Tuesday 6th Dec 2016 - Logistics Manager

The unsung hero

The growing importance of e-commerce and omni-channel is generating new pressures for retail’s silent partner, the packaging industry. Alex Leonards explores some of the changes and challenges being faced in the market.

This article was first published in Logistics Manager, August 2016.

This article was first published in Logistics Manager, August 2016.

There is an unsung hero confronting a supply chain battle more commonly associated with retailers and their partnering logistics companies. Pivotal to survival in the ever-looming omni-channel takeover, is innovative and flexible packaging.

Like retailers and logistics companies, the packaging industry is feeling the impact of an explosive upsurge in online buying. Silently and often unnoticed, packaging companies have been adapting to the changing retail landscape; delivering products that assist in the smoothing out of omni-channel journeys.

The impartiality of the packaging industry enables it to offer a wide variety of solutions; each suited to a particular product and its accompanying route. Packaging is wide reaching, and a fundamental part of the retail journey and experience. But its importance is often unheeded.

“Omni-channel retail logistics operations are grappling with the challenges of fulfilling customer demands for anywhere, any time delivery,” says Edward Hutchison, managing director of BITO Storage Systems. “It’s been a steep learning curve with lot of attention paid to the sophisticated systems managing this need.”

These logistics challenges have forced the packaging industry to come up with new methods and designs, as well as to take on more responsibility.

“Packaging has always been about supply and demand,” says Andrew Smedley, divisional manager at Antalis. “Companies try to make packaging this complicated thing – the reality is about supply and demand.

“Companies have to have the right product at the right time, that’s the fundamental part of what the packaging company should do.”

Hutchison says that the fundamentals of delivery should not be overlooked. “This includes the transit-packaging units,” he says. “Increasing volumes of small order and high value deliveries to homes or click and collect desks of shops require a special kind of delivery unit: one that is durable, light, protective, secure, easy to identify, easy to handle and convenient to transport. All this must come at an economical price across the life of the transit-packaging unit.”

At Macfarlane Packaging, which supplies protective, transit and retail packaging, 25 per cent of its customers are in e-commerce and 65 per cent of its packaging products are bespoke. Rachel Fellows, national accounts 3PL director for Macfarlane, says that particularly with omni-channel the company is finding that it needs to operate with speed, but also remain aligned with customer branding. The pressure to provide packaging that will keep up with the agility needed in peak times, and for same, next day and one-hour delivery, is becoming more and more visible. “Quickly, sometimes within four hours, we need to make sure we have the packaging at various spots in the supply chain,” says Fellows.

For some of its customers, 50 per cent of their e-commerce sales happen during only two months of the year. “The challenge related to packaging has changed,” says Fellows. “ We used to have more of a steady demand – we’re now focussing on de-risking our customer’s peak period.”

Packaging design is vital to the supply chain and if done efficiently can save time, money, and hassle for the customer.

“There’s been an increase in click and collect,” says Fellows. “ We are working on various initiatives that will allow packaging to sustain the journey, and also be able to be compact to storing, and easy to open for the customer.”

Agility isn’t often associated with packaging. But its design can play a key role in speeding up a journey. Providing easy to carry packaging for click and collect, for example, enables consumers to walk straight out of a shop with their product instead of purchasing a bag. It all adds up to a more efficient and timely supply chain journey, as well as a happy customer.

Journey

“It’s from the start of a journey to the end,” says Fellows. “With click and collect we’re trying to tick all of the boxes – protective, but nice and quick to hand over at collection.”

BITO’s Hutchison says that when choosing packaging, customers have to take a lot into consideration – and they expect a lot from their packaging:

“Is it available with a folding lid that can be secured with a lead seal? Can a delivery agent carry the container comfortably? How much will the container hold and, importantly, how much space will the empty container save when folded? Also, how quick and easy is it to fold so that the delivery agent can get onto the next job? Finally, will its dimensions allow optimum of use of space in racking or shelving while it’s in a warehouse or stockroom?”

The reworking of goods is a phenomenon that, before the rise of omni-channel, wasn’t so noticeable in the packaging industry.

“With the reworking of products and solutions to over-packing in the distribution centre, we’ve never seen this before,” says Fellows.

Because consumers are buying more, the number of lines per order is increasing. A higher rate of returns is also becoming more evident.

“We need to design packaging to allow them to be returned easier,” says Fellows.

According to her, packaging companies are relying more on collaboration, and are increasingly needing to work alongside vendors. “If we can work more upstream, we can reduce the need to repackage,” says Fellows.

She says that customers are beginning to look more closely at the supply chain and all of its factors – particularly at product cost.

“Customers are challenging what the profitability of their product availability on line is – say low value versus the cost of the packaging, to allow it to work through courier network, a lot more detail is being put on the true cost of the items, whereas before the focus was on the technology of the websites,” she says.

Fellows talks about a “need for speed”, where companies are looking at agility and the ability to change packaging quickly. She says that companies are looking for ways to reduce the number of packers needed, but at the same time achieve a higher throughput.

“Any design we look at, packaging produced on demand, storage, are the focus areas as opposed to price,” she says. “Bad packaging can result in big losses.” The intention is to find a harmonious balance of factors.

“It’s a see-saw balance between cost and performance, but still a need to delight,” she says.

This need to delight, in other words to provide an enjoyable and consistent customer experience, is a consideration that seems to be dominating the retail and logistics industry at the moment. And packaging plays a significant role in achieving a smooth running and positive customer experience.

“You’re having higher demand for that look and that feel,” says Antalis’ Smedley. “It’s all about the customer experience.”

