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SCM Spotlight: Managing Packaging in Logistics

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In the early 1920s, Avocados were positioned as a delicacy for the rich. It was marketed as “The aristocrat of salad fruit”. Due to its delicate nature, Avacados required costly post-harvest storage and distribution to ensure fresh and ripe availability at retail. Due to the nature of the product, value loss in the chain was significant. In 1970s, the till then-popular variety ‘Fuerte’ was taken over by ‘the Hass’. This was creamier and better flavour than the Fuerte. With its thicker, pebbly skin it endured the logistics process better. Its smaller size induced customers to have more of it, more frequently. With almost 70% more units in the same size box, it made business sense for the distributors and retailers as well. And my packaging expert friends tell me, “If Avacado can do, I can do too!”

Let us understand the packaging journey thus far and assimilate the superlative business impact that packaging presents in the current changing (and uncertain) shopper behaviour and route-to-market.

Packaging…thus far

The humble invention of the earthen pot started it all. It was the first time that hunter-gatherer mankind could safely keep food & water for later consumption. However, we will start our walk through journey of packaging from recent decades only. (laughs)

“Packaging is a coordinated system of preparing goods for safe, secure, efficient and effective handling, transport, distribution, storage, retailing, consumption and recovery, reuse or disposal combined with maximizing consumer value, sales and hence profit.” Mazen Saghir Now, some readers might say “Bhai, kehna kya chahtey ho?”

Unlike the local sweet shop, a factory produced good requires several layers of packaging for it to be stored and transported in good form until it is actually consumed. The packaging layers are:

  • Primary packaging: this layer is in direct contact with the product.
  • Secondary packaging: contains several primary packs
  • Tertiary packaging: several secondary / primary packs arranged together on pallet
  • Group packaging: packaging that protects several primary packs (eg mono-carton)
  • Industrial packaging: for B2B nature of WIP or raw materials
  • Used packaging: end-life state of the packaging after product is removed by consumer.

Approximately 7 different types of packaging material go into a single parcel. Paper, tape, cardboard, Styrofoam, bubble wraps are most commonly used.

Over the years, packaging has developed as a specialized function with the business objective of highest product safety at lowest cost (a. cost packaging material itself, b. logistics cost impact thereof). In the current VUCA times, packaging provides meaningful opportunities to make a significant impact on brand building (topline) and sustainability (ESG)…in addition to cost savings (bottom line).

Sustainability

Customer and investors alike are demanding companies to be more environment friendly in all manners. Most current forms of packaging materials are derived from plastics and wood, both of which are not sustainable. Further, environment friendly disposal of used packaging material is critical to sustainability.

The Global Mantra promulgated is: Reduce, Re-use, Re-cycle

First, not all types of plastics can be recycled. Empty plastic bottles have a higher recyclability than the shrink films. Further, from business economics angle, recycled plastics compete with virgin plastic on costs. Alas, packaging material recyclability currently does not augur well from business economics. We certainly require Innovation and Investments in the waste management companies.

Delivery companies do not take back the packing material. It may sound very out-of-place today when I suggest that used packaging material be collected by delivery person himself. This may be mandated within this decade.

Here is a preview to some interesting work in this space:

Nanotechnology: Ply-wrapping films are being made thinner with the use of new technology at the molecule level in each of the layers of the film to provide the desired stretchability, higher puncture resistance, improved holding force. This helps in reduced consumption of plastic.

Compostable: packaging solutions made largely with corn starch, sugarcane pulp. This breaks downs into non-toxic elements in 180days in a composting environment. * Pulp from bamboo and mushrooms is being tested to create packaging that resembles Styrofoam. There is innovation work also being done in creating water-based cohesive that holds cartons together, eliminating the need of wrap-films altogether.

Awareness: ‘We fear what we do not know’. Good consumer education, regulations to help customers adapt to the right things. Awareness is the first step to change. Necessary regulations need to be mandated Label primary packaging correctly identifying if it is re-cyclable or not. In a recent initiative, HUL has put up refill kiosks at leading MT outlets where environment conscious shoppers can buy detergents in their own containers.

Smart Packaging

Smart packages have RFID chips or IOT sensors embedded onto them. It helps trace the journey of the product since first packed. The information provided is beneficial for quality assurance, regulatory documentation, inventory management, customer interaction. While the use case is immediately justified in temperature and handling sensitive cargo, it is finding traction in all other categories from tracking, customer service and inventory management perspective.

Smart food package labels turn color shades to signify the extent of quality deterioration. At set levels of degradation, Smart label will turn opaque, making the bar code illegible, thus not billable at the cash till. In the absence of an opportunity to pick from the shelf, e-shoppers truly miss the physical store experience and quality assurance. Smart labels can fill-in partially for one part.

Ecommerce: Delivering Experience through Packaging

A couple of years ago, the parcel received from the e-tailer would have no less than 40% air. It was literally your product tossed in a carton with lots of cushioning. Customers do believe (albeit unconsciously) that they are paying for the extra packaging. There has been a tangible reduction in the ‘air in the carton’ (right-sizing the boxes) but it has been purely from the utilitarian packaging approach of reducing costs while maintaining product integrity. We are now post-graduating to the age of “unboxing experience”. Logistics has a big role to play. Unboxing the carton is the last moment of truth for brand communication. Having taken care of the utilitarian need of packaging, here we have an opportunity to make the unboxing experience personal and memorable.

For example: instead of round shape bubble wrap, a dog toys/food company used dog-bone shaped bubble wrap. It made the brand stand out at the time of unboxing itself. Based on the customer browsing history, items in the wish-list, items dropped from the cart, AI …one could drop in paper coupons, messages along with the invoice in the now customized carton. This will certainly send a subtle message to the shopper that she is means more than just a ‘click’ to the platform. Basis the demographics & product fragility, the Fulfilment Centre could choose from the available 8-10 packaging options (colourmaterial). Cardboard box versus paper bag for different PIN codes basis the customer profiling.

Conclusion

Indeed, packaging is set to play a significant business role. It is advised that packaging experts should be invited early in the product design cycle itself. Also, we must continuously partner for the regular customer/shopper promotions and proactive logistics initiatives… Delivering the brand promise with every shipment!


This article by Shammi Dua, Lead – Supply Chain CSL, Distribution at Unilever originally appeared in the SCM Spotlight segment for the February 2022 issue of Logistics Insider magazine. All views expressed in the article are his own and do not represent those of any entity he was, is or will be associated with.

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