Packaging is the technology of enclosing or protecting products for distribution, storage, sale, and use. Packaging also refers to the process of design, evaluation, and production of packages. Packaging can be described as a coordinated system of preparing goods for transport, warehousing, logistics, sale, and end use. Packaging contains, protects, preserves, transports, informs, and sells. In many countries it is fully integrated into government, business, institutional, industrial, and personal use.
IMPORTANCE/ROLE OF PACKAGING IN SUPPLY OPERATIONS
- Physical protection – The objects enclosed in the package may require protection from, among other things, mechanical shock, vibration, electrostatic discharge, compression, temperature, etc.
- Barrier protection – A barrier from oxygen, water vapor, dust, etc., is often required. Permeation is a critical factor in design. Some packages contain desiccants or oxygen absorbers to help extend shelf life. Modified atmospheres or controlled atmospheres are also maintained in some food packages. Keeping the contents clean, fresh, sterile and safe for the intended shelf life is a primary function. A barrier is also implemented in cases where segregation of two materials, prior to end use is required, as in case of special paints, glues, medical fluids etc. At consumer end, the packaging barrier is broken or measured amounts of material removed for mixing and subsequent end use.
- Containment or agglomeration – Small objects are typically grouped together in one package for reasons of efficiency. For example, a single box of 1000 pencils requires less physical handling than 1000 single pencils. Liquids, powders, and granular materials need containment.
- Information transmission – Packages and labels communicate how to use, transport, recycle, or dispose of the package or product. With pharmaceuticals, food, medical, and chemical products, some types of information are required by governments. Some packages and labels also are used for track and trace Most items include their serial and lot numbers on the packaging, and in the case of food products, medicine, and some chemicals the packaging often contains an expiry/best-before date, usually in a shorthand form. Packages may indicate their material with a symbol.
- Marketing – The packaging and labels can be used by marketers to encourage potential buyers to purchase the product. Package graphic design and physical design have been important and constantly evolving phenomenon for several decades. Marketing communications and graphic design are applied to the surface of the package and (in many cases) the point of sale display. Most packaging is designed to reflect the brand’s message and identity.
- Security – Packaging can play an important role in reducing the security risks of shipment. Packages can be made with improved tamper resistance to deter tampering and also can have tamper-evident features to help indicate tampering. Packages can be engineered to help reduce the risks of package pilferage or the theft and resale of products: Some package constructions are more resistant to pilferage and some have pilfer indicating seals. Counterfeit consumer goods, unauthorized sales (diversion), material substitution and tampering can all be prevented with these anti-counterfeiting technologies. Packages may include authentication seals and use security printing to help indicate that the package and contents are not counterfeit. Packages also can include anti-theft devices, such as dye-packs, RFID tags, or electronic article surveillance tags that can be activated or detected by devices at exit points and require specialized tools to deactivate. Using packaging in this way is a means of loss prevention.
- Convenience – Packages can have features that add convenience in distribution, handling, stacking, display, sale, opening, reclosing, use, dispensing, reuse, recycling, and ease of disposal
- Portion control – Single serving or single dosage packaging has a precise amount of contents to control usage. Bulk commodities (such as salt) can be divided into packages that are a more suitable size for individual households. It is also aids the control of inventory: selling sealed one-liter-bottles of milk, rather than having people bring their own bottles to fill themselves.
Factors influencing Packaging decisions and considerations in International Marketing
There are a number of factors that influence decisions in respect of packaging features like size, shape, design, surface graphics, color schemes, labeling, materials etc.
- Physical Characteristics:
Packaging decisions are influenced by certain physical characteristics of the product like the physical state, weight, stability, fragility, rigidity, surface finish etc.
- Chemical characteristics:
Certain physio-chemical factors like the effect of moisture, oxygen, light, flame, bacteria, fungi, chemical action etc., on the product are vary important factors to considered while making packaging decisions.
