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Packaging industry outlook highlights sustainability trend, supply chain challenges

Packaging industry outlook highlights sustainability trend, supply chain challenges

From: Transportation Today

Looking ahead this year, experts in the packaging industry are on common ground when it comes to naming the most-notable trends, the common challenges, and the best solutions for managing the landscape.

Demand for sustainable packaging, for instance, will continue driving the industry, as companies work to produce and use recyclable materials, as well as those that are 100-percent biodegradable.

“We are seeing a much stronger emphasis on sustainability, which includes items that are not only made from recycled content but also quality for curbside recycling,” Tim Spicer, president of, a national distributor of industrial packaging and shipping supplies, told Transportation Today.

“Corrugated shipping boxes made from recycled content with paper gummed tape rather than clear poly packing tape is the most common example of this,” added Spicer.

Tom Egan, vice president of industry services at PMMI: The Association for Packaging and Processing Technologies, said sustainability is definitely a top trend in packaging for 2023.

Specifically, “sustainability is a focus for all companies in the packaging and processing supply chain, with a special emphasis on consumer packaged goods (CPG) firms,” Egan explained.

And with a constant focus on sustainability improvements, he said companies continue to introduce and improve packages of all types.

David Feber, senior partner in Detroit and the global leader of McKinsey & Company’s Packaging Service line, agrees that sustainability is an overarching key trend in packaging.

“It has finally hit a tipping point and we see it continuing to accelerate across the value chain in 2023,” Feber said. “This will be further affected by accelerating regulations and legislation being enacted in the U.S. and in the European Union.”

Within packaging, Feber said this can mean recyclability, recycled content, using less materials, and/or the need for companies to have a lower carbon footprint in packaging.

“No single substrate is good at all sustainability dimensions and we expect to see a portfolio of solutions across paper, plastic, metal and glass being used to satisfy sustainability needs,” said Feber. “These will change based on the segment, application and geographic region.”

One of the impacts on the packaging industry, according to Feber and his associates, will be the redesign of packaging composition to avoid mixed materials in the packaging. To accomplish this, he said there will be a shift to more mono-materials (such as using only polyethylene in the packaging), or a shift from packaging materials having low recycling rates to those with higher rates.

“There is also a strong drive to facilitate sorting and recycling, by harmonizing labeling on how to recycle to make it easy for consumers to do it right, as well as increasing capacity for recycling, especially in plastics,” said Feber, noting that, for instance, there’s a call for the same labeling to be used all over the U.S. and EU.

For its part, features sustainable items and Spicer said the company is also introducing new items that fall into this mix, such as a protective padded mailer that is cushioned with corrugated fiberboard rather than traditional bubble wrap.

Other Trends

In addition to sustainability, PMMI’s Egan said there are two other top trends impacting companies involved in packaging and processing: automation and robots.

“All three trends have been impacting the industry to varying degrees for multiple years,” said Egan, “and in all cases, the impact remains significant into 2023.”

Even as the sustainability improvements continue, he said it’s also important to recognize that the packaging utilized for any given product must protect the product to the point-of-use by the customer. “This includes promotion, transportation through the supply chain, and providing such information as directions for use, ingredients, and best uses of the product.” Egan said. “We ask a lot of the packaging industry.”

To that end, he said most CPG firms are actively seeking automation solutions as part of their IIoT process — or the industrial internet of things, which refers to interconnected sensors, instruments, and other devices networked together with computers’ industrial applications, including manufacturing and energy management.

“This opportunity for automation provides access to advanced features, improved performance metrics, and, in some cases, contributes to the sustainability goals of the CPG production operation,” Egan said.

PMMI members, he added, address this automation need with a variety of solutions, ranging from a relatively simple, efficient solution to a more elegant solution that enables very flexible deployment by the customer production operations team. “This flexible design may include the ability to use different packaging designs and even different materials to achieve the best fit for their consumers,” he said.

Robots also represent a strong, growing segment of the automation solutions for production operations. A PMMI Business Intelligence report released in October 2022 identified the principal areas for robot growth including secondary packaging and warehousing/logistics. The same report also identified that collaborative robots (cobots) are viable solution sets and will continue to grow over the next five years.

Similarly, Feber said innovation will generate more positive results than ever in the industry.

“Whether we are in a downturn or not, climate change, COVID-19, disrupted supply chains and digitalization have increased the pace of change to a new level,” said Feber. “Fueling that speed of change with new regulatory pressures means that first movers and new transformative concepts have a better chance to get established and scale.”

E-commerce is another transformative trend, according to McKinsey & Company.

“During COVID-19 many consumer packaged goods segments had an increase in share of online sales in one to two years that normally would have taken five to seven years,” Feber explained. “In many CPG segments, the e-commerce channel is above 20 percent, making it significant as an own packaging format segment.”

