Expert Guide: Small Business Manufacturing | Tory Burch Foundation

You may have the branding and the buzz, but none of it matters if you can’t get the product made and made right.

Consumer packaged goods (CPG) expert and startup advisor Jessica Jaffe, brought her nearly 20 years of experience bringing products to market to a session of our webinar series focused on small business manufacturing. She built her career at Target, Safeway, and HelloFresh, among others and she’s seen what works—and what doesn’t. Jaffe shared her roadmap for navigating the process, from assessing manufacturers to setting up partnerships for long-term success.

Here’s everything you need to know, whether you want to have more product for your own store or you’re scaling to fill retail orders. 

THE DIFFERENT TYPES OF MANUFACTURERS.

Full Service

A turnkey solution, this supplier handles everything for you: formulation, ingredient sourcing, manufacturing, packaging, labeling, and compliance. 

Pros: Ideal for small companies lacking the infrastructure or time to manage every step themselves.

Cons: Less control over ingredient sourcing and customization.

Custom Formulation

The niche manufacturer—perfect for those with a unique or proprietary formula or specialized ingredients, like organic snacks or medical-grade beauty.

Pros: Full control, plus flexibility for smaller batches and test market launches. Manufacturers can also help you secure certifications—third-party approvals that verify your product meets certain industry standards, e.g. USDA organic.

Cons: Expensive, and will require more time for testing and approvals.  

Toll Processing or Co-Packing 

They provide a specific service, like packaging, for a “toll” or fee. You’re responsible for the rest, including raw materials and supply chain management. For example, after finalizing a recipe in a test kitchen and sourcing the bulk ingredients, you hand them off to a co-packer to get things packaged and retail-ready. But before you share anything, make sure your contract clearly states you own the recipe and include a mutual NDA to protect your intellectual property.

Pros: Great for smaller runs and keeping costs in check. You outsource only what you need.

Cons: Time- and labor-intensive. Your company must have a strong logistics team.

COST CONSIDERATIONS.

When setting your suggested retail price, Jaffe emphasizes relying on the total cost of ownership model, something many founders overlook. “We don’t always think about all the other touchpoints along the supply chain that will erode your margin,” she explained.

Cost of Goods

Minimum order quantities (MOQs) can lower per-unit costs—just bear in mind that more inventory means higher storage and shipping fees. Other factors that will impact cost: add-on charges for customization and material price fluctuations due to tariffs or market changes, both for ingredients and packaging.

Not sure where to begin with pricing? Even if your product is a new category, there’s always going to be some sort of benchmark that you can use as a guide. “If this didn’t exist,” Jaffe asks, “what is the alternate? What are people using instead?” Try using Investopedia’s Total Cost of Ownership explanation and example.

Warehousing and Fulfillment

Should your warehouse be near the manufacturer, a main retail partner, or your office? (Some manufacturers also offer warehousing, which can help cut costs.) What is the fee structure like—per pallet or per cubic foot per month?

For direct-to-consumer sales, your partner should be able to handle both bulk and individual units, with the appropriate software on the back end.

Work in perishables? Choose a place that offers temperature and humidity control. A first-in, first-out inventory system (a.k.a. FIFO) is critical, too—it prevents spoilage and reduces waste.

Distribution and Freight

How you ship—air, sea, or ground—will impact the cost and transit time. Watch out for added fees for fuel, insurance, duties, or special handling (e.g. fragile or temperature-controlled goods). If your partner has a preferred carrier, see if you can take advantage of the negotiated rate.

Most importantly, clarify who’s paying what (a.k.a. freight on board or FOB). An international manufacturer might cover shipping to the U.S., for example, but then you’re responsible for moving the product the rest of the way to its destination.

Tariffs

Jaffe recommends working with a lawyer or customs broker—and getting familiar with harmonization codes, the internationally recognized product-classification system. Get the code wrong and you could end up overpaying.

Retail

Landing a major retailer is exciting, but it comes with hidden costs—from slotting fees for securing shelf space to markdowns and chargebacks for damaged or expired goods.

OPERATIONAL CONSIDERATIONS.