While packaging is very important in marketing, it is costly too. Indeed, there are a number of cases where the cost of packing is more than the cost of the content. The rising cost of packaging has become a matter of serious concern. Every effort should therefore, be made to reduce the packaging costs as much as possible without impairing the packaging requirements.
packaging should also necessarily possess the quality of convenience from the point of view of consumers, distributors and producer. Hence, apart from the functional needs, a good package should possess certain features like ease to open and close, ease to dispense, ease to dispose of, ease to recycle, ease to identify, ease to handle, convenience to pack, convenience to stack, convenience to display etc.
- Miscellaneous Factors:
Apart from the factors mentioned above, packaging decisions may be influenced by a number of other factors. For example, if there is any statutory rule in respect of packaging, it will have to be abided by. The socio-cultural factors could influence packaging decision. Consumer attitudes also have to be given due consideration. The growth of consumerism in a number of countries, interalia, also suggests that packaging decisions should be made with meticulous care.
Special Considerations in International marketing:
In addition to the general considerations in packaging mentioned above, there are certain special factors to be considered in export packaging decisions. Important among them are the following:
- Regulations in the Foreign Countries:
Packaging and labeling may be subject to government regulation in the foreign countries. Some countries have specified packaging standards for certain commodities. The trend toward requiring labeling in a countryâ€™s native language is growing. If such regulations are not strictly followed, the goods may be confiscated or may attract some other punitive action.
- Buyers Specifications:
In some cases, buyers like the exporters to give packaging specification. While incorporating such specifications it should also be ensured that packaging satisfies other requirements like the statutory requirements.
- Socio-cultural factors:
While designing the packaging for a product, socio-cultural factors relating to the important country like customs, traditions, beliefs etc, should also be considered.
- Retailing Characteristics:
The nature of retail outlets is a very important consideration packaging decision. For instance as pointed out earlier, in some of the foreign markets as a result of the spread of supermarkets and discount houses, a large number of products are sold on a self-service basis. The package has, therefore, to perform many of the sales tasks and hence it must attract attention, describe the productâ€™s features, give the consumer confidence and make a favorable overall impression.
- Environmental factors:
Packaging decisions are also influenced by certain environmental factors like weather and climate factors. The impact of such factors in the place where the product originates, while the product is in transit and while in the market etc., should be considered. The package should be capable of withstanding the stresses and hazards of handling and transportation, stacking, storing etc., under diverse conditions.
Attention should also be paid to the aspects relating to the disposal of the packaging. One of the qualities required for good package is that it could be easily disposed of or recycled. In some of the developing countries like India many packaging materials easily find some other use or are recycled. But the situation is different in other countries. Indeed, the disposal of packaging materials is causing environmental problems in a number of countries Reusable packages the risk of misusing it for selling bogus products.
- Containers plastics and mettalic
- Role of packaging in supply operations
The traditional “three R’s” of reduce, reuse, and recycle are part of a waste hierarchy which may be considered in product and package development.
- Prevention – Waste prevention is a primary goal. Packaging should be used only where needed. Proper packaging can also help prevent waste. Packaging plays an important part in preventing loss or damage to the packaged-product (contents). Usually, the energy content and material usage of the product being packaged are much greater than that of the package. A vital function of the package is to protect the product for its intended use: if the product is damaged or degraded, its entire energy and material content may be lost.
- Minimization – (also “source reduction”) The mass and volume of packaging (per unit of contents) can be measured and used as one of the criteria to minimize during the package design process. Usually “reduced” packaging also helps minimize costs. Packaging engineers continue to work toward reduced packaging.
- Reuse – The reuse of a package or component for other purposes is encouraged. Returnable packaging has long been useful (and economically viable) for closed loop logistics systems. Inspection, cleaning, repair and recouperage are often needed. Some manufacturers re-use the packaging of the incoming parts for a product, either as packaging for the outgoing product or as part of the product itself.
- Recycling – Recycling is the reprocessing of materials (pre- and post-consumer) into new products. Emphasis is focused on recycling the largest primary components of a package: steel, aluminum, papers, plastics, etc. Small components can be chosen which are not difficult to separate and do not contaminate recycling operations. Packages can sometimes be designed to separate components to better facilitate recycling.
- Energy recovery – Waste-to-energy and Refuse-derived fuel in approved facilities are able to make use of the heat available from the packaging components.
