As we continue to explore what vendors showed at drupa 2012 for our Digital Printing for Packaging, it is important to understand what challenges their customers are facing. Karstedt Partners in collaboration with Mike Ferrari of Ferrari Innovative Solutions has developed a series of graphic depictions to help illustrate the dynamics affecting the packaging supply chain. The first diagram shows the historical lifecycle for a typical product. Segments “A” and “B” align with special requirements, for either new product launches or promotional activity. Segments “C”, “D” and “E” focus on the management of active products. The supply chain focus is on segment “D”, the mainline or long run requirements, as this is desired business in a capital-intensive business such as packaging.
The Packaging Lifecycle – Historical View
Source: Karstedt Partners, LLC
Packaging Converters receive orders from Brand Owners and translate the demand stream into production orders. The next figure shows converter production requirements.
Packaging Converter Production Requirements – the Old Operational Model
Source: Karstedt Partners, LLC
Consumer behavior related to how we shop, where we shop, and what we shop for has changed over the past ten years. Likewise, the retailer and brand owner response has changed dramatically to enhance consumer engagement. The result has been rapid product proliferation. Twenty years ago, in most major product classifications, four to five major brand producers served 80% of that specific market demand. Put another way, four products served 80% of the market. Today, four to five major brand producers continue to serve most major product classifications, but instead of producing a single product, they now produce 250-300 variations of the same product. The product inside is the same, only the packaging has changed. The next figure shows how this dynamic is impacting the product lifecycle.
The Packaging Lifecycle – Revised View
Source: Karstedt Partners
The total volume produced has not changed; the total number of orders, as well as the distribution of those orders has changed dramatically. The number and frequency of mainline orders has decreased dramatically, while the number and frequency of orders for innovation, event marketing, low-volume SKUs and end-of-life requirements has increased dramatically. The challenge for the packaging supply chain traditionally has been to manage scale; the new challenge is to continue to manage scale while also managing scope. Industries with an infrastructure tailored to volume typically have a difficult time adding capabilities for speed, flexibility and convenience. This creates opportunities for new entrants such as contract manufactures and contract packagers.
The fourth post in this series: A Deeper Look at the Unmet Needs in Packaging, will further discuss what challenges face packaging converters that digital and analog systems suppliers are trying to address.
Series Overview: True to its history of introducing new technology to the printing world, drupa 2012 offered plenty of new things. In addition it showcased a great deal of packaging specific offerings in printing and finishing technologies. If drupa 2008 was “The Inkjet drupa” this time around it was surely “The; ‘we think we have a digital solution for packaging’ drupa”. Karstedt Partners spent 10-man days on the floor meeting with equipment suppliers, users, journalists and pundits evaluating what was being offered by vendors, and what was being asked for by users. This 4 part series of posts offers an overview of what we learned from these meetings and can share with those interested in our opinions and observations. The full 61-page report is available by clicking here.