Geographical Preference

Do you want a domestic or international manufacturer? The latter can offer lower production costs and greater scalability while the former allows for easier communication, faster lead times, and lower shipping costs. Domestic will also be closer to your warehouse, distribution partners, and customers not to mention you, which can help with quality control.

Volume Requirements and Scalability

Not all manufacturers can accommodate low-volume startups or scale quickly as your brand grows, so it’s important to determine both your initial production run and future scaling needs.

For instance, if you get a spike in demand, will they have the materials ready? Are they investing in new equipment or technology? How quickly can they support innovation, if you add a new SKU?

Certifications and Traceability

These matter for both the brand and its retailers. Certifications include Fair Trade Certified, gluten-free, kosher, Good Manufacturing Practices (GMP), Leaping Bunny, and cruelty-free. Traceability, meanwhile, refers to tracking every step of a product’s journey—including individual components—through the supply chain. Always request audit histories to ensure the manufacturer meets the standards.

Materials and Packaging

Are you sourcing the materials, or will the manufacturer? Does it have contracted relationships with suppliers? Otherwise, volatility in the supply chain can result in increased costs for you. The same questions apply to packaging—everything from the labels and tags to secondary packaging, especially for beauty brands.

HOW TO FIND MANUFACTURERS.

Start with online platforms and directories: Keychain, Thomas, Maker’s Row, Alibaba, and Global Sources.

Head to the trade shows, such as Natural Products Expo West, Newtopia Now, Pack Expo Las Vegas, Cosmoprof, and those hosted by the Private Label Manufacturers Association. They’re a great way to see the competition and touch and feel the products in person. Jaffe cautions against using brokers, however, at least in the early stages: “They’re expensive and you represent your brand the best.”

And, of course, there’s networking. “Connect with people in a similar industry,” Jaffe said. “They can provide referrals, alumni groups, chambers of commerce…. Get out there and have the conversations.”

HOW TO VET MANUFACTURERS.

Find out about their manufacturing, packaging, and research and development capabilities.

What are their sourcing strategies, and how are they hedging for future fluctuations?

Know their MOQs, tiered pricing, and lead times. “You want to make sure that, as you’re diminishing your inventory, you can reorder and get product in time for any retail opportunities,” Jaffe explained.

Ask for referrals, production samples, and if they’ve worked with brands of your size.

Visit the facility, or see a few and compare. “This is the best way to understand their capabilities, processes, quality control, and safety measures,” said Jaffe. “If you have the opportunity, do it.”

HOW TO NEGOTIATE TERMS.

Nail down the cost structure and any associated fees. Make sure there’s no ambiguity, and document the MOQs and tiered pricing. Also, get the manufacturer to commit to a lead time—it will help you manage your supply chain and respond to fluctuations in demand—and to payment terms “for as long as you can possibly get,” said Jaffe.

Protect your intellectual property. For example, if you’re commercializing your mother’s recipe, make sure you own it and the manufacturer can’t sell it to a different brand or private label. “Get that in place in the contract as soon as you start sharing any information about your business,” she continued, adding that a mutual NDA—to protect the integrity of both parties—is essential, too.

Just as important: have outside counsel review any agreements—they can flag issues around liability, insurance, and other potential risks. In fact, when asked who should be on your speed dial during this process, Jaffe put legal at the top, followed by an accountant and a trusted advisor who’s gone through it before.

YOU’VE SIGNED WITH A MANUFACTURER. NOW WHAT?

Schedule a trial run. If possible, Jaffe emphasized being on site for a first-run approval. “You only get one shot with the customer and the retailer,” she said, noting that on-site visits ensure open communication. “I’ve been in situations where I’ve had to reject a full run of product, $40,000 worth, because it didn’t meet the specification.”

Next, map out your demand and forecasting. Think about how much inventory you want to hold at any given time—remember, that’s cash you could otherwise be spending on marketing or other initiatives. Then secure those warehouse and fulfillment partners and finalize your distribution plan.

Last but not least, have a backup plan to mitigate risk. “Make sure you have a short list of alternate suppliers you’ve vetted in case you need to switch to a different manufacturer,” Jaffe advised.