I wrote an article published in this space in 2020 describing how COVID-19 might forever change the CM/CP service provider/end user relationship.
I stated, “Our service provider companies can ease the packaging industry’s manufacturing limitations by assisting and broadening their relationship with end users through the points I have mentioned.”
Where are we three years later? Let’s revisit the four areas I discussed in the service provider/end user relationship to see how the COVID-19 pandemic has affected the supply chain, and how its effects will modify how we look at business models moving forward.
1. My prediction: Secondary sourcing will become critical.
What has happened: The first idea that I brought up when thinking of COVID-19 is the number of people affected. Because of spacing requirements and the number of people not working, the number of workers has been depleted and manufacturing output decreased. This, in turn, affects supply chains and timelines for all aspects of your business. Because some suppliers are not able to meet delivery dates and production schedules, secondary sourcing becomes critical.
Companies have been forced to find a secondary or alternate source to ensure they meet their delivery dates and production schedule. They have found another source either within one company or a separate secondary source. They have been forced to avoid putting all their eggs in one basket, because that one basket could not fulfill their requirements.
Companies are now dual sourcing to ensure their production lines are operational and can achieve business continuity. Dual sourcing capability also lends itself to flex capacity to address temporary surges in demand or a seasonal product. Secondary sourcing has opened the doors to additional suppliers and improved service provider/end user relationships.
2. My prediction: Speed-to-market will prioritize larger production runs.
What has happened: Another practice that companies have enacted to increase their order fulfillment rates has been to move production of smaller volume or new products externally to allow internal manufacturing to focus on larger production runs. Changeovers on production lines cause downtime and limit output on commercial manufacturing lines. Smaller production runs and suppliers with large minimum order quantities (MOQ) have end users looking to additional service provider companies to provide innovation and efficiency with speed-to-market capabilities unavailable internally.
With the ever-changing marketplace and the growth of e-commerce, speed-to-market is still a major pain point for all end users. Service provider companies that can offer multiple services are in demand. The use of digital packaging and personalization offers service provider companies an opening to fulfillment, as major end users’ manufacturing is usually geared to larger volume and longer production runs.
3. My prediction: Attention to “unboxing” or the “opening experience” will drive opportunities.
What has happened: As e-commerce business continues to grow, the amount of attention and development that goes into providing customers with a positive opening experience with their e-commerce product’s packaging continues to be crucial. The amount of traffic that social media influencers can drive through positive reviews is amazing and a lot of that has to do with the consumer’s experience when opening the e-commerce package. This type of value-added service is a driving point for end users that are working to increase their e-commerce business and reputation.
The need for an opening experience provides a growing opportunity for service providers for low-cost, quick packaging changes. Options include repacking multiple varieties of products into bundles and personalized packaging that end users do not want to be burdened with internally. This has not changed. This area has only grown and become a key growth opportunity that service providers can offer.
4. My prediction: Service providers will thrive running new packaging innovations.
What has happened: The fourth point I mentioned that has changed the service provider/end user relationship resulting from COVID-19 relates to innovation, productivity, and robotics. As end users are concentrating on fulfilling orders on current products on their existing manufacturing lines, they may lack the line time or manpower to validate innovative new packaging and products or packaging and productivity initiatives. This still exists and has only grown as business has increased, and end users must use service providers to expediate clients’ orders. End user companies are going to turn to service providers to run new innovative packaging/products until they can justify bringing them in-house. As many end users’ production lines are at capacity, having downtime to validate new packaging/products might not be a feasible alternative.
Finally, an issue I did not consider in 2020 was the amount of business and the changes that COVID-19 would generate for service providers. The pandemic caused many companies to seek outside assistance to fulfill customers’ requests. End users had issues running their facilities and production lines. Today, employees are in high demand and the idea of robotics and Artificial Intelligence (AI) technology is inviting. However, the number of orders these companies are trying to fulfill pushes lead times out to approximately a year or longer. COVID-19 has changed our packaging industry, and the service provider industry is growing to meet these larger end user requests. PW