- Disposal – Incineration, and placement in a sanitary landfill are needed for some materials. Certain US states regulate packages for toxic contents, which have the potential to contaminate emissions and ash from incineration and leachate from landfill. Packages should not be littered.
Packaging machines may be of the following general types:
- Accumulating and Collating Machines
- Blister packs, skin packs and Vacuum Packaging Machines
- Bottle caps equipment, Over-Capping, Lidding, Closing, Seaming and Sealing Machines
- Box, Case and Tray Forming, Packing, Unpacking, Closing and Sealing Machines
- Cartoning machines
- Cleaning, Sterilizing, Cooling and Drying Machines
- Coding, Printing, Marking, Stamping, and Imprinting Machines
- Converting Machines
- Conveyor belts, Accumulating and Related Machines
- Feeding, Orienting, Placing and Related Machines
- Filling Machines: Handling dry, powered, solid, liquid, gas, or viscous products
- Inspecting: visual, sound, metal detecting, etc.
- Label dispenser
- Orienting, Unscrambling Machines
- Package Filling and Closing Machines
- Palletizing, Depalletizing, Unit load assembly
- Product Identification: labeling, marking, etc.
- Sealing Machines: Heat sealer
- Slitting Machines:
- Weighing Machines: Check weigher, multihead weigher
- Wrapping machines: Stretch wrapping, Shrink wrap, Banding
- Form, Fill and Seal Machines
- Other specialty machinery: slitters, perforating, laser cutters, parts attachment, etc
The 8 biggest challenges packaging distributors face:
- The perception that “Packaging is a commodity.”
Yes, packaging materials are available from many sources. Many materials can be substituted freely. Packaging is as important as any other component of a product. For consumer products, packaging often is the deciding factor in a purchase decision. An academic study determined 70% of decisions at grocery stores are made at the point of purchase.1 What is influencing that decision? Packaging is a
critical component of how we choose what we buy. While most industrial packaging will never been seen by the consumer, it does play an important role in getting product to consumers undamaged and in an efficient manner. An efficient use of packaging materials is a competitive advantage. That
advantage does not always have to be price driven. Reducing damaged product, improving supply chain efficiency, and providing protection against theft, counterfeiting, and tampering are all vital roles packaging plays.
Rather than trying to focus on a packaging product with your customers, discuss their business processes and challenges with them. Is damage an issue? Where in the supply chain? What are their supply chain challenges? Focusing on the bigger picture will help your customer understand the importance of packaging.
- Differentiating your value proposition is difficult.
We all try to sell our value. We are all “partners” with our customers. Very few companies differentiate themselves well. Why? Because very few of us, executives and sales forces, differentiate ourselves well. Most often, we use price to differentiate. Price is something easy for the customer to see. It is a strategy, if you are the low cost producer and have the capital base to hold out a protracted price war, but usually using price to differentiate creates a vicious circle that results in
margin compression if it is not stopped.
The key to differentiation is looking at the world through your customers’ eyes. They can buy boxes, stretch, labels, etc. from a myriad of sources. Why should they buy from you? Because you don’t care if they buy from you: You care that they improve their businesses. That’s your goal: help your customer improve. If you do that, they will have no choice but to buy from you.
How can you help your customer improve? The process begins by understanding his or her business. What are the drivers of success? What are the hurdles the business must overcome? This is the key first step in differentiation. Offering programs – vendor managed inventory, savings guarantees, etc. – are great. They are also generic. You can only offer specific solutions if you truly understand your
You can also differentiate by working with your suppliers. The supplier‐distributor relationship is a two way street – we need each other. Often, the relationship turns adversarial. Work with your suppliers and they will work with you.
- Customers do not do an “apples to apples” comparison of competitors’ products.
After you have worked hard to combat the perception that packaging is a commodity and you truly do provide value to your customer, you get the following
phone call:Customer: “I just got a quote from XYZ. Their price on [corrugate, stretch, tape, labels, fill in the blank] is 25% cheaper than yours. I’m not happy.
You: “Are you sure it meets the specifications you set for the product?” Customer: “The rep provided me a specification sheet that matches what you’re selling me and overcharging me for.”
As a supplier, we encounter situations like this almost daily. Inevitably, it has one of the following causes:
- The specification is not an apples to apples comparison.
