Cost and Pricing Model for Private Label and Contract Manufacturing

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Cost and Pricing Model for Private Label and Contract Manufacturing

How much should you charge customers for private label and contract manufacturing of dietary supplements and pharmaceutical products?

This question could be answered by a variety of methods. A common approach in contract manufacturing organizations is to look back at what was charged for similar products in the company’s history and just make a guess based on whether or not a profit was made the last time. Another approach is to charge whatever the customer will bear while making sure to cover costs. These are typical practices, but wouldn’t it would be nice if the answers were based on actual costs of raw materials and overhead operations? Now InstantGMP™ offers a way to calculate costs and prices with a real-time Cost and Pricing Model that is include in their InstantGMP™ MES manufacturing execution system. The model can be attached to each Master Batch Record and then automatically copied into each Batch Production Record so it becomes a permanent part of the batch documentation.  This model was developed in joint cooperation between InstantGMP™ and the formulation development experts at PharmaDirections.

The first step in using the model is entering known costs of all ingredients, raw materials and components which you can get from catalogs or purchase orders. The operational or overhead costs per day for the production facility are then entered into the model. Next comes the packaging and label costs. Finally the number of days needed for production are entered. This information forms the basis for making calculations no matter which ingredients are selected and no matter which the batch size is needed.

Using the model is easy. You just select the ingredients, raw materials and components that are going to be used in the batch, enter the amount of each that will appear in the final product and input a batch size. The model will calculate the cost for each dosage unit and for the entire batch.

You can select the margin you want to apply and the price that is charged to the customer is automatically calculated. You can easily select different ingredients or change the batch size and the model quickly updates the cost and price.

The benefits of this Cost and Pricing Model are:

  • It’s easy to update formulations and quickly get revised estimates of manufacturing costs and of prices to charge to customers.
  • You can quickly change ingredients and instantly get updated costs and pricing.
  • You can easily compare costs and pricing at different facilities or with different manufacturing processes.
  • You calculate costs and pricing at any scale of production.

The best benefit is that this Cost and Pricing Model is free with every InstantGMP™ MES application.