Major challenges with outsourcing manufacturing for your healthcare brands

Outsourcing manufacturing for healthcare brands can be an appealing solution for many beauty businesses. It allows them to focus on product development, marketing, and scaling, while a third-party manufacturer handles the complexities of production. However, while outsourcing manufacturing sounds like a magic bullet, it comes with its own set of challenges that can impact your brand’s success.

Why Outsourcing Seems Like the Perfect Solution (But Isn’t Always)

As a healthcare brand, you’ve probably realized that manufacturing can be time-consuming, capital-intensive, and require specific expertise. The solution? Outsource production. After all, the market is teeming with contract manufacturers ready to turn your formulations into products at scale.

Here’s what outsourcing promises:

• Lower upfront investment in equipment and facilities.
• Access to specialized expertise, allows you to bring innovative products to market faster.
• Freedom to focus on marketing and customer acquisition rather than worrying about the technicalities of production.

Sounds like a win, right? But here’s the thing: outsourcing manufacturing is far from a foolproof solution. There are significant challenges that, if left unchecked, could derail your brand’s growth.

Where Things Start to Go Wrong

The reality of outsourcing is often different from the glossy promises. Below are key challenges that brands face when they entrust their manufacturing to external companies.

1. Quality Control Issues

One of the biggest concerns with outsourcing is quality control. When you’re not handling production in-house, monitoring every aspect of the process is harder. Quality control inconsistencies are an unintended risk when your product goes through multiple hands.

Manufacturers may cut corners or miss minor defects, which could lead to:

• Batch inconsistencies.
• Poor product performance (e.g., separation of ingredients).
• Failure to meet industry regulations.

For smaller brands especially, one bad batch could lead to damaged reputations, loss of customers, and costly recalls.

2. Communication Barriers

Most healthcare product manufacturers operate on a global scale, with many based in countries far from your headquarters. This opens up potential issues with communication, especially if you’re dealing with a manufacturer in a different time zone or with whom you don’t share the same language.

Miscommunication over product specifications, timelines, or regulatory standards can lead to delays, incorrect formulations, or packaging mishaps. These missteps are expensive both in time and resources—something to be careful of when working with external partners.

3. Supply Chain Vulnerabilities

When you outsource production, you’re not just relying on one company—you’re often relying on a network of suppliers and subcontractors, leading to supply chain instability. Any delay or issue with raw material suppliers can disrupt your entire production schedule.

This was a harsh reality for many brands during the COVID-19 pandemic, where global supply chains were severely disrupted. Even major players like Estée Lauder experienced production delays due to ingredient shortages and factory shutdowns. For small and mid-sized brands, these disruptions can be devastating.

4. Hidden Costs

Outsourcing can be marketed as a cost-saving measure, but hidden costs often arise, especially if scaling quickly. While you may save on equipment and labor, there are often additional expenses related to:

• Shipping and logistics.
• Customs and duties (for international manufacturers).
• Audits and quality assurance inspections.

Plus, if any batches are faulty, you’re responsible for covering the costs of recalls and returns. This financial strain can eat into your profit margins.

5. Loss of Control Over Intellectual Property

When you outsource, you’re trusting another company with your formulations, processes, and product designs. Although most manufacturers sign non-disclosure agreements (NDAs), there’s always the risk of intellectual property theft or misuse, especially in competitive markets like healthcare.

An example of this was seen in a dispute between L’Oréal and Olaplex, where L’Oréal was accused of stealing patented formulations after working with Olaplex on a potential acquisition deal. While this case escalated to the courts, smaller brands often don’t have the resources to pursue legal action if their IP is misused.

How to Mitigate Outsourcing Challenges

Now that we’ve identified the major challenges, let’s discuss actionable solutions that can help your brand navigate outsourcing without compromising on quality or control.

1. Establish Rigorous Quality Assurance Protocols

Even though you’re not handling the manufacturing process yourself, you can (and should) implement strict quality assurance protocols. Conduct regular audits of your manufacturer’s facilities, review batch samples, and work with a third-party testing lab if necessary.

Set clear quality standards with measurable metrics, and ensure your manufacturer holds proper quality control certifications for their processes and ingredients

2. Maintain Clear and Constant Communication

Make sure there’s a clear communication strategy in place. This includes:

• Having a dedicated project manager to liaise with your manufacturer.
• Using collaboration tools that can document conversations and track production milestones.
• Regularly visiting your manufacturer’s facility. This not only improves communication but also fosters a stronger working relationship.

3. Diversify Your Supply Chain

Don’t rely on a single manufacturer or supplier for your products. Diversifying your supply chain can help mitigate the risk of production delays or ingredient shortages.

For instance, many brands turned to local manufacturers during the pandemic when international suppliers were struggling. This strategy may involve higher upfront costs, but it will pay off by reducing vulnerability to external disruptions.

4. Negotiate Transparent Contracts

Before entering into any agreement, ensure that your contract is clear about:

• Production timelines.
• Penalties for late or defective products.
• Ownership of formulations and intellectual property.

This level of transparency helps prevent misunderstandings down the road and ensures both parties are on the same page.

5. Focus on Building a Strong Relationship

Building trust with your manufacturing partner is crucial for long-term success. Invest time in getting to know them, understanding their processes, and collaborating closely on new products. Manufacturers are more likely to prioritize your brand if they see you as a valuable partner rather than just another client.

Conclusion: Outsourcing Isn’t Perfect—But It Can Be Managed

Outsourcing your healthcare brand’s manufacturing comes with real challenges, from quality control issues to communication breakdowns and intellectual property risks. But with the right manufacturer, proper systems, clear communication, and strategic partnerships, you can minimize these risks and grow your brand.

The key is not to see outsourcing as a set-and-forget solution. It requires constant vigilance, strong relationships, and a proactive approach to quality assurance.