In many boardrooms, manufacturing assets are now the largest undeployed capital pool. Historically, manufacturing decisions in the Consumer Packaged Goods (CPG) industry have been centered around scale and aligning manufacturing near demand centers to focus on cost optimization. The environment in CPG has been shifting over the past several years with insurgent brands driving growth and taking market share, changing macroeconomic and geopolitical conditions challenging supply chains, and increased scrutiny of return on invested capital by investors and organizations. 

Yet many of those assets have not been reevaluated through today’s capital and risk lens. 

These pressures have led many organizations to ask questions about owned vs. asset light manufacturing models and to rethink the best approach for their organization. Rather than leaning into a strictly owned manufacturing or asset-light strategy, an asset-intentional manufacturing strategy incorporates a disciplined evaluation of every production asset against competitive advantage, capital efficiency, and risk-adjusted return on capital. Owned assets must earn their place in the portfolio. 

Where Ownership Creates Advantage 

Asset ownership is justified and fits into a capital strategy in two scenarios: differentiating assets and strategic control assets. 

Differentiating assets are those where the organization leverages proprietary formulation or manufacturing methods; economies of scale are difficult to replicate externally; quality precision is an anchor to brand equity; regulatory oversight requires direct control; or speed to innovation is critical to achieving competitive advantage. 

Strategic control assets represent manufacturing that provides supply resilience across high-risk categories, guarantees supply across high-volume SKUs, or where internal manufacturing is the optimal choice for cost optimization. 

For many organizations, a review of their product and manufacturing portfolio often highlights that only a portion of their business falls into this category. 

Where Ownership Becomes a Capital Drag 

Manufacturing assets are capital intensive, reinvestment heavy, and balance sheet constraining. The current macroeconomic environment and high interest rates are pressuring organizations further, highlighting the opportunity cost of capital tied up in manufacturing. 

Non-strategic areas are where leveraging outsourcing can drive the best results for an organization. Scenarios where outsourced production tends to be the optimal capital strategy include product categories where co-packer or co-manufacturer capabilities and capacity are high, production of products is standardized, differentiation is driven by the brand (not the process), and where economies of scale are hard to achieve with internal manufacturing. Appropriately identifying and developing strategies to mitigate risk and build supply resilience can make outsourcing production of these goods a positive capital strategy for the organization. 

In one recent project, Clarkston partnered with a CPG brand to assess its long-term manufacturing strategy. A portfolio-level review revealed that several owned production assets weren’t tied to proprietary differentiation and were generating below-portfolio Return on Investment Capital (ROIC). Through a structured asset-intentional assessment, leadership aligned on transitioning select production to external partners while retaining ownership in strategically differentiating areas. Post-execution, the organization is now redeploying capital toward brand expansion and innovation investments while building governance capabilities to support a hybrid network. 

Measuring Capital Efficiency with Return on Invested Capital (ROIC) 

Financial analysis and framing of capital utilization is critical to aligning an optimized strategy. ROIC is the metric that should be evaluated in setting capital strategy, as it layers in the effectiveness of capital at generating return for an organization, rather than focusing on EBITDA and a common approach of leveraging fixed cost reduction narratives. ROIC enables organizations to align financial and operational goals while assessing capital turnover and the true cost to capital utilization.  

Owning facilities and production assets ties up significant capital, and the opportunity cost should be evaluated as part of the equation. Instead of owning assets, could the capital be better deployed to drive innovation, brand investment, automation, or acquisition? 

Adding in outsourced production creates complexities as well that need to be balanced in this equation. Layering in the co-packer or co-manufacturers margin adds cost, contract complexity, drives implications across logistics, and shifts the organization towards a variable cost model.  

Balancing Risk in Manufacturing Strategy 

Increasing supply chain complexities and challenges have highlighted the importance of supply resilience over the past several years. It’s essential to appropriately balance risk in designing a capital strategy around manufacturing. In shifting toward an asset-intentional strategy, organizations need to evaluate the right balance of supplier concentration, geopolitical exposure, raw material volatility, and regulatory oversight to balance risk exposure with cost optimization. 

In another project for a CPG client, Clarkston conducted a comprehensive co-manufacturing benchmarking and strategy assessment that extended beyond production footprint to include commodity pricing, logistics cost analysis, and warehousing contract strategy. As a core component of this analysis, each co-manufacturer and commodity were evaluated to fit within the desired risk portfolio of the client. The recommendations included opportunities to leverage their strategic partnerships in new ways to optimize costs and improve supply chain resiliency. 

Depending on the risk appetite of the organization, this may lead them to retain ownership of certain production to materially reduce risk exposure. Where external production is selected, a diversified external supplier network can provide flexibility and improve business continuity in the event of a supply challenge, cost impact, or other significant event occurring. 

Aligning manufacturing strategy with this method can reduce risk and ultimately enhance supply resilience while finding a healthy balance between capital strategy and supply chain optimization. 

Governance is Imperative to Successful Implementation 

Shifting manufacturing strategy toward a hybrid network or a fully asset-light approach introduces additional complexities into managing the business, both operationally and financially. Governance maturity is a prerequisite to successfully enabling a strategic shift in manufacturing strategy. This requires end-to-end digital visibility, disciplined S&OP integration, scenario modeling capabilities, structured contractual risk allocation, and formal supplier performance management. 

With these core capabilities, hybrid or asset-light manufacturing networks can outperform a traditional owned manufacturing model. Lacking these capabilities can create undue risk and result in negative supply and cost scenarios when challenges occur.  

The Strategic Outcome 

Asset-intentional manufacturing delivers capital flexibility, scalable capacity, and risk calibrated supply resilience. It aligns capital strategy with operational execution, enabling organizations to: 

• Redeploy capital to accelerate growth 
• Create network agility and scalability 
• Build risk calibrated supply resilience 

Asset-intentional organizations routinely ask: 

• Would we build this facility today? 
• Does this asset protect proprietary differentiation? 
• Is each asset’s ROIC above the portfolio average? 
• Does ownership materially reduce risk exposure? 
• Do we possess governance maturity to outsource responsibly? 

At Clarkston, we help our clients answer these questions and many more as we partner with leadership teams to evaluate, design, and operationalize asset-intentional manufacturing strategies that balance capital efficiency, competitive advantage, and risk exposure.