you are trying to introduce something new to the market. When that happens, things get a little greasy, since the producer of those raw materials generally has guidelines that need to be followed, and the materials themselves need to be registered with the government. On the upside, nobody else can copy you, being that the materials came from a source unique only to you.
Before anything happens, never forget to have your contract manufacturer sign a NDA prior to revealing your formulations. They will typically give you 5 years without much hassle. The worst thing that could happen to you is they start producing your idea and selling it on their own. Why wouldn’t they? If they can make it for you they can make it for themselves too, and most factories partake in some kind of B2C using their own brands.
In our industry, there are only a handful of factories with the capacity to produce pharma products. Fortunately, we found one willing to produce what we need, and they happen to be one of the largest pharma companies in Thailand. That could be good or bad, depending which way you slice it.
In the pharma business, there is typically a Chinese wall between the sales and production units. As a matter of fact, the sales and marketing are usually cordoned off into a completely separate company from the manufacturing business and are treated as such by the employees, albeit the shareholders are the same. This keeps the interests of the C-level execs aligned, and if there really is no interaction between the two units, you can probably get away outsourcing your product to the factory side without the marketing side stealing your ideas.
CJ and I took the day off the travel out of Bangkok to visit their laboratory in the suburbs. We had our suppliers also fly in from Singapore to join us, mainly for compliance duty. The materials we will handle are very delicate, and temperature and humidity need to be monitored closely at all times. Their role was to see if this factory was up to standards.
What’s interesting is that each country follows a slight variation of the law when it comes to the FDA. In Thailand, for example, the FDA will allow us to claim a shelf life of 24 months for our product based on an extrapolated 18 month result, whereas in Singapore that is a big no-no. Ostensibly, it also depends on how well you reason and who is on the other end making the decision.
Long story short, this factory abides to one of the highest standards in Thailand in big pharma and we will most likely proceed with them in the interim. The load of paperwork and registration that needs to be completed before then that cannot be described by a single blog post, and I anticipate at least another 3 months before we can run our first production batch.