The concept of supply chains has been thrust upon the consciousness of the world due to a crisis brought on by COVID-19 and its variants. In the U.S., for example, flotillas of container ships parked off major ports translate into shortages and outages, fueling inflation. It doesn’t mean, however, that most people understand what supply chains actually are.
A supply chain is the network of companies whose combined contributions result in a finished product reaching a customer/consumer. What constitutes a finished product is relative in that one company’s finished product can be a component of another company’s product. By that lone example, supply chains can be (and frequently are) complex, and can stretch from local to global.
Supply chains are dynamic, with their signature characteristic being physical flows. That’s why supply chains cannot exist without packaging. Value-adding operations convert raw materials into the vast variety of items that constitute the commercial stream. Those items must be adequately packaged to endure the handling, transportation, and warehousing that are at the heart of supply chains.
The indispensable reliance that supply chains have on packaging was argued in my October 2018 column, “Packaging: The Strongest Link in Supply Chain Management?”, and the expressed fundamentals still apply. Nonetheless, the pandemic has caused such disruption that changes in how business is planned and executed are inevitable. Before launching into that discussion, however, a brief digression into the history of packaging and physical flows can lend perspective.
The phrase distribution packaging has endured for generations, reflecting its connection with physical flows. It predates the phrase supply chain, which is of comparatively recent coinage, itself preceded by materials management, physical distribution, and logistics (originally, a military term). The point is that throughout the evolution of phraseology describing disciplines devoted to physical flows, packaging has been an enabling constant.
Knowledgeable sources warn that another pandemic will occur (a warning separate from, but acknowledging of, the specter of disruptions caused by natural disaster, geopolitical upheavals, and the like.) Strategic planning of supply chains needs to reflect such certainties. Those plans, in turn, will carry significance for packaging.
Some supply chains will be reconfigured, even if it’s not feasible in the near term. An example: companies will rethink the degree to which offshore manufacturing, with its cheap labor, offsets the costs and the risks associated with separation by distance and time. Those risks include slower recovery from a pandemic than what’s experienced by the U.S. and the Western world. Whatever the configuration, package laboratory testing will be challenged to model the supply chain and to simulate the imposed forces and hazards.
Another change will be increased amounts of inventories throughout supply chains, as a buffer against future disruptions. Companies learned that, even when the causes of shortages and outages are known by customers, goodwill and customer satisfaction still suffer. In short, people prize delivery and performance. Increased inventories generate increased inventory-carrying costs. They run counter to “lean” operations, an example being JIT (just-in-time) receipt of inventories, which are placed quickly into production instead of into storage.
Packaging can contribute to the containment of inventory-carrying costs. The greater the amount of inventory, the greater its exposure to being damaged during warehousing. Damage can be inflicted by material handling, for example. Another damaging effect is static compression, especially on loads stacked on the floor, rather than in storage racks. Stacked loads don’t always remain columnar and are subject to collapsing. Palletized loads comprise most of the inventories in warehouses; therefore, the integrity of tertiary packaging is essential to inventory-carrying costs.
Transportation is a form of warehousing because cargo is under storage throughout the conveyance. The relationship is exemplified by intermodal, containerized transportation, which transpires across extended times. From a systems perspective, inventory-carrying costs, and packaging’s effect on it, start prior to the arrival of inventory at a warehouse.
In addition to physical flows, supply chains are characterized by informational flows. Advancements in information technology (IT) will improve communications among supply chain members and increase overall transparency. On a related note, packaging has been an early medium for scanner technologies, to the benefit of order placement and order replenishment. Informational flows are important to packaging procurement, given the limited practicality of having a ready product but lacking the packaging. Because packaging typically embodies multiple components, the unavailability of a single component can halt operations.
Any crisis denotes having been taken by surprise. In harsher terms, a crisis results from failure of foresight, planning, and execution. Preventing another supply chain crisis brought on by a pandemic will be a priority of industry and government. As the aforementioned changes, as well as others, are implemented, packaging must be assigned its pivotal roles.
Sterling Anthony, CPP, is a consultant specializing in marketing, packaging, logistics, and ergonomics.
He can be reached at 100 Renaissance Center-Box 176, Detroit, MI 48243, 313/531-1875, or email him at email@example.com.