Managing Inventory When You Use a Contract Manufacturer (Co-Man)

Author: Ciara Rogers, Senior Product Manager at Cin7

For many growing CPG brands, partnering with a contract manufacturer (or co-man) is a natural next step. Whether you’re producing hot sauce, protein bars, cold brew, lip balms, or shampoos, working with a co-man allows you to scale production without investing millions in your own facility. But while co-manufacturing solves a lot of production challenges, it can introduce a new set of inventory management problems. Suddenly you’re coordinating raw materials and supplier lead times, production schedules, and finished goods across multiple partners. Without the right systems in place, it’s easy to lose visibility into what you have, where it is, and what you need to produce next.

Let’s break down both the benefits and challenges of working with co-manufacturers, and how tools like Cin7 can help bring everything together.

The benefits of working with a co-manufacturer

For growing food and beverage brands, contract manufacturers make scaling possible. Instead of building your own facility or investing in specialized equipment, a co-mans allow you to leverage an existing production line, experienced operators, and established food safety processes. This means you can ramp up production faster, expand into new retailers, and meet growing demand without massive capital investment. By outsourcing production, brands can focus on what they do best, building their brand, marketing their products, and growing sales.

But while co-manufacturing unlocks growth, it also adds complexity to your operations.

The challenges of managing inventory with a co-man

Once a co-man enters the picture, your supply chain becomes more complicated. Instead of a simple “make product → sell product” workflow, you now have multiple steps and partners involved.

For small CPG teams, inventory management quickly becomes one of the biggest operational challenges.

1. Raw materials, manufacturing and packaging are in multiple locations

Many brands provide ingredients or packaging materials to their co-manufacturer. For example, a hot sauce company might send bottles, labels, and caps to their co-man, while the manufacturer sources ingredients like peppers and vinegar.

This means your inventory may exist in several places at once:

• Ingredients at your supplier
• Packaging materials at your warehouse
• Components at your co-man’s facility
• Finished goods at a 3PL or distributor

Without a centralized system, teams often rely on spreadsheets and emails to track this. That makes it difficult to know exactly how much inventory you truly have available and ultimately leads to mistakes that hurt your bottom line.

2. Production planning gets harder

Production with a co-man often requires long lead times. You might need to book production slots weeks or months in advance, and ingredients may need to be ordered before a production run can even begin.

For example, a cold brew coffee brand might need to plan:

• coffee bean purchases
• bottle orders
• labels and packaging
• co-man production time

If demand spikes unexpectedly, maybe you land a new retail account or go viral on TikTok, it becomes very difficult to react quickly.

3. Inventory visibility disappears during production

One of the biggest pain points with co-manufacturing is losing visibility while products are in production.

Raw materials get consumed during manufacturing, and finished goods are produced in batches. Without proper tracking, it’s easy to lose track of:

• how much ingredient inventory was used
• how many finished units were produced
• how much waste occurred during production

This makes it difficult to calculate accurate cost of goods sold (COGS) or know how much inventory you truly have available to sell.

4. Sales orders and production often live in separate systems

Many small CPG companies start with a mix of tools:

• Shopify for ecommerce
• Amazon Seller Central
• QuickBooks for accounting
• Spreadsheets for inventory

Once production and co-manufacturing are added to the mix, these disconnected systems can cause serious problems.

For example:

• Ecommerce sites sell inventory that hasn’t been produced yet
• Production orders get delayed
• Purchasing teams don’t know when to reorder ingredients as accurate forecasting becomes nearly impossible

Without visibility across the entire supply chain, planning becomes guesswork.

How Cin7 helps manage co-manufacturing inventory

This is where inventory management software becomes essential.

Cin7 is an inventory management software and Lite ERP designed to help product-based businesses manage purchasing and suppliers, production, inventory, and sales in one connected system .For CPG brands working with contract manufacturers, Cin7 helps connect every step of the supply chain, from purchasing ingredients to finished goods and customer orders.

Manage purchasing and supplier inventory

Every production run starts with raw materials and packaging.

Cin7 allows brands to manage supplier purchasing directly in the system. Teams can create purchase orders for ingredients, bottles, cans, labels, or cartons and track when those materials are received. For example, a kombucha brand might use Cin7 to track tea leaves from one supplier, glass bottles from another, and labels from a packaging vendor.

All incoming inventory, across all locations, is recorded and visible in one place. This helps teams understand exactly what materials are available.

Track recipes and production with Bills of Materials (BOM)

In food and beverage manufacturing, every product has a recipe or formula. In inventory management software, this is called a Bill of Materials (BOM).

A BOM defines:

• the ingredients used
• packaging components
• production steps / production routing required
• quantities needed to produce each batch
• Labor required
• Machines/Machine time required

Cin7 allows brands to define these BOMs so they can accurately track how raw materials are converted into finished goods. A production BOM outlines the components, resources, and operations required to manufacture a product and supports the creation of production orders.

When a production run is scheduled, Cin7 automatically calculates how much of each component is required and tracks the inventory consumed during production.

This provides clear visibility into ingredient usage, finished product quantities, and production costs.

Track inventory through co-manufacturing production

Even if production happens at a third-party facility, Cin7 can still track the workflow.

Brands can create production orders in Cin7 for batches being produced by a co-man. This allows teams to track raw materials issued to the manufacturer, production quantities, and finished goods created.

Many brands set up the co-man as a separate inventory location such as:

• Co-manufacturer facility
• Production partner warehouse

When materials are sent there, inventory is transferred to that location.

Example workflow:

1. Bottles and labels shipped to co-man
2. Inventory transferred in Cin7 to Co-man location
3. Materials consumed during production
4. Finished goods created and recorded as finished goods in Cin7

Connect production with sales channels

One of the biggest advantages of Cin7 is that it connects production with sales. The platform integrates with ecommerce platforms, marketplaces, wholesale systems, big box retailers through EDI, and POS systems so inventory stays synchronized across all channels.

Cin7 automatically updates inventory levels as orders are placed and fulfilled. This helps prevent common issues like overselling inventory, running out of stock unexpectedly, and selling products that haven’t been produced yet. Everything stays connected in one centralized system.

Forecast demand and plan future production

Finally, Cin7 helps brands plan for future growth.

Cin7’s forecasting tool, ForesightAI, analyzes historical sales and inventory data to help businesses anticipate future demand and optimize purchasing and production planning. For a growing beverage brand, this might mean predicting how many cases of a flavor will sell next quarter.

With this insight, operations teams can:

• schedule production with their co-man
• order ingredients earlier
• ensure inventory is available for major retail orders

Instead of reacting to demand, brands can start planning ahead with confidence.

Bringing your supply chain together

Working with a contract manufacturer is one of the most effective ways for CPG brands to scale production. But it also introduces new operational challenges, especially around inventory visibility and production planning.

Without the right tools, it’s easy for inventory to get lost between suppliers, manufacturers, warehouses, and sales channels.

Cin7 helps bring these pieces together by connecting purchasing, production, inventory, and sales into one system. With clear visibility into ingredients, production runs, and finished goods, CPG brands can make smarter decisions, avoid stockouts, and scale their operations with confidence. As your brand grows, having a connected inventory system becomes just as important as having the right manufacturing partner.

As a StartupCPG partner, Cin7 also offers all StartupCPG members 50% off 3 months of Cin7 Core.  Learn more about Cin7 today.

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