The Packaging Summit, 13 -15 May, 2008, Rosemont, IL, USA

Robert Wilson. ChairmanAnia Krolak. Consultant

Johan Carlsson. Consultant

PACKAGING DESIGN VS. PROCUREMENT

The Pöyry Group

Net sales € 720mPersonnel 7,200

EnergyPersonnel 1,800

Infrastructure & Net sales € 220mPersonnel 2,400

Paper, PackagingNet sales € 280mPersonnel 3,000

EnergyNet sales € 220mPersonnel 1,800

Infrastructure & EnvironmentNet sales € 220mPersonnel 2,400

Consulting•Consumer Packaging Strategies•Packaging Procurement•Sustainable Businesses

•Renewables•Markets and Policies•Sector/Producer Strategies•Plant Design and Operations

•Waste Management•Municipal Waste Strategies•Organics•Policy Framework

Sustainability: As a Business Driver - Where it Began…

Greenhouse gases, Climate changeCarbon

Forest certification

Geneticallymodified

organisms

1994 1997 2000 2003

Level of

Attention

Low199019801970

Old growthforests

Recycling

Clear cutting

Nuclear power

Hg

BOD SO2

Extreme

HCHO

The environment has been a growing force over 30 years. Issue follows issue, but with a residual accumulating impact. The collective direction is one of ‘sustainability’ – of life, quality, aspiration.

2007

Health

Chemicals (REACH)

Sustainability

+PackagingWaste

Time

Water, Air, Food ?

Based on survey of issue intensity – articles, profiles, debate

Packing design and procurement are drawn into this

Packaging Design vs. Packaging Procurement

Marketing

New Product Development

R&D

New Packaging

Design Packaging Procurement

LogisticsManufacturing

Conflict ?Resolution ?

Packaging Design

Value <1% of sales New product, renovation

Packaging Procurement

10-15% of sales= cost reduction

Differentiation vsCommoditization

Qualification. New KPIs• Carbon, GHG• Embedded Water• Waste, Obsolescence• Recyclability• Transport – food km

Perception vs Scorecards

•Complexity reduction•Supply chain opt.•Cradle/Gate to Gate•Make/buy

Value per Shelf Space vsTotal Costof Ownership

Competitive Advantage• Closed Loop• Total Cost of Shelf Space• Cradle to Cradle• Business outsourcing

Legislate vs Innovate

Role of Packaging

•Product protection,•Decision to buy (FMT), •Promotions•Production efficiency

Perception of Packaging

Consumer perceptions: • Tied into Climate Change• Overpackaging, waste• Labelling confusion• Retail driven, CSR• Consumer vs Customer

Sustainable Packaging

Eco-design• New materials, pack. factors• Less is more• Localisation• Alignment to customer

Conflict AreasEvolution

Common ground

Conflict/R

esolution

Pack Design vs. Pack Procurement Objectives

design

procurement

purchasing leverage

product safety

supply chain optimization

brand consistency

manufacturingcost reduction

securityof supply

packaging competitiveadvantageTCO

brand revival (renovation,promotions)

brand differentiation

brand loyalty

consumer delight

productsafety

packaging competitiveadvantage

supply chain optimization

manufacturingcost reduction

brand protection

product & pack qualification

waste and obsolescence management

waste and obsolescence management brand

consistency

brand protection

product & pack qualification

Finding Common Ground

design

procurement

purchasing leverage

securityof supply

TCO

brand revival (renovation,promotions)

brand differentiation

brand loyalty

consumer delight

Conflict/R

esolution

Common ground

Search for the right balance and the new common ground

packaging competitiveadvantage

waste and obsolescence management

manufacturingcost reduction

supply chain optimization

Case Study: Innocent, UK

• Innocent (£76.6/USD150 Mn sales) procurement strategy is fully integrated into the sustainable pack design.

• Design. New sustainability initiative – packaging, brand

• Procurement role. The company abandoned PLA-based bottles because commercial PLA-based packaging composting was ‘not yet a mainstream option’ in the UK.

• In September 2007 Innocent became one of the first British company in the world to put its drinks into 100% recycled PET bottle.

• Planes are not used to transport its fruit and, whenever possible, alternatives to fossil fuels ar e employed. 10% of profits is given to charity.

Packaging competitive advantage: collaborative design and procurement

packaging competitiveadvantage

packaging competitiveadvantage

Case Study: Waste and ObsolescenceNew Focus, New (common) KPIs. Design and procurement get realigned

waste and obsolescence management

waste and obsolescence management

Raw MaterialProduction

Raw MaterialDistribution

Product Manufacture

Product Distribution

Retail and Consumption

Disposal/Recycling

Cradle to Cradle(Total Cost of Shelf Space)

Closed Loop(Packaging-in Packaging-out)

Gate to Gate

• Carbon Footprint…. carbon neutral, offsetting• Embedded Water• Recyclability, Reuseability… packaging• Transport… food and product miles (km)• More to come

‘ New’ KPIs

Case Study: Top Global Brand Owners Manufacturing cost reduction: Business process outsourcing offers flexibility to deal with complexity

manufacturingcost reduction

manufacturingcost reduction

BUNDLING

Print, Product and Brand managementPrinter consolidation, designPromotions, obsolescence managementBrand support – consistency

Supply Chain IntegrationMultiple category streamsSupply chain analytics, logistics, ITGrowth facilitation

Financial and Security ManagementWorking capital managementData and information managementPackaging, brand and identity securitySocial, environmental returnsQuality and assuranceEnvironment complianceChain of custody

ManufacturingPack/fill, FlexibilityProcurement, sourcing, demand planningMaterials performance, specification

Business Process Outsourcing

Drivers• Annual cost savings

create the momentum for outsourcing

• ‘Annual’ KPI reset. Outsourcing paid on achievement

12

Case Study: Closed Loop Supply Chain

• As nearly 70% of recovered post-consumer plastics waste is exported mainly to China, rHDPE availability in the UK is very limited.

• The manufacturing base for food-grade rPET and rHDPE has only started to develop in the UK, new supply chains are created to guarantee the quality and continuity of deliveries. As a result, companies are forming closed loops.

• Driven by Marks & Spencer (M&S, upmarket supermarket chain) commitment to require the food-grade of rHDPE for milk bottles, manufacturers such as Veolia (MRF), Closed Loop London (plastics recycler – a £30 m investment), Nampak Plastics (HDPE bottle blow moulder), Dairy Crest (milk producer) and have formed a closed-loop supply chain.

• Other Closed Loop examples – Direct, real time GHG offset purchase.

Supply chain optimization

supply chain optimization

supply chain optimization

Customer

packaging competitiveadvantage

waste and obsolescence management

Conclusions – Packaging Design vs Packaging Procurement

Conflict ? Resolution ?

Design and Procurement work together to achieve the customer need and competitive advantage from sustainable packaging

supply chain optimization

Closed loop systems provide the substrates for securing supply chains of environmentally preferred materials.

manufacturingcost reduction

Business process outsourcing provides the flexibility, access and cost to support design and procurement complexity

New KPIs direct the way in which design and procurement engage.

Pöyry Consulting LtdCentury HouseStation WayCheamSurrey SM3 8SWUnited Kingdom

tel: +44 20 8770 3200firsrtname.lastname@poyry.com

Robert WilsonAnia KrolakJohan Carlsson