best practices in demand driven contract packaging - peak vs weak seasons
DESCRIPTION
Best Practices in demand driven contract packaging – Peak Vs Weak seasons The outsourcing of packaging operations is an area which has witnessed significant growth in the recent years. Companies in a range of industries see value in the practice, particularly with regard to increasing flexibility, reducing costs and risks. Meeting peak season (Christmas, major sports events/festivals) demand while maintaining margins has become a huge challenge for Consumer Packaged Goods (CPG) and Food, Beverage and Tobacco (FBT) companies. Watch Beroe’s packaging experts, Ishpreet Virdi and Abhiraj Munnangi, as they discuss best practices followed across the CPG and FBT industry to meet peak season demand spurts and the evolution of contract packaging services in emerging markets. About the speaker: Munnangi Abhiraj - Munnangi Abhiraj is a packaging expert at Beroe Inc. He specializes in providing Rigid and Flexible packaging formats related procurement intelligence to Fortune500 companies. In his 2 years at Beroe, Abhiraj has built extensive knowledge and expertise in categories including Rigid and flexible packaging in the end use markets such as pharmaceuticals and Consumer packaged goods among others. He has written and published several thought leadership papers in leading global Packaging Magazines. Some of the topics he has covered in his papers include “Parenteral Packaging: Raw Material Substitution and Procurement Impact” and “Regulatory Panorama and Regional Acceptance of CR Formats of Packaging”. Ishpreet Virdi - Ishpreet Virdi is a packaging expert at Beroe Inc. She specializes in providing Flexible packaging formats related procurement intelligence to Fortune500 companies. In her 2 years at Beroe, Ishpreet has built extensive knowledge and expertise in categories including pouches, sachets, bags and laminates among others. She has written and published several thought leadership papers in leading global Packaging Magazines. Some of the topics she has covered in her papers include “Stripping complexities with Strip, Stick and Blister Packs” and “Flexible Packaging – The Game Changer for CPG Companies”.TRANSCRIPT
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Ishpreet Virdi Senior Research Analyst Beroe Inc. Dialing in from:
India
Munnangi Abhiraj Lead Analyst Beroe Inc. Dialing in from:
India
Speakers
Panel for the Webinar
Sharan Ramesh Engagement Manager Beroe Inc. Dialing in from:
India
Moderator
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5
•Case Examples
Integration of Contract Packaging Services into Packaging Strategies
Pain Points during Peak Season Demand
Situational Importance of Contract Packaging
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Packaged FMCG/CPG product for sale
Primary Packaged Product
Warehouse/Distribution & Fulfillment
Retail Shop
Packaging Material
Secondary Packaging Unit
Customized Packaging Unit
DID YOU
KNOW?
Billion Dollar
Spend
7
13%
22%
11%
North America
Vancouver
Olympics
2010
FIFA World Cup
2010
South Africa
China
Beijing Olympics
2008
38000
42000
46000
50000
54000
58000
62000
Aug-0
9
Sep-0
9
Oct-
09
Nov-0
9
Dec-0
9
Jan-
2010
Feb-
2010
Mar-
2010
Apr-
2010
May-2
010
Jun-2
010
Jul-2010
Aug-2
010
Christmas Spurt
Soccer Wave
8
South African Retail Sales Statistics:
• Event Examples: Known Demand Conditions with
standard packaging requirements. For example- Gift sets, or prestige promotional items
• Markets: Established markets . Not prone to seasonal demand spikes.
• Event Examples: Market entry into areas such as Brazil, China, India.
• Markets: Nascent Markets or Market entry
conditions with demand uncertainty.
• Event Examples: Christmas, New years, Festivals/Sports with or weather related events with customized packaging requirements. Peak Seasons
• Markets: Customized markets with customer
centric approach and demand variability.
Se
rvic
e
Cu
sto
miz
ati
on
Hig
h
Lo
w
Non-Critical Categories
Strategic Category
• Event Examples: Product value chain falls under core competency with dynamic packaging. For examples- Diapers for a CPG company.
• Markets: Established markets. Demand dictated by end use industry.
Leverage Category
Bottleneck Category
Long Short Service Lead Times
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Contract packaging Necessity: Contract packaging Necessity:
Contract packaging Necessity: Contract packaging Necessity:
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Package Design Component / Materials Sourcing
Material Handling
Process/ Packaging
Warehousing Shipping/ Logistics
Cost and Quality Concerns
• Quality and Cost -
• Melding service costs to final
product cost.
• Maintaining internal quality levels when using contract
packaging.
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Package Design Component / Materials Sourcing
Material Handling
Process/ Packaging
Warehousing Shipping/ Logistics
Maintaining Inventory Levels and lead times
• Quality and Cost -
• Melding service costs to final
product cost.
• Maintaining internal quality levels when using contract
packaging.
• Maintaining Inventory Levels
and lead times
• Matching Inventory levels
with Demand. • Meeting short run demands
or demand spurts.
• Managing Seasonal Demand
needing customized
packaging
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Package Design Component / Materials Sourcing
Material Handling
Process/ Packaging
Warehousing Shipping/ Logistics
Seasonal barriers and road congestion
• Maintaining road freight
services
• Infrastructure
• Tighter time frame • London Olympics Data
(2012):
• 11 million visitors were
expected
• Congestion was expected to increase by 30%
• Journeys through London
were expected to take 20%
longer on an average
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Package Design Component / Materials Sourcing
Material Handling
Process/ Packaging
Warehousing Shipping/ Logistics
• Quality and Cost -
• Melding service costs to final
product cost.
