How do I manage inventory at my co-packer?
Working with a co-packer or contract manufacturer means your inventory exists in a location you don't control. Raw materials, work-in-progress, and finished goods all sit at someone else's facility, managed by their systems and processes.
This creates a visibility challenge that trips up many CPG brands. You need accurate inventory data to plan production runs, fulfill customer orders, and manage cash flow—but you're dependent on your co-packer to provide that information.
Here's how to maintain the visibility you need without becoming that client who calls every day asking for counts.
Establish clear inventory reporting expectations
Before visibility problems arise, define what information you need and how often you need it. This should be part of your co-packer agreement.
What to track:
- Raw material inventory by item and lot
- Work-in-progress quantities
- Finished goods inventory by SKU and lot
- Inventory on quality hold
- Damaged or expired inventory
Reporting frequency:
Daily inventory snapshots are ideal, especially for finished goods and fast-moving materials. Weekly reports may suffice for slower-moving components. At minimum, get inventory counts before and after each production run.
Report format:
Specify the exact format you need. CSV files that match your system's import requirements save hours of manual data entry. If your co-packer uses a WMS with export capabilities, request direct data feeds rather than manually compiled reports.
Connect systems when possible
The gold standard for co-packer visibility is a direct integration between their warehouse management system and your planning tools. This provides near-real-time inventory data without manual reporting.
Many co-packers use WMS platforms like 3PL Central, ShipHero, or Deposco. Planster integrates with over 100 WMS and 3PL platforms, which means you can often pull inventory data directly rather than relying on emailed spreadsheets.
If direct integration isn't available, ask about API access or scheduled data exports. Even a daily automated email with an inventory file is better than waiting for someone to remember to send you numbers.
Reconcile counts regularly
Co-packer counts and your records will drift apart. Materials get used. Products get shipped. Damage happens. Small counting errors accumulate.
Weekly reconciliation of finished goods prevents small discrepancies from becoming large surprises. Compare your records to their reported counts. Investigate variances over 1-2%.
Monthly reconciliation of raw materials catches usage discrepancies. If their counts show more ingredient consumption than your BOM calculations suggest, either your BOMs are wrong or there's waste you should know about.
Quarterly physical counts with your presence (or a third party's) provide a hard reset. Don't rely solely on co-packer-reported numbers—verify independently at least quarterly.
Track materials you supply
If you're sending raw materials to your co-packer for production (versus buying materials they source), you need even tighter tracking.
Document every shipment you send to the co-packer. Include quantities, lot numbers, and expected receipt dates. Match this against their receiving confirmations.
Track theoretical versus actual consumption. If you sent 1,000 kg of an ingredient and they produced 20,000 units requiring 50g each, theoretical consumption is 1,000 kg. If their end-of-run inventory shows only 900 kg consumed, understand where the extra 100 kg went.
Plan for materials in transit. Material you've shipped but they haven't received exists in limbo. Account for in-transit inventory in your planning to avoid double-ordering.
Build relationships, not just reports
Co-packer relationships work best when both parties see themselves as partners. A few practices help:
Share your forecasts. Give your co-packer visibility into your demand expectations. They can plan capacity and flag potential issues early if they know what's coming.
Visit regularly. In-person visits build trust and give you ground-truth visibility that reports can't provide. Walk the warehouse. See where your inventory sits. Understand their processes.
Communicate proactively. If your forecast changes significantly or you're launching a new product, tell them early. Surprises strain relationships and lead to inventory problems.
Common co-packer visibility problems
Problem: Reports arrive late or inconsistently.
Solution: Make reporting a contractual requirement with specific deadlines. If reports are consistently late, discuss the root cause—it's often a process issue on their end that can be fixed.
Problem: Counts don't match reality.
Solution: Investigate systematically. Is it a counting error, a timing issue (inventory moved between count and report), or an actual loss? Different root causes need different fixes.
Problem: No lot-level visibility.
Solution: If lot tracking matters for your products (food safety, expiration dates, recall capability), insist on it. This may require upgrading their systems or processes—discuss who bears that cost.
Problem: Communication goes through too many layers.
Solution: Establish a single point of contact at the co-packer for inventory questions. Document contact information and escalation paths in your agreement.
Key takeaways
- Define inventory reporting requirements upfront—what data, how often, in what format
- Integrate systems directly when possible to avoid manual reporting delays
- Reconcile counts regularly: weekly for finished goods, monthly for materials, quarterly with physical verification
- Track materials you supply separately from materials they source
- Build partnership through forecast sharing, regular visits, and proactive communication
Frequently asked questions
How much inventory visibility should I expect from my co-packer?
At minimum, you should receive finished goods counts weekly and production reports after each run. Better co-packers provide daily inventory snapshots and real-time access through their WMS. The level of visibility often correlates with the size and sophistication of the operation.
What if my co-packer won't share inventory data?
This is a red flag. If they're holding your inventory, you have a right to know quantities and locations. Push back firmly. If they still refuse, consider whether this is the right partner. Lack of transparency often signals deeper operational issues.
Should I hold safety stock at my own warehouse or at the co-packer?
It depends on your fulfillment model. If products ship directly from the co-packer, keep safety stock there. If you distribute from your own facility, hold stock where you ship from. Sometimes a hybrid approach works—keep fast-movers at the co-packer and replenish your DC for broader distribution.
How do I handle inventory for multiple co-packers?
Maintain separate inventory records for each location and aggregate in your planning system. Planster supports multi-location inventory tracking, showing you stock at each co-packer and calculating requirements across locations. This centralized view is essential when production is distributed.
What happens to leftover materials after a production run?
Define this in your agreement. Options include: co-packer holds for your next run, co-packer returns materials to you, or co-packer disposes/sells at agreed terms. Whatever you decide, document it and track those materials in your inventory.