Confidentiality and Secrecy:
Formula ownership, process secrecy, joint customer and supplier confidentiality and other mutual confidentiality agreements.
Raw Material Sourcing and Pricing:
- Who will purchase raw materials?
- How will raw materials be sourced and from where, and for how much?
- Who maintains vendor quality and delivery compliance records?
- Do minimum raw material quantities purchased need to be set?
- If partial bags, drums or shipments are needed, how much is bought, and who owns it?
Raw Material and Vendor Substitution Authority:
- Who has final approval on raw materials used in formulation?
- If substitutions are necessary, does the vendor have authority to make subsitutions?
Product Manufacturing Directions:
- Which party will establish product manufacturing directions?
- Will the producer be trained in desired methods or approve the producer’s established methods?
- Sign off by both parties.
Costs of Manufacturing:
These vary based on batch size, yield loss, batch labor, time in production, QC complexity, adjustments needed, and packaging complexity (especially packaging complexity!). Don’t overlook costs of warehousing and shipping.
- Can the job run on producer’s equipment as-is, or is hand-work required, especially in filling, labeling, packaging, palletizing and shipping?
- Can it be run using normal equipment settings and configurations?
- Can the producer easily re-set tolerances to the desired alternative?
New Equipment or Process:
- If new or heavily-modified equipment or process configuration is required, is there a joint purchase arrangement?
- Who pays?
- Who owns?
- At what time does ownership change?
- If it’s a joint purchase, what are the terms and amounts for payback or buyout?
- What happens to payback or equipment upon termination of the Agreement?
- Lump sum buyout?
- Sell equipment to producer?
- Sell to another?
- Take back?
Filling, Labeling, Shipping Directions:
- Container type, material, size, lining; lid type; handles?
- Label position and method of adhesion (glue or self-stick)?
- Boxes, trays, wrapping?
- Box loading and configuration?
- Stickers or extra labels and location; bar codes?
- Shape, size, material and strength of pallet; weight per pallet?
- Stacking pattern, wrapping, strapping, skid sheets or top cover?
- Markings, labels or bar codes on palletized package?
- Weight, loading pattern, blocking and bracing?
Raw Material Control:
- Who owns raw materials?
- What about excess and overstocks?
- Is shelf life an issue?
- Who keeps track of use, what are the frequencies of inventory and delivery reports?
- Delays in raw material delivery are which party’s issue?
- What happens to work-in-process if the agreement is cancelled or modified?
Finished Goods Control:
- Who takes title to finished materials?
- Who has ownership of excess and overstocks?
- What about shelf life issues?
- How are quantities to be held; what is the frequency of inventory reports?
- Any special storage requirements (humidity, temperature, etc.)?
Quality Control Coordination:
- Who trains whom in required test methods?
- Who approves the batch?
- Retains to which parties?
- Copies of production reports and QC certifications to whom and on what frequency?
- Off-spec, overstock, out of business, project canceled, shelf-life surpassed.
- Who takes responsibility for disposal or rework?
- Aexcel may not manage HazWaste shipments for product disposal in cases of another party’s responsibility; this is prohibited by law.
- Lead-times and consequences or penalties for late deliveries?
- Who arranges the shipments?
- FOB where?
- Who insures the shipments?
- Who covers the DOT compliance?
Invoice and Payment Terms:
- Timing of invoice (at ship, at make, etc.).
- Raw materials may be on extended terms; labor charges are not.
End-user Ordering Method:
- Direct communication to Aexcel, indirect, work from min-max inventories, or accumulated and submitted by which parties to this agreement?
- Who Does Technical Service at the End User?
- Length of Agreement and Requirements to Terminate:
- Number of days, method of notification, person notified, etc.
Cancellation Disposition of Materials:
- Shipments to where?
- Re-sale to third party?
- Producer take and use raw materials?
- Hazardous waste issues are controlled by EPA.
- For those things out of the control of the other party.
- Insurance certs?
Binding Legal Authority:
- In what state?
- Who receives various required communications and notifications, and in what form?
- MSDS and PDS control by whom?
- Certificates of Analysis?
- QC reports?
- Per gallon?
- Per batch?
- Labor only?
- Materials only?
- For each incremental step?
Additional Services or Charges by Producer:
- Lab to follow batch making
- Tech service
- Periodic inventory
- Test batches
- Equipment re-set
- Added set-up and clean-up
- Inventory holding and management
- In and out charges
- Upfront investment reimbursement in the event of (either party’s) termination
- Who gets paid for what by whom?
- Does any 3rd party have to be made whole (i.e. raw material or equipment suppliers who have shipped or installed but not been paid) and by whom?
- Earnest money on deposit or in escrow?