Formula Management: The Game-Changer For Contract Manufacturing

Contract manufacturers are vital in producing goods based on customer specifications and formulas. This complex process involves managing numerous formulas, bills of materials (BOMs), and production parameters for a diverse range of clients and products. Without a robust formula management system, contract manufacturers can face challenges such as errors, delays, and reduced efficiency. Implementing an Enterprise Resource Planning (ERP) solution with advanced formula management capabilities can help address these challenges and optimize production processes.

Centralized formula database

Effectively managing a large number of formulas requires a centralized and organized system. A spreadsheet-based approach is often prone to errors and makes it difficult to maintain consistency. An ERP solution can provide a centralized formula/BOM database that serves as a single source of truth for formula information. This database stores customer formulas, specifications, ingredients, procedures, and packaging requirements, ensuring that R&D and production teams have access to the latest and most accurate information.

Version control

In contract manufacturing, customer formulas frequently undergo revisions to reflect product improvements or specification changes. Manual version control can lead to confusion and errors, with teams potentially using outdated versions. An ERP solution can streamline version control by allowing users to create formula revisions with detailed change logs and effective dates. This ensures that teams always have access to a formula’s most recent approved version, maintaining consistency and adherence to formulation standards.

Formula flexibility

Contract manufacturers must cater to each customer’s unique requirements, which may involve specific ingredients, strengths, sensitivities, or allergen considerations. An ERP solution should provide the flexibility to create multiple formula variants or options for the same product. This enables teams to easily duplicate and modify formulas while maintaining their integrity. Such flexibility facilitates customization and ensures that contract manufacturing orders adhere to each client’s specific needs.

Formula accuracy

Contract manufacturing demands strict adherence to customer specifications regarding ingredients, quantities, and processing steps. An ERP solution can reduce data entry errors and enhance formula accuracy by assigning formulas to specific plants, production lines, and work centers. Formula rules can be configured to enforce SOPs (Standard Operating Procedures) and ensure consistent production practices. Real-time reporting tracks formula utilization and variances, providing valuable insights into production efficiency and identifying potential areas for improvement.

Formula costing

Accurate costing is crucial for contract manufacturers, as it forms the basis for pricing custom orders. An ERP solution can tie formulas directly with costing modules to determine precise costs for contract production orders. This includes factors such as materials, labor, and overheads. Accurate costing transparency enables contract manufacturers to derive optimal pricing strategies for their services.

Regulatory compliance

Contract manufacturers must adhere to a range of regulations, including security standards, allergen controls, restricted ingredients, and other compliance requirements defined by customers. An ERP solution can support regulatory compliance by restricting ingredients, tracking ingredient lots, controlling formula access, and enforcing change management procedures requiring customer approvals for formula revisions.


As a contract manufacturing business grows and adds more customers, formula management becomes increasingly complex. An ERP solution should provide the scalability to handle this growing volume of formulas. This includes unlimited formula storage capability, powerful version control, custom reporting, and advanced production integrations. A scalable solution ensures contract manufacturers can effectively manage their formulas as their business expands.

Production scheduling

Effective production scheduling is essential for contract manufacturers to meet customer demands and optimize resource utilization. An ERP solution can connect its formula management directly with the production scheduling system. This enables scheduling batches and production runs based on formula specifications, such as batch sizes, inventory availability, ingredients with shorter shelf life, manufacturing steps, quality protocols, and other relevant factors.

Change management

Managing formula changes is a critical aspect of contract manufacturing. An ERP solution can automate workflows for customer review and approval of any formula changes. This change management process ensures that all revisions meet customer standards before production, minimizing the risk of errors and maintaining product quality. The ERP can also track the entire change history for audit purposes, providing a transparent record of formula modifications.

Ingredient optimization

Optimizing ingredient procurement can significantly impact costs and efficiency for contract manufacturers. An ERP solution can analyze formula and inventory data to identify opportunities for ingredient optimization. This includes minimizing stock-outs of formula ingredients, reducing wastage due to spoilage, and lowering ingredient inventory carrying costs.

Overall impact

By implementing a modern ERP system with comprehensive formula management capabilities, contract manufacturers can:

  • Improve productivity and efficiency
  • Maintain consistent product quality
  • Enhance regulatory compliance
  • Optimize pricing strategies
  • Achieve greater customer satisfaction

Formula management is critical for contract manufacturers to enhance productivity, maintain quality standards, and ensure customer satisfaction. A modern ERP system provides a robust and scalable solution for centralized formula management tailored to the specific needs of formula-based manufacturing. This comprehensive approach optimizes production planning, efficiency, accuracy, and regulatory compliance across the contract manufacturing business, enabling companies to thrive in this competitive industry.

In the competitive world of contract manufacturing, staying ahead of the curve is essential for success. Deacom ERP stands out as a powerful and versatile solution specifically tailored to the needs of formula-based manufacturing. With its deep industry expertise and comprehensive formula management capabilities, Deacom empowers contract manufacturers to achieve operational excellence, enhance customer satisfaction, and maximize profitability.

About the author

Product Marketing Manager at | Website

Hilary Johnson has been in marketing for over 20 years with an additional skillset in mechanical engineering for half of her career. She has worked in a variety of manufacturing industries including aerospace & defense, medical devices, additive manufacturing, renewable energy, and more.