A few weeks ago I was asked at a meeting, “Sachin, what is one of the biggest challenges in the packaging industry?” Honestly, I hadn’t anticipated my response to change so significantly from then to now.
Present Day Challenge
The packaging industry is up against some unique challenges in the face of COVID-19. The nationwide lockdown has brought the entire packaging supply chain to an almost grinding halt. The government is making all efforts to continue the steady supply of essentials to the 1.3 billion strong Indian population. However, this won’t be possible without packaging the product leading us to a Catch-22 situation.
Having said that, we’re faced with an extraordinary situation that will require extraordinary steps. The industry is working with the government to provide these essentials as effectively as we can. In the meanwhile, it would be important for everyone to stay put and not panic as we get through this difficult phase.
That said, in an ordinary market situation, the challenges differ. While the fragmented nature of the industry adds up to a large segment of the problems, that’s just one part of the puzzle. One commonality that can be mapped across businesses and industries though is the chaos that these challenges lead to. Chaos in terms of failed packaging design, packaging stock-out, erroneous artwork, product recalls – it’s a long list. At a broader level, resulting in a loss of business and revenue. And that’s where the bigger problem lies.
Organizations are intrinsically wired to think about aspects like the product, its quality, its usability, and its benefits. This often takes away the spotlight from packaging. In some cases, we’ve seen businesses lacking awareness on how their packaging is impacting their business topline and bottom line. And in most cases, this can be tied back to their inadequate understanding of the packaging supply chain.
At a macro level, the GDP growth slowed down to a seven-year low of 4.7% in October-December 2019. The National Statistical Office has also pegged the economic growth at 5 percent for FY 2019-20 in its second advance estimates. These factors have directly impacted employment rates and have hit the consumer sentiment putting a brake on spending. This coupled with the COVID-19 pandemic is straining the supply side and hurting the economy as well.
Cumulatively, these factors will impact the packaging industry since a large section of the population holds on to discretionary spending that propels the economy.
Unbranded Products & Fragmented Supply
At a micro level, the fragmented nature of the supply side leads to industry challenges. Adding up to that is that packaging as a product category is unbranded. Together this creates a mediocre customer experience with issues such as inconsistent packaging quality and tedious vendor discovery. For manufacturers, this means underutilized capacities, inconsistent processes, and reduced margins. End result – a suboptimal demand and supply system with tremendous room for improvement.
With environmental awareness rising globally, there is a strong momentum towards sustainable solutions. Stakeholders across the value chain are voicing their concerns regarding the use of plastic packaging and organizations are realigning themselves in this direction.
However, there are teething challenges the market is facing in providing these sustainable solutions. The investment required for the research of these solutions is high. This has limited the number of available eco-friendly options. Also, these solutions come at an added cost which neither the industry nor the consumer is prepared to absorb. This is making manufacturers wary of investing in the production of packaging that might not fetch the markup price. Importing again is cost-intensive.
While there is a penetration challenge, it can be stabilized through increased adoption of eco-friendly packaging across industries, as we’ve witnessed in the food services industry.
Solving Industry Challenges with Technology
Most of these challenges can be solved with technology, to form a tightly knit and integrated system. However, with technology, an all-embracing approach would be necessary. Every stage of the procurement process will need automation. Business leaders can empower their teams with visibility of their supply chain in real-time. This would help them absorb demand fluctuations faster.
The industry has immense potential in terms of manufacturing capacity. This combined with an automated supply chain system can create a sustainable ecosystem that can be used by generations to come. Digitalization of the supply chain is what will enable the packaging industry to operate at full potential. And that’s a mission every individual at Bizongo is working towards developing.