best practices in demand driven contract packaging - peak vs weak seasons

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• How to post a question?

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Ishpreet Virdi Senior Research Analyst Beroe Inc. Dialing in from:

India

Munnangi Abhiraj Lead Analyst Beroe Inc. Dialing in from:

India

Speakers

Panel for the Webinar

Sharan Ramