How do you incentivize and reward your contract manufacturer for their innovation efforts and outcomes?

Innovation is a key driver of competitive advantage and growth for many businesses, especially in fast-changing and dynamic markets. However, innovation is not only the responsibility of your internal R&D team, but also of your contract manufacturer (CM), who can provide valuable insights, ideas, and solutions to improve your products, processes, and performance. But how do you motivate and reward your CM for their innovation efforts and outcomes? Here are some tips and best practices to consider.

Find expert answers in this collaborative article

Selected by the community from 2 contributions. Learn more

1 Align your goals and expectations

The first step to incentivize and reward your CM for innovation is to clearly define and communicate your goals and expectations for the collaboration. What are the specific innovation challenges or opportunities that you want to address? What are the desired outcomes and metrics that you will use to measure success? How will you share the risks and benefits of innovation? By aligning your goals and expectations with your CM, you can create a common vision and a shared commitment to innovation.

Add your perspective

Beli Thakur, CPIM

A leader with expansive background in procurement and operations management: Supply Chain | Operational strategies for startups and fortune 500 companies | Procurement | Contract Manufacturing | COGS | Cost Optimization
Report contribution
The ownership of any proprietary product/process should be agreed and included in the agreement before the collaboration starts to avoid disputes.

Like

2 Co-create and co-innovate

The second step to incentivize and reward your CM for innovation is to involve them in the co-creation and co-innovation process. This means treating them as a strategic partner, not just a supplier, and engaging them in the ideation, prototyping, testing, and scaling stages of innovation. By co-creating and co-innovating with your CM, you can leverage their expertise, capabilities, and resources, as well as foster a culture of trust, openness, and feedback.

Add your perspective

Jake Ribbe

Helping D2C Brands Launch Supplements That Convert, Scale, and Stay In Stock.
Report contribution
Historically, copackers are not renowned for being particularly friendly or motivated when it comes to innovation. Their primary focus is often on running their machines at high volume to generate profit. Therefore, it's often more advantageous to establish your own infrastructure for innovation. This entails hiring formulation or technology consultants and streamlining processes to make life easier for your contract manufacturers. While copackers can provide valuable information and insights, relying on them for heavy lifting in research and development can slow down progress. Copackers are more likely to collaborate and innovate alongside you if they perceive you as a client committed to handling a substantial portion of the groundwork.

Like

3 Establish a reward system

The third step to incentivize and reward your CM for innovation is to establish a reward system that recognizes and rewards their contributions and achievements. This can include both financial and non-financial incentives, such as sharing the cost savings or revenue gains from innovation, offering performance-based bonuses or profit-sharing schemes, providing access to new markets or customers, giving recognition and appreciation through awards, testimonials, or referrals, and supporting their learning and development through training, mentoring, or coaching. It's essential that the reward system is transparent, fair, consistent, and aligned with the value and impact of the innovation.

Add your perspective

4 Monitor and evaluate

The fourth step to incentivize and reward your CM for innovation is to monitor and evaluate the progress and results of the innovation projects. This means setting up regular meetings, reports, and feedback loops to track the performance, challenges, and opportunities of the innovation activities. By monitoring and evaluating the innovation process and outcomes, you can identify and celebrate the successes, as well as learn from the failures and improve the collaboration.

Add your perspective

5 Adapt and evolve

The fifth step to incentivize and reward your CM for innovation is to adapt and evolve the relationship and the innovation strategy based on the changing needs and demands of the market and the customers. This means being flexible, agile, and responsive to the emerging trends, technologies, and opportunities that can create new value and differentiation for your business and your CM. By adapting and evolving the innovation approach, you can maintain a long-term and mutually beneficial partnership with your CM.

Add your perspective

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

Add your perspective

How do you incentivize and reward your contract manufacturer for their innovation efforts and outcomes?

1

2

3

4

5

6

1 Align your goals and expectations

2 Co-create and co-innovate

3 Establish a reward system

4 Monitor and evaluate

5 Adapt and evolve

6 Here’s what else to consider

Contract Manufacturing

Rate this article

Thanks for your feedback

More articles on Contract Manufacturing

More relevant reading