Feber also said that the physical strength demands on packaging for CPG products is much higher when being shipped directly to consumers and much of the packaging hasn’t been changed yet. “SIOC, Ship In Own Container, is a growing concept, where products are supposed to be shipped in its own packaging rather than using transport boxes or parcels,” he said.

In fact, for, Spicer said ensuring success has been focused on a continued commitment to providing the best user experience online.

“This starts with strong organic positioning and strategic paid advertising on key search engines,” said Spicer. “Once on our website, we have gone to great effort to ensure products can be found easily through an internal site search and logical category listing with customized product filtering.”

“Having helpful content to help the visitor is key in providing the best experience for the customer,” he said.

Industry Challenges

Supply chain problems, however, do persist for the industry.

Egan, for example, said that one element of the supply chain that continues to be a constriction is the last delivery element from the distribution warehouse or from the production floor to the point of retail.

“There is a great dependence on the supply chain, both on the basic transportation across oceans, as well as the last mile of delivery,” he said. “While innovative solutions continue to develop, not all are in place at enough scale to impact the issues that have developed.”

To improve future availability, many companies are transitioning from an efficient supply chain to a resilient supply chain.

“This change is an important aspect of being able to provide products with minimal disruption when raw materials, ingredients, or component supply is impacted by one main supplier,” said Egan. “A resilient supply chain allows organizations to access raw materials and components from multiple suppliers, often now located in different countries or even regions of the world.”

And while this does add some cost, Egan noted that it also enables businesses to continue to function in a relatively efficient manner when interruptions occur at a supplier.

Spicer agreed, saying that “supply chain issues have fortunately calmed down in the last several months, with lead times getting closer to pre-pandemic times.”

“Still, we are forced to carry extra inventory to cover the shipping delays in getting product to our warehouses,” he said.

Feber painted a similar picture, noting that while supply chains seem to be freeing up, especially in some segments where volumes have returned to pre-Covid levels, there may still be some disruptions.

“In those areas, supply chains, scarcity of some materials, and cost pressure will remain,” he predicted. “We still have longer lead times in supply over continents, meaning that the industry might live with delays, or need to look for more local supply of materials and conversion for packaging.”

And circling back to sustainable materials, Feber pointed out that the demand on high-quality PCR (post-consumer recycled material) in plastics is far higher than supply.

“There is a shortage of material for large users of packaging,” he said. “The same goes for barrier-coated papers that are aiming to substitute some plastic packaging.”

This shortage of green or more sustainable materials leads to a cost increase, what Feber described as a so-called “green premium.”

“In a market of inflation and higher interest rates, we will see a continued cost increase,” he said. “At the same time, the new regulations mentioned… will also add and/or increase EPR fees (Extended Producer Responsibility fees for packaging) and potentially introduce new taxes for non-recyclable packaging. All in all, this will put pressure on packaging costs.”

Additionally, Egan at PMMI said another ongoing “huge challenge” is having a qualified workforce for all parts of the packaging and processing supply chain.

“As generations continue their transition in the workforce, the need for trained operators and maintenance technicians is very strong, as is the need for professional management and technical professionals, such as engineering,” he said.

PMMI and its members are actively engaged with numerous schools to promote a better awareness and understanding of packaging and processing, Feber added, saying PMMI members develop informative content and provide training, financial and professional support to grow the workforce and solution sets to help the industry continue thriving.

Planning Ahead

The transformational changes of the immediate future will challenge many packaging players, said Feber.

“Nevertheless, these changes will also offer real growth opportunities for organizations pursuing the right focus and actions,” he said, noting that McKinsey research on the last recession found that some companies — the resilient ones — generated excess total shareholder returns (TSR) during the downturn and the recovery.

Resilient companies have some distinctive characteristics in common, which enable them to emerge strong during the recovery phase, added Feber. “An important one is focusing on growth by focusing aggressively on resources.” For example, he suggested doubling the reallocation to key growth areas.

Spicer also pointed out that as shipping costs rise and with UPS and FedEx charging not only for package weight but also now for the size of the package, it is more important than ever to purchase the right size shipping box for a specific product.

“Having an oversized box could secretly be costing your company thousands of dollars per year from UPS and FedEx charging by the dimensions of the box,” he said. “Having a shipping box that is the best fit is definitely the most cost-effective solution given the way the major parcel carriers are charging for shipping.”

Egan of PMMI said that packaging and processing companies will achieve constant progress in areas as diverse as product protection, promotion, and recycling.

“This includes new product introductions to meet changing consumer tastes and demands, as well as improvements in the production process and the materials utilized,” he said. “It is an exciting industry with interesting opportunities and rewarding careers.”

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