- The specification is an apples to apples comparison and the other vendor
is trying to protect or win other business with a lowball price.
- The specification is apples to apples and the competitor does not
understand making money is important.
- Some combination of the above.
A is relatively easy to combat. Explain why the initial product was specified and what its advantages are. If you cannot, you were overselling. That strategy inevitably leads to an irate customer. I suggest you offer alternatives today before a competitor does.
B is the most difficult situation to combat, particularly if the particular item is one that you use to earn your margin. This is where your differentiation strategy will pay off. If you are selling a bundle of products, it might be time to revisit the value you bring to the customer. If you are not selling a bundle of products, now is the time to propose a solution that offers you more share of his spend.
C will correct itself in time. It is a painful process. Just matching a price sends the message that you are no different (better) than your competitor. In certain circumstances, you might have to match the price. That is a last resort, particularly if there is little or even negative margin associated with the product/account.
D is the typical situation seen in the packaging industry. Because we struggle to differentiate ourselves, we use price to stand out, as mentioned above. You can avoid this by properly differentiating yourself among your competitors.
- Rising raw material costs.
Commodities associated with packaging have risen dramatically over the last 2 years. Oil, pulp, and chemicals have increased significantly over this time period.
Component January 2009 January
No one associated with packaging has been immune to the increases. Many suppliers have held out as long as they could; double‐digit increases are the norm. If you are not raising your prices, you will most likely find yourself out of business in a very short period of time. Raising prices is seen as a non‐productive activity. Use the opportunity to develop your differentiated position as a solutions provider. The increases cannot be avoided, but they can be mitigated. Are there opportunities to change processes? Don’t just focus on material substitutions. Yes, those opportunities most likely exist, but real savings will come from helping your customer improve his business processes. We
recently worked with a distributor who was able to help his customer reduce his shipping function staffing from 3 FTEs to 1. It required an increase in packaging spend but an overall significant savings to the customer. There was no down‐gauging or substitution; the process was completely redesigned. Do you think that distributor is worried about price competition?
- “Just in time inventory” at the customer level means more emergencies.
- “Just in time inventory” at the supplier level means longer lead times.
We all fell in love with just in time inventory when the economy was good. We reduced inventories and knew we could get product when we needed. Now, we face rampant inflation and component shortages. Additionally, cutbacks at the customer level have resulted in new people handling tasks they did not handle in the past. Cutbacks at the supplier level mean they do not have capacity to meet your customers’ emergency requests. It all means you are stuck in the middle between a customer that needs product and a supplier that cannot provide it. Here is again where your differentiation strategy pays off. With your customer, you SHOULD manage inventory of all products you sell to them. That is a critical function you can play. With your vendors, do not be the boy who cried wolf. Vendors understand emergencies and will work with you. However, if every order is an emergency, you will have zero credibility.
- Vendors go direct.
In an increasingly lower margin world, many packaging manufacturers have responded by going direct to end user customers. That can circumvent the value add you as a distributor bring. Most manufacturers cannot do what you do. They cannot improve processes; they are experts in a certain area. They don’t see the big picture; their goal is to sell what they make. You have a distinct advantage in these areas. Use it! The more you see the big picture, the more valuable your services are.
- Customers are demanding higher service levels but don’t want to pay more for the
Customers want you to hold more inventory, do more frequent deliveries at lower volumes, and cut their prices! Oh, and your management has increased loads and increased the minimum order the company will deliver. Again, you are caught in the middle.
First, one simple axiom: the customer pays the bills. Repeat: the customer pays the bills. That mantra should drive how this situation is handled. Right below that is the mantra: We need to make money. We need to make money. There is certainly a tension that exists. It can be balanced, however, by planning and creativity.
Do your delivery days coincide with demand? Does your customer have space constraints that cause issues? These can be planned for and optimized. Again, the more you know about your customer’s business, the more you can optimize. Work
with them to solve these issues. Get creative. Can the route schedule be changed? Can your vendors drop ship? Can you make the emergency deliveries of certain items? The demands for increased service levels are an opportunity for you to
demonstrate your value. Take advantage or a competitor will.