• Maintaining internal quality levels when using contract
packaging.
Labor Issues
• Maintaining Inventory Levels
and lead times
• Matching Inventory levels
with Demand. • Meeting short run demands
or demand spurts.
• Managing Seasonal Demand
needing customized
packaging
• Labor conditions
• Availability of skilled labor
• Poor staffing
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Package Design Component / Materials Sourcing
Material Handling
Process/ Packaging
Warehousing Shipping/ Logistics
Increased SKUs
• Quality and Cost -
• Melding service costs to final
product cost.
• Maintaining internal quality levels when using contract
packaging.
• Maintaining Inventory Levels
and lead times
• Matching Inventory levels
with Demand. • Meeting short run demands
or demand spurts.
• Managing Seasonal Demand
needing customized
packaging
• Labor conditions
• Availability of skilled labor
• Poor staffing
• Specially during major
events like festivals and
sports
• Difficult to maintain balance – between increased SKUs
and one’s infrastructure
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Package Design Component / Materials Sourcing
Material Handling
Process/ Packaging
Warehousing Shipping/ Logistics
Lack of Transparency
• Quality and Cost -
• Melding service costs to final
product cost.
• Maintaining internal quality levels when using contract
packaging.
• Maintaining Inventory Levels
and lead times
• Matching Inventory levels
with Demand. • Meeting short run demands
or demand spurts.
• Managing Seasonal Demand
needing customized
packaging
• Labor conditions
• Availability of skilled labor
• Poor staffing
• Specially during major
events like festivals and
sports
• Difficult to maintain balance – between increased SKUs
and one’s infrastructure
• Communication:
• Demand forecasts
• Capabilities
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Package Design Component / Materials Sourcing
Material Handling
Process/ Packaging
Warehousing Shipping/ Logistics
Automated v/s Manual
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Why is this important and what can we do ?
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LEARN
PLAN
ENGAGE
ADAPT
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LEARN
PLAN
ENGAGE
ADAPT
Strong Technology & IT Systems
Location
Reliability and Experience
Must Haves
Buyers
Alternate Delivery Options
Equipment Functioning
Labor Shift Detail
Service Providers
Demand Forecasting
Selecting the Right Supplier
CDL Logistics – London Olympics
• Warehousing and delivery teams were expanded • Sourced 20 additional vehicles • Embraced night time and weekend deliveries
Preventing Seasonal Barriers and road congestion
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LEARN
PLAN
ENGAGE
ADAPT
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Pricing Bases
Suppliers
Distance to
Focus Markets
Outsourcing
Practice
Global Contract
packagers and 3PLs
Local Contract
Packagers and 3PLs
Both Global and
Local supply base
Near Focus markets Within Focus
Markets Overseas delivery
Product Volume
Based Pricing
Pricing based on
Service fees
Time & Material
Pricing
Value Added Service
Based Pricing
Customized Co-
packaging
Requirements
(E.g. Seasonal demand spurts such as Christmas and
New Year or Chinese New Year etc.., or non standard
product packaging etc.).
• Internal Co-Packaging Expertise: Medium
• Operational Complexities/Risks : High
Full-Outsourcing
Strategy
Hybrid/Embedded
Operations
In-Sourcing or Self
sourcing Strategy
• Location- USA
• Number of Facilities- 6
• Peak Season handling Strategy- Establishing packaging lines in customer distribution center.
Benefit for buyer- Greater control over quality.
• Client – COTY
• Peak season estimates- 8 million packs over 3 million in off season
• Practice- Establish new packaging lines self site or customer site.
• Increased transparency with client.
Meet the increased demand of 5 million packs
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Coregistics – Embedded operations
Saddle Creek Logistics – Christmas
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Pricing Bases
Suppliers
Distance to
Focus Markets
Outsourcing
Practice
Global Contract
packagers and 3PLs
Local Contract
Packagers and 3PLs
Both Global and
Local supply base
Near Focus markets Within Focus
Markets Overseas delivery
Product Volume
Based Pricing
Pricing based on
Service fees
Time & Material
Pricing
Value Added Service
Based Pricing
Customized Co-
packaging
Requirements
Full-Outsourcing
Strategy
Hybrid/Embedded
Operations
In-Sourcing or Self
sourcing Strategy
(E.g. New product launch in a nascent markets)
• Internal Co-Packaging Expertise: Low
• Operational Complexities/Risks : High
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LEARN
PLAN
ENGAGE
ADAPT
Cross Road Centers
• Logistic providers in the USA
• Were approached by another warehousing and transportation provider • Developed partnership
• Result – Delivered ahead of time
Bottleneck
Category
Demand
Variability Reactive
Plan B
Educate
Weekly Forecasts
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LEARN
PLAN
ENGAGE
ADAPT
Are we ready?
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Necessity for Contract
packaging
Situational importance of
Contract packaging
Pain Points in peak seasons
Planning for Peak Seasons
Engaging in Peak Seasons
Adapting in peak Seasons
Are we ready?
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Direct Impact on retail
sector:- 600-700 million Lira