Back when I started my first business, a big challenge was to decide on the type of packaging for my products. I didn’t know whether I should buy it from a broker or a factory. There were so many things to consider, and I was confused. However, after tons of research on this topic, I ended up knowing a lot about it. In this article, I will share with you everything you need to know when choosing your packaging supplier.
What exactly is a broker, and how is it different from a factory?
Don’t feel embarrassed if you don’t know exactly what a broker is, it’s not something you encounter daily. Still, you’re not alone, and I’m here to explain.
A broker is a person who arranges transactions between a buyer and a seller and gets a commission if they close a deal. So, he doesn’t actually own any assets, he may not even see the final products, but he still earns good amounts of money.
He often has access to many factories and gets better prices, because of the amount of work he can offer.
Broker vs Factory: Pros and Cons
Since there is no general answer, obviously both of the options have their advantages and disadvantages.
Pros and Cons for Brokers
| Pros | Cons |
| Complex product solution | Not professional in single product comparing matched factory, but familiar to the whole chain |
| Budget-friendly solutions | |
| Quick delivery | |
| Consultancy | |
| Lower MOQ | |
| Design service | |
| Sourcing service |
Pros and Cons for Factories
| Pros | Cons |
| Better price per unit | Less flexibility |
| More efficiency on simple projects | Larger minimum quantities |
| Larger budget needed |
Which kind packaging company should I choose?
You should choose to work with a factory if you plan to place a big order and you already have the exactly design you request. On the other hand, choose a broker if you want to place smaller orders or if you need consultancy on the development of the project.
However, there are more things to consider when taking such an important decision for your business. The good news is I will talk about each of them so you don’t lose money or time by trying everything available on the market.
What exactly should you think of when choosing your packaging supplier?
Nobody could say that a broker is better than a factory or the other way around. And sadly, reading minds is not that possible, for the moment.
So… Just concentrate on what you need and write down the main aspects of that desire. This will get you a step closer to the final answer.
To help you with that process, I will give you a list of things you should analyze before making a decision on good packaging solution:
- Quantity requested
- Complexity of the project
- Stage of the project
- Budget
The quantity requested
You need to think about the quantity of the orders you want to place and how frequent they will be.
If you plan to order larger quantities and less frequently, choose a factory. Usually, they will offer you a better price per unit.
If you need smaller quantities, more frequently, a broker is your better option. Since they act as middlemen, they will also work with smaller quantities, but typically for a higher price per unit. Overall, you will spend less money, more efficient.
The complexity of the project
In my experience, most of the times, if you consider your solution to be complex, you should probably choose to work with a broker.
As you advance in the design project, the product can suffer many changes. This can sometimes be too much for a factory, because of limited equipment and expertise.
A broker has the advantage to work with many factories, with various experts and machinery. They can offer you multiple solutions for your needs.
Stage of the project
You should also consider which stage are you in with the development of your project.
If you are at the beginning of the process and need consultancy, the best option would be a broker. They often offer you advice and newer solutions for what you would like your packaging to look like.
A factory normally requests a final prototype that they can start to produce quickly. They won’t take the time to discuss with you too many options and will offer less flexibility.
Budget
The budget you have for this specific area plays a very important role in the decision.
In general, working with a factory requires a bigger budget. You need to invest in developing the prototype and also in a bigger quantity ordered, and this will drive your costs up.
If you can’t afford to invest a lot of money in the packaging, a broker is your answer. They can also offer you products that they have in stock, so you don’t need to invest in a design process of your own. The smaller quantities they agree to work with are also more budget-friendly.
Which factors influence my decision?
Here we talked 2 factors that influence the decision most.
- Company type, depending on the type of the company and the project, there is some basic advice.
- Company size
How company type influence decision?
Business models are different for each company. The resources available for developing a packaging solution are variable. So, the type of your company should certainly influence your decision.
We did some research and we discovered some typical solutions chosen by companies from different industries. Here are the results:
Co-packaging original equipment manufacturers
Generally speaking, they choose brokers for more complex packaging kits and factories for simpler ones.
Design companies
Choose a factory if you think you can handle the design part of the project, as it will save you a ton of money. Otherwise, go for a broker for a smaller initial investment.
Wholesale companies
It seems like your only option would be working with a broker. Your business model requires this kind of partnerships in order to produce more profit.
Sourcing agent
As a sourcing agent, if you have the time and the willingness to give for probably one of the most exhausting tasks of your life, go for a factory. Otherwise, just choose a broker, it’s simpler.
Developing a prototype and then ensuring that everything works smoothly is really time-consuming. There are way too many parties involved in the process. You need to be tough to do it all!
How company size influence my decision?
Sometimes, a small companies annual revenue is equal to a bigger companies budget for developing some new packaging options. Although that’s pretty sad for the first ones, only by taking the right decisions they could increase their budget.
So, here are some basic instructions depending on the size of your business.
If you represent a larger company, such as a corporation…
You often have a substantial budget to spend on packaging. Then, the decision is made based on the complexity of the products and the quantity needed.
If your product is complex, then your only viable option is usually a broker. However, if it’s a simple project, a factory could offer a better price, especially if the quantity needed is big enough.
If you own a small business…
Most of the time, a broker is the best choice. They can offer smaller quantities so you can test if your products are selling well, and you could increase the number with each order.
They will also help you to develop the right product for your needs.
Concluding…
As you probably found out, there is no such thing as the best option for everyone. It gets a little complicated, but it is what it is. With some effort, you hopefully found out what you should do.
At the end of the day, finding a business partner that can help your business grow healthy is the only thing that matters.
