On February 15 it was announced that DuPont and Procter & Gamble Co. had agreed to become investors in Packtion (Chicago, IL), an online solution provider for the $450 billion global packaging industry, by investing a combination of cash and certain intellectual property. Packaging World asked Tom Hayman, director of corporate purchases at Cincinnati-based P&G, to elaborate on how the relationship with Packtion would affect P&G’s packaging design and procurement process. Portions of the interview follow.
Q: How did P&G’s commitment to Packtion come about?
A: They approached us in the Spring of 2000. We worked with them on a couple of pilot projects that are still underway. We also evaluated other comparable offerings that we saw out there. But as we went through the evaluation process, it soon became clear that Packtion was the most capable collaborative packaging portal. We felt that an opportunity to combine with Packtion not only our own intellectual property but DuPont’s as well, was simply an unbeatable opportunity.
Q: How will P&G use Packtion?
A: We’ll use all three of their product offerings. The Knowledge Management Network [packaging-specific data and information covering industry publications, company profiles, regulatory databases, and Web sites] will help us make better, faster decisions. Product Rocket, Packtion’s collaboration software, is really exciting because it offers opportunities to do both package design and development collaboratively, as well as some commercial and supply chain collaboration. The Private Network component is appealing, too. Ideally it will become a place where suppliers catalog all of the packaging materials they offer and buyers catalog the things they buy. Ideally these catalogs will be in the same language and format, so you can quickly search from either the buy or supply side for what’s available out there.
Q: Can you provide an example of the intellectual property P&G might bring to the table?
A: A good example is the specification management system that we’ve spent five years and many millions of dollars developing internally to help us manage packaging specs globally. Packtion will now have exclusive rights to use it in the packaging domain to offer customers a world-class global specification management system that will not only simplify spec management for customers but will also link to the Private Network cataloging system that Packtion is building. It will give companies a packaging specification management system that is in the same language as Packtion’s catalogs. That will make shopping in the catalogs much easier and faster for Packtion’s customers. In fact, we’re optimistic that the spec management system that emerges from all of this will become an industry standard.
Q: Is P&G giving away too much, potentially to its own competitors, by sharing things like a global spec management system that it took five years to develop?
A: This is the role we’ve chosen to play to help establish industry standards where it’s beneficial to everybody up and down the supply chain. If we believe we have something that will help facilitate B2B e-commerce, then we think it’s the right thing to share it. We help ourselves in the process.
Q: Will there be a change in how new packages are developed and sourced at P&G?
A: Currently it’s primarily a competitive bid process. The software offered by Packtion will let us take a more collaborative approach to design and procurement. We’ll be able to work with suppliers to concurrently design new packages vs the more sequential system we have today.
Q: The inherently competitive nature of a Web-based reverse auction seems diametrically opposed to the collaborative approach you’ll employ with Packtion. Do you have a preference for one over the other?
A: Each plays a role depending on the market situation and the business need. The reverse auction is a dynamic tool in the right competitive situation, but you have to have established competition and multiple suppliers. The collaborative process, on the other hand, is more suitable to custom-made items. It’s uniquely suited to the packaging process because that process involves so many different companies. Packaging feedstocks, on the other hand, like resins on the plastics side or linerboard on the paper side, those might be better handled through competitive bidding or reverse auction.
Q: Was it efficiency or economics that led you to Packtion?
A: It was both. Efficiencies will come from having multiple parties online concurrently, designing the package while having available the same CAD drawings and being able to have input concurrently. Because it will be more efficient, it will improve speed to market dramatically, by 20% or more, probably a lot more. As you get more efficient, economics come into play. You don’t need as much time or as many resources. More important, if you get all the right people focused concurrently upfront rather than sequentially, you greatly improve your chances of designing an optimized package right out of the gate rather than the more common scenario today where you overengineer a package and then lightweight it or thinwall it later on.
Q: Can you pick a specific new package and compare how it’s developed today with how it might be developed via Product Rocket?
A: A plastic bottle for shampoo is a good example. The shape of the bottle is often created by an outside design studio. Technical properties such as top load strength and wall thickness are more often managed by a lead supplier in conjunction with P&G technical resources. The current process calls for many iterations and a lot of sharing back and forth of CAD files, sometimes over the Internet, sometimes on disk. With Product Rocket, we can take that iterative process and make it a collaborative, concurrent one, where the flow of information is more transparent. And remember, that plastic shampoo bottle also requires a label, a closure, and corrugated secondary packaging. If you can get the suppliers of all those components online at the same time in designing all those pieces–and probably include resin suppliers as well–you’ve got the opportunity to have the whole team assembled upfront, and you have all of them focused on meeting the needs of the consumer and retailer in the design of the package.
Q: Could Packtion’s tools improve the supply chain that’s relied upon for existing packages?
A: The initial focus of the collaborative software at Packtion is on package design and development, not supply chain management per se. Packtion is in discussions, though, with other e-marketplaces to see how they can link together to provide customers a complete service offering. But I think they realized from the start that it didn’t make sense for them to go out and compete with other exchanges that were focused on supply chain management, inventory reduction, CPFR [collaborative planning forecasting replenishment], and so on.
Q: If it isn’t Packtion that P&G relies on for web-enabling its supply chain management system, who is it?
A: Transora has announced the selection of Syncra Systems (Waltham, MA) as its CPFR software provider. We are familiar with Syncra, but we rely more on Transora for those types of transactions. (See sidebar on page 32 for more on Transora.)
Q: Will Packtion’s service offerings affect the way P&G purchases packaging equipment?
A: Most definitely, particularly the design of the equipment. A lot of our packaging equipment is not what you’d call off-the-shelf, and Packtion’s collaborative tools are ideally suited to that kind of process.
Q: What about security?
A: It’s all password-protected. You can determine who has access to what information and on what basis, read-only or read-and-write.