Chet Rutledge, director of packaging for private brands for Walmart Stores Inc., recently participated in a Packaging World webinar that presented Walmart’s views on Retail-Ready Packaging, or RRP as it’s come to be called. Speaking exclusively with Ben Miyares, president of the Packaging Management Institute, Rutledge outlined some of the achievements made—and some of the challenges still faced—as Walmart works to realize the business benefits of RRP. Here is a portion of that webinar conversation.
Packaging World:
How does Walmart define retail-ready packaging, and what is the business justification for implementing RRP?
Rutledge:
RRP is packaging that’s fit for purpose throughout the supply chain. That means it must be in keeping with the five easies. Is it easy to open? Is it easy to identify? Is it easy to shop? Easy to stock? Easy disposal? Those are the core elements that have been defined through the IGD network in the UK. We have today a lot of products that I would call essentially “shelf-ready,” but in our terms, we refer to that and most of our suppliers will refer to that as a PDQ. So what’s the difference between this and the PDQ? Well PDQ is something I could get into fairly easy but it may be today just a perforated box with a knock-out panel. Graphics may not even be in the picture. True RRP, on the other hand, takes graphics into account, harmonizing graphics at that. I’ve seen some really good work where the transport secondary packaging actually ends up on shelf. The graphics marry up with the primary package for a really nice look and presentation on the shelf. It’s much more than just a brown box. Is it easy to stock products? Think about products that are high-volume items, small items that you end up stocking one at a time on the shelf. If you can stock multiple of those items in one motion versus a dozen separate motions, there’s speed and efficiency gained in stocking practices. Key icons are also part of true RRP, a graphic look that makes it easy to find it in the back room. If you’ve got product that’s in the back room and storage that’s two or three bays high and somebody’s looking for that, it makes it very difficult when it’s a sea of the same look, the same item. It’s really just looking at it as a whole delivery system that goes throughout the whole process and making it easier for an associate to find, locate, and put the product on the shelf, while also helping the customer find it, recognize it, and purchase it.
Does Walmart have a general grocery retail position on RRP in the United States?
We don’t have a formal publicly stated position at this point for the U.S. We do have in Canada. Walmart Canada and the Loblaws chain are going forward with RRP because they’re in alignment with the trade associations there in Canada. In the United States, we’re not as aligned. I know that other retailers are looking at it as part of their business strategy. But I don’t think there’s a uniform approach, which has been a key to success in my opinion with making RRP succeed in Europe, especially the UK. There was industry alignment. We obviously have a lot more variables in the U.S. just due to size and due to complexity of the supply chain and distance the product has to travel. But some industry alignment would be helpful. I look at it as three major product groups. In Group 1 are packages that are fairly easy to change over. There may even be some existing items that are in some form of shelf-ready package already. If it’s some minor modifications to that current package, that’s relatively insignificant. I can make that change with no cost impacts, because it’s relatively easy. In Group 2 things get progressively harder. Does it require capital? Does it require machinery modifications? And then in Group 3 you’re looking at new equipment and evaluating a whole new process. I think you can find value in every one of them. So I’m encouraging suppliers that I work with by telling them that anything currently in some form of shelf-ready package or anything that they can change today to meet the retail-ready guidelines with no impact, no cost impact, by all means go ahead and do that. Then the other side of the coin is for new items coming in. You’re going to have to develop packaging anyway, so let’s go ahead and put RRP into the thought process for those new items coming in. I see it more as an evolutionary process. It’s not going to happen overnight. It’s going to be much more of an evolutionary process.
It’s a lot easier to think about it at the outset than to try to look at your existing RSC and say alright, how can I convert that to RRP? Is Wal-Mart envisioning RRP for principally the grocery end of the business, or do you extend this to non-grocery items as well?
It has a potential to play in all categories. The area that I’m focused on is more groceries. Groceries and the consumable segment of the business, that’s what I’m responsible for. But think about socks and those types of garments that often are peg-hooked today. I’ve seen some side-by-side video comparisons of peg-hooking and RRP, and there’s a lot of time, labor, and shelf space wasted by peg hooking. So there’s definitely opportunities for RRP in categories like that. Seasonal items, too.
I would think that one principal area of difference between Europe and North America would be the distances that products must travel from point of manufacture to point of sale. Is there any possibility of adding a sixth easy, Distribution, for the US, or is that already incorporated in the five?
Fundamentally, I think it would be inherent in the five, but you’re right, our distribution legs are much longer versus any of the distribution legs in Europe. So that must be paid a little more attention here in North America. You could even go further back and get into the manufacturing piece of it. Is it efficient, and is it easy to manufacture? Is it easy to assemble it at pack-out point or the point of initial manufacture? These are really key areas that we have to take into consideration as well.
Should packaging equipment builders and packaging material suppliers be part of the discussion in the US or North America?
I think it would be a good thing to incorporate that into the process. In my experience, basically any of the areas where I’ve found opportunity for real dollar savings, for performance benefits, for optimization opportunities, they don’t come without mechanization or automation. So getting some of those key manufacturers involved as well to gain some insight is good. The key to success for all this, in my mind, is that it has to be a win-win-win scenario for everybody involved. It can’t be detrimental to any one participant in the process or it just won’t work. I’m really a proponent of trying to develop a much more collaborative environment, and we’re seeing some success in that as well.
How about the Grocery Manufacturers Association and organizations like that? There had been talk of an RRP subcommittee being formed at GMA, but now that seems to have dropped down their priority list. I wonder if that’s an indication of a lack of interest or just a sign that they have an awful lot on their plate.
I would suspect it’s because they have an awful lot on their plate. We are working collaboratively with a team in Canada to address the potential difficulties that might surface if CPG companies made changes to meet RRP needs in Canada and those changes didn’t take into account what that means for the U.S. market. We know, too, through association meetings and things of that nature, that several other retailers are developing their own independent strategies around RRP, and we’re hoping to address that collaboratively, too. If there are separate standards set by several different key retailers, that’s going to create such a level of complexity in the manufacturing process that it’s not going to be truly beneficial for CPG companies or retailers. So gaining some general guidelines that can be applied across the board will limit the number of packaging sizes and shapes that have to be dealt with. This will drive efficiencies at all levels. And it’s going to become even more important as retailers like Walmart and Target begin looking at more urbanized markets requiring smaller store formats. That is going to lead to yet more pack varieties, typically smaller ones. The more you can modularize, the better.
What about shelf sizes? There are at least 4 different depths of shelf sizes in the refrigerated section alone across the industry. Couldn’t there be an understanding on one or two shelf depths?
That’s definitely a key concern that I hear from a lot of manufacturers. It has to be addressed.
Why is Walmart so heavily focused on dry goods and RRP? Wouldn’t you rather go to the dairy case and take a look at all those individually cupped yogurt containers and so forth?
Part of the explanation is that we initiated a pilot last year in Canada with confectionery and saw some really positive results. But branching out from a dry goods category like confectionery to items in the cold chain is complicated by the need to understand the impact of temperature, moisture, and changing humidity on the packaging. So that will take some more work.
What about sustainability? You sometimes hear from CPG companies that RRP is directly opposed to the idea of reducing packaging. Yet Walmart made it pretty clear in the RRP guidelines you distributed in 2008 that they were sustainable RRP guidelines. Does sustainable packaging complicate or even prohibit sustainable packaging?
I don’t think so, no. I think sustainability should be in the DNA of everything that we do. What helps enormously is taking a systems approach that harmonizes primary, secondary, and tertiary packaging. You have to have all three of those or the product can’t get from point of manufacture to the shelf, nor will the customer be able to buy the product and take it home. And it has to perform at home properly, too. It’s all about engineering the packaging components properly. You may even increase packaging materials in one area but reduce them in another. Better use of things like Z-flute, for example, with its enhanced load-bearing properties, shows promise. Also important is to remember there’s no simple answer to any of this. It’s not a one-size-fits-all proposition.
Let’s turn to sharing, and by that I mean the sharing of information regarding RRP and its functionality in store operations. I know Walmart does a lot of research in this area. Do you share your findings with suppliers? And what about other retailers? To come up with some universal standards or guidelines on RRP, you’re going to have to sit down with others, do some sharing, and ultimately compromise for the greater good.
We work collaboratively with our suppliers because we know that for us to be successful, it helps to recognize that we all have some skin in the game. When it comes to other retailers, we have to be cautious, obviously, about anti-trust and all those types of issues. But opportunities do exist where we can participate in a GMA effort, for example. That’s neutral ground, and it’s a good place for us and other retailers to do something similar to what was done in Europe on RRP. That’s one of the keys to long-term success with this, I believe, where we can gain alignment for a more unified approach.
Last question. What advice can you offer other retailers and their suppliers?
I think there are two keys. First is close collaboration by retailers and their suppliers. And second is to remember that you have to look at it as a complete system and engineer a solution with that in mind. That means all the way from the point of manufacture through distribution through shelf-stocking to how it looks on shelf and how it performs in the home. They’re all critical components.