Smedley says that there is a conflict between marketing teams that want to splash out on the branding, and operations teams pulling the other way for the best value solutions.

“Our job is to find the middle ground,” he says. “Keep trying to come up with something new, which is a challenge.

“Making the customer go ‘wow!’ is not the easiest thing in the world, we are evolving and trying to help do this.”

Fellows agrees. “There’s extra competition, it’s got to give the experience of the brand,” she says.

Some of Macfarlane’s packaging for retail will be delivered in the form of a standard brown box, but will incorporate branding inside the packaging.

“It’s still got to be aesthetically pleasing – they want it to be personalised,” she says. “But then we need the operational balance – we’re talking about costs and protection.”

Essentially, retailers are looking for a cost to serve that won’t impact the customer experience – which is a huge responsibility and challenge for the packaging industry. On top of this, packaging businesses still have pressure coming in from the new retail environment – where they have to keep up with click and collect, and same day deliveries.

“If there needs to be a delivery from the hub in four hours, when you separate all the channels, our customers still want that consistency of brand and that is the challenge,” says Fellows. “It depends on the route. It needs to ensure consistency in the complexity and scale, the space issue and the personnel skill set, once you start separating different routes and different packing,” she says. “It’s exciting for us to have a different offering.”

Smedley uses the example of beauty products to demonstrate the importance of packaging for the end consumer:

“There’s nothing worse than getting it through, and it’s all broken to pieces and goes everywhere. It’s a balance between that nice feeling – if you’ve gone and spent £100 on something, you want to feel like when it turns up you’ve spend £100 on something, not looking like its been kicked about. Because you won’t go back to that shop again.”

If the packaging doesn’t reflect a brand, or uses a low quality material that leads to a damaged product, the supplier will have a lot to answer for.

“ If we supply products that don’t give the wow factor or don’t meet the brief, we take responsibility because it’s out reputation as well as our customer’s,” says Smedley. “The simple rule I have, when you’re within a customer presence, I wear a hat that says okay if I’m employed by these people what would I do.

“Nine times out of ten what’s best for the customer will be best for us as the supplier, not necessarily for the short time but for the long term.”

Economic uncertainty

Online activity has certainly spiked, but there is currently a lot of uncertainty in the industry. Although online sales are steadily continuing, says Smedley, they’re not selling as much.

“There isn’t enough happening, but there is no one reason,” he says. “ Economic uncertainties, not really knowing what’s going to happen with Brexit. Sales are down – big global player’s sales are down, people are on that edge of ‘Do I invest? Do I expand?’

However he does say that a positive thing to come out of this is that people are being more cautious and looking at where they are going to save money and be greener.

“Process, product, or whatever the type of improvement, it might be through automation, but people want to find ways to invest back into the market,” he says.


Is it green enough?

This year packaging hit media headlines when Amazon customers took to social media to demonstrate their disapproval of excessive packaging on their goods. Customers were complaining about small purchases packed into big boxes, filled with excess cushioning and void fill materials like bubble wrap and paper. This media attention has certainly brought environmental considerations to the fore of the packaging industry.

“Companies are still very interested in being green, but when push comes to shove, the number of companies that will add additional costs is limited,” says Antalis’ Smedley.

Antalis has a scheme in place that ‘carbon offsets’ its customers. For every one and a half tonnes of cardboard used, the company will plant four trees on the customer’s behalf.

“There’s no reason why companies can’t take that step,” he says. “It shouldn’t really be about money.”

Macfarlane did some packaging research that found that the biggest proportion of customers surveyed felt that the box was too big for the item. “From an environmental point of view it’s about optimisation, and the dimension of the outer carton for the transit space. We are aiming for packaging that reduces the size of the outer, but with better infill so we can increase cube utilisation.”

She thinks that the increase of activity on social media has meant people are more confident in voicing their concerns. “It’s more so on the pack side as opposed to the material itself,” she says. “When it comes to optimisation, depending on the customer, there’s a challenge to offer the most rational offer of boxes, and balancing that with not over packing for environmental reasons.”

Macfarlane has a box optimisation tool that helps with this – it enables the user to work out which kind of box is most suitable.

“We [the industry] need to reduce the amount of packaging,” she says. “And recommend the direct packaging robust enough to go through omni-channel.”


Macfarlane invests to solve packaging challenges

Macfarlane Packaging has launched an innovation lab designed to generate solutions for packaging challenges. The company invested £300,000 in the site, which is based in Milton Keynes.

The site includes interactive touchscreen technology, protective packaging design software, printer and cutting table, modern packing benches and an equipped packaging solutions showroom.

Customers will be able to visit the site to ‘fully understand the total cost of their packaging process’, design packaging solutions, interact with packaging solutions including packing benches, packaging machinery and packaging consumables.

The company says that this site will enable it to ‘speed up the process of creating for its customers bespoke, cost effective’ solutions.

“For the first time, customers will be able to access in one location the latest technology and expertise in a creative environment designed to solve the wide range of packaging challenges they face in their business, whether that be storage, transport, packing, damages and returns or customer experience,” says Donna Lynch, new business development director of Macfarlane Packaging. “Our Macfarlane Packaging Innovation Lab has been designed to problem-solve from start to finish in one location, providing creative solutions that customers can touch, see and take away with them – sometimes even on the same day.”

Craig Wheeler, e-commerce/retail operations director of Feelunique, the online beauty retailer says: “I’m confident that this facility could make a big difference to online retailers such as Feelunique, for whom the customer experience is vitally important. The online retail environment moves at a terrific pace, so being able to bring even our most demanding packaging challenges to Macfarlane and work with them in one location with access to the latest packaging technology and materials to create a solution that meets our needs is a major step forward.”