Bring back my six-pack
Everywhere in France, mills are running at full speed to cope with increased demand as more people are baking at home. At the Belleau mill, not far from Niort (in the Nouvelle Aquitaine region), orders have been multiplied by 22 and unit orders have shifted from pallets to trucks. As the family-run mill got organized to produce more, it emerged that one of the toughest challenges was to make sure there was enough packaging to ship the flour. The issue can be observed in other segments including pharmaceuticals, where the need for additional security provided by packaged goods results in skyrocketing demand. E-commerce transportation also requires more cardboard boxes and plastic bags to transport groceries and essential goods to households under lockdown. Amazon is now the single largest consumer of corrugated boards in the US, representing 5% of total demand. According to McKinsey, US consumers intend to double their spendings at online-only grocery stores. A similar pattern has been seen in China: online sales of fresh food by a large online retailer grew more than 200 percent during a ten-day period in late January 2020 compared with the same period in 2019, with sales of meat and vegetables increasing more than 400 percent.
But all is not rosy for the packaging industry. Not only does it suffer from the general economic slowdown, but demand for industrial, luxury, and some other B2B-transport packaging is declining steeply. The packaging industry needs to adapt to the shift in demand at a time when sanitary measures must be put in place to maintain production.
Le plastique c’est fantastique ?
As the world fights for gloves and masks, consumers and retailers are far more tolerant toward the use of disposable boards and plastics. Starbucks has suspended the use of reusable cups at its stores in order to protect staff and customers from the coronavirus.
Many countries are withdrawing the ban of single-use plastic, and the environmental impact of packaging is reassessed in lights of its benefits, more apparent in the current situation. According to Mark Little, who is in charge of reducing food waste at Tesco, “every ton of waste means the equivalent of 3.5 tons of carbon dioxide are released without purpose. In contrast, a tonne of packaging causes emissions of 1-2 tons.”
However, the recent taste for plastic may change in the coming weeks. According to a new study, the novel coronavirus is detectable in aerosols for up to three hours, up to four hours on copper, up to 24 hours on cardboard and up to two to three days on plastic and stainless steel. Whatever change may come, more flexibility will be required from packaging companies to adapt to changing sanitary requirements as more scientific evidence of the nature of the virus is published. Therefore consumers are more likely to receive goods in flexible packaging (corrugated boards, folding cartons, liquid paperboard and plastics) rather than metal and glass.
Today, depending on the material they use, and their business model, packaging companies react differently to the crisis. Ron Elina, the CEO of Amcor (who produces mainly flexible packaging and rigid plastics) said in a call with JP Morgan “Our end markets are defensive and they have always helped us drive consistent cash flow which has been pretty resilient, and those food and medical markets are more essential now, really than ever. So as we said earlier, the demand is there and it just comes down really to eliminating any operational disruptions that we may have.” On the contrary, Owens-Illinois, one of the largest glass producer promotes the long-term environmental benefit of its product as opposed to “If we allow COVID to damage our recycling and change our habits the biggest crime we’d be committing is the one against nature,” says Randy Burns, vice president of Global Government Affairs at O-I Glass.
Packaging Subject Matter Expertise in AI Agents
AI solutions are good tools to implement more flexibility in packaging operations. From SKU, to RFID and QR codes, the packaging industry has massively adopted tracking technology. Providing these capabilities natively adds value to the packaging service. Online retailers such as Amazon, Alibaba and C-Discount leverage customer data to identify the most popular products, and also analyze customer satisfaction in light of tracking data retrieved from packaging itself. The balance of power is shifting from brands to e-retailers. This shift provides an opportunity for the packaging industry to seize value by integrating tools to better manage customer relationships in its products and services.
In addition to leveraging AI to analyse consumer data, some packaging companies are leveraging machine-learning and advanced analytics in their operations. SIG, a german aseptic cartons producer uses them to predict demand and adapt production more quickly. This entails predictive maintenance strategies and the broad usage of devices capable of adapting to changing desired output – think smart conveyors, bin-pickers, checkweighers and entire packaging lines. Another example is Tetra Pak. Johan Nilsson, who heads Tetra Pak Services identifies numerous advantages to the use of AI : “the workforce will be able to focus on managing the plant, making quick, informed decisions and continuously increasing the speed of production, reducing errors and minimizing product waste.”
Another key ingredient of AI for the packaging industry is computer vision, which helps produce packages that are both good looking and robust enough to avoid the cost of defects that could appear in transport through visual inspection. The applications are countless: checking the presence of lost components or parts of an object, the dimensional accuracy on objects against geometric tolerances, and controlling labels and their placement. The FieldBox platform is used by an online retailer to monitor equipment and analyze defects in real time, allowing to increase logistics’ center uptime and resolve issues in packaging operations more promptly.
Covid will accelerate the adoption of these technologies as packaging companies need to implement more customization and more automation at the same time. The lockdown also provides room to lay the foundation of data-driven process optimization or leverage untapped sources of data. Quite appropriately it seems, setting the priorities right is key to leading the pack.
Looking to make better use of data to find quick wins in the packaging value chain ?