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Packaging 'Payback'

Sonoco creates economies of scale that accelerate speed-to-market and reduce obsolescence in helping manufacturers meet the emphasis on outsourced packaging that works at retail.

Test packages work their way through the production line at the pilot plant within Sonoco's Package Development Center in Hartsv
Test packages work their way through the production line at the pilot plant within Sonoco's Package Development Center in Hartsv

Total packaging solutions strategy is a term that best describes Sonoco’s effort to operate ahead of the curve in packaging supply chain management, which goes beyond contract packaging. Sonoco’s blueprint for success recognizes that:

• Many consumer goods companies are marketing organizations, and packaging lies outside of their expertise.

• The emphasis on retail packaging is growing as retailers

demand different packaging configurations in the battle to

gain shelf distinction.

• Timeliness has surged in importance as shorter runs of promotional packaging have gained prominence for retailers seeking to build incremental sales.

The competencies necessary in addressing these challenges include the ability to manage large, fluctuating workforces that do the manual packaging often required in meeting retailer demands. Another requirement is an intimate understanding of the packaging preferences that drive high-volume retailers.

These capabilities may be foreign to most consumer goods manufacturers, but they aptly describe Sonoco’s packaging services. Sonoco operates at the leading edge as a package supplier in that it offers contract fulfillment as a value-added service. Sonoco gains economies of scale by leveraging its packaging expertise in rigid paper, rigid plastics, flexible packaging, and easy-open closures. At the same time, Sonoco enhances its value offering by sharing its understanding of the packaging preferences of high-volume retailers and execuiting the logistics needed to fill retailers’ product orders fast.

The approach with Gillette

How does Sonoco’s range of services play out with a customer? Here’s one example. Sonoco executes the planning, storage, and procurement of all packaging components, from primary packages to point-of purchase displays, for Gillette razors and blades. Under a traditional supply chain model, Gillette would build a product production schedule to put millions of completed razor packages in storage until the time they are needed.

With a total packaging solutions approach, Sonoco manages Gillette’s entire supply chain. Gillette ships razors in bulk to Sonoco, which then puts the razors into the right mix of packaging, in just the right number of packaging units, that a retailer may require on very short notice.

Many of these razor packages find their way into Wal-Mart. As an approved vendor of point-of-purchase displays to Wal-Mart, Sonoco understands the retailer’s footprint requirements for primary packages, pallet display specifications, and promotional packaging preferences. By tying production runs more toward demand rather than forecasting, Sonoco has helped the Gillette Company reduce its inventory storage period by six weeks.

Sonoco refers to this key customer benefit as “payback,” and it is driving the growth of the company’s packaging services business. Contract packaging forms the backbone of the company’s packaging services platform, a $400 million piece of the total $3.2 billion pie at Sonoco.

Charles Sullivan, senior vice president, global consumer products, believes the division can double its business by 2007.

Reduce the ‘pit stops’

But with this opportunity also come challenges. Proliferating numbers of SKUs are shortening packaging production runs to minutes rather than days and threatening speed to market. Sullivan notes that Sonoco faces the same critical challenge that grips the entire contract packaging industry—find better ways to sequence production line changeovers and maximize efficiency.

Jeffrey Schuetz, staff vice president, consumer packaging global technology, describes Sonoco’s approach to short-run packaging production as a “NASCAR pit mentality.” Sullivan adds that “instead of pitting every lap, we need to figure out how to pit every 100 laps.”

Sonoco’s total solutions approach helps consumer product companies in two distinct ways. Its Package Development Center (PDC) in Hartsville, SC, designs, creates, fills, and tests packaging while its Sonoco CorrFlex operations, based in Winston-Salem, NC, create promotional packaging and related displays.

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