Packaging Postponement: A Game Changer for F&B Companies
Q: Why is packaging postponement an important consideration for food and beverage (F&B) companies?
A: Market demands are constantly in flux as holiday seasonality dictates inventory needs. Also, consumers enjoy an unprecedented variety of food formats. Consider the different product quantities and sizes that one might find in a vending machine, a convenience store, a supermarket, or a restaurant. Snack and drink availability is ubiquitous in the United States. Consequently, major brands are vying for market share.
By positioning product packaging further downstream in the supply chain and closer to the consumer, food manufacturers can take advantage of different selling opportunities. This translates to how they deploy capital. If a certain quantity size or format represents 80 percent of sales, the company will focus its investments there to maximize productivity. That’s not to say it will leave the other 20 percent on the table. Increasingly, food companies will partner with contract packagers or third-party logistics providers to perform that work off line.
This is especially true for one-off projects or new product trials. Not every product becomes a blockbuster, so food manufacturers don’t want to spend the capital for necessary tooling until they know they have a winner.
Q: How can packaging be a catalyst for business process change elsewhere in the supply chain?
A: Exercising strategic postponement creates additional value upstream and downstream in the supply chain. For example, companies can improve manufacturing efficiency and capital utilization to maximize yield. Further downstream, there are gains in terms of transportation and warehousing cost reduction, such as lower cost of goods sold, total landed costs, and inventory positions. Additionally, any strategy that lowers total cost of delivery is also good for the environment.
Many shippers are similarly looking for partners that not only provide packaging services, but can also deliver services around that core competency. This may include R&D on certain types of materials and product types, or even graphics. Companies want turnkey solutions that allow them to purchase packaging, inventory management, promotional package and display design execution, all the way through to fulfillment.
Q: What factors should a company consider when deciding the best packaging postponement location?
A: It all comes down to transportation and logistics spend. Companies need to understand the costs of moving products between various links and nodes in the supply chain. They need to know what their demand looks like, and where those demand centers are located. When you understand the demand picture and identify landed costs, by putting them together, you’ll have a good idea of where you should be packaging products in the supply chain.