Increase partnership efficiency through a third-party adviser

Some CPG companies are embracing outside experts to identify untapped opportunities in working with co-packers to get products to market faster.

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As the packaging industry continues to evolve to address new trends, initiatives, and standards, consumer packaged goods (CPG) companies and contract packagers alike are compelled to move quickly to meet market demands. Rising competition, compounded with cost constraints, requires the need to look beyond the obvious and seek additional resources for ideas and guidance on the latest innovation, cost-savings, and sustainability efforts.

Today, an increasing number of CPG companies are adding specific agreements in their contracts to hire third-party experts. Outside firms bring an unbiased perspective, disciplined approach, proven management experience, and broad industry knowledge. Those characteristics enable them to recognize opportunities or spot areas for improvement that may have been overlooked. With CPG companies focused on internal operations and contract packagers tasked with ever-growing responsibilities, a third-party perspective provides external insight into alternative methods to augment existing processes and help uncover new ways to increase efficiencies.

We’ll explore how market dynamics are fueling a need to integrate third-party experts into the mix, and the benefits both CPG companies and contract packagers can realize from the partnership.

Looking beyond conventional methods

 Advancements in packaging equipment and dynamic market changes have transformed contract packagers from tactical suppliers to strategic partners for CPG companies. But escalating workloads and continually increasing expectations have limited contract packagers’ time and ability to focus beyond their traditional scope. For product manufacturers that are dealing with a myriad of issues and challenges, from managing multiple contractors to meeting new packaging demands brought on by new industry initiatives, leaning exclusively on contract packagers for support may not always produce the desired outcome.

A lack of resources and time, as well as limited internal expertise, makes hiring a third-party expert financially beneficial for both contract packagers and product manufacturers.

Following are three scenarios that illustrate the value of and the need for third-party experts.

[1] Developing packaging standardization

 An international semiconductor company tapped a third-party expert for help after uncovering inconsistencies in its packaging. The company employed a network of 55 subcontractors worldwide with five distribution centers responsible for shipping more than 1.3 billion products per day. Each contractor relied on its local box maker to package and distribute products. With no standardized packaging method in place, the box makers packaged the products as they saw fit. The results included variations in condition, quality, and branding of the packaging.

Some products arrived in perfect condition, while others were damaged on arrival. Additionally, inconsistent use of logos and marketing materials led customers to believe that they had received outdated product. The lack of consistency in packaging tarnished the semiconductor company’s brand and fueled increasing customer dissatisfaction.

The company’s global logistics director hired an outside firm to work with its contract packagers to assess processes and create a procedure to standardize packaging across product lines. The third-party expert applied best practices in packaging optimization to assess packaging dimensions, graphics, materials, labels, and cube utilization. Through the experts’ recommendations, the semiconductor company developed an internal council to implement packaging standardization and assure that all future packaging meets specifications.

[2] Demonstrating sustainability

 The emergence of sustainability is making a significant impact in the packaging industry. Initiatives, such as the Wal-Mart sustainability scorecard, are forcing the market to change the way companies do business. This situation has spurred many questions and concerns, with many companies seeking guidance on how to comply with these new standards.

Third-party experts are leading the charge to help demystify complex information and demonstrate what CPG companies and contract packagers need to do to become more sustainable.

An international manufacturer of electronic games and toys enlisted the support of a third-party expert when it had been asked by Wal-Mart to reduce its packaging. The packaging of one particular product used multiple plastic bags, twist ties, and EPS foams. A third-party firm audited then-current packaging systems and advised the product manufacturer to reduce the number of plastic bags to one and to replace the EPS foams with corrugated materials. The entire packaging for this product is now recyclable.

[3] Creating distribution chain visibility

 A food company employing a network of contract packagers experienced consistent damage in shipper cases for one of its bakery products. Because the bakery items didn’t appear to be damaged, the product manufacturer didn’t feel any urgency to remedy the problem.

However, an audit by a third-party expert revealed that the damage in the shipment case did create problems in the distribution chain. Unstable load structures resulted in cases tipping over during distribution. In an evaluation of the contract packager’s facility, inspectors determined that case-erector equipment was damaging the shipper cases.

After the equipment was appropriately calibrated, case damage was eliminated. Furthermore, the involvement of a third-party expert helped contract packagers gain insight into areas they would not have access to otherwise. Visibility into the distribution chain reinforced the importance of fixing damaged cases, regardless of their scale or impact.

Expect to see more CPG companies embrace the practice of bringing outside experts into the partnership. Contract packagers can use this opportunity to take an active role in seeking an appropriate partner that can help complement and enhance their operations.

The author, Tom Driscoll, is a business development manager for Adalis Corp., a global packaging and supply chain solutions company in Vancouver, WA. Visit www.adalispackaging.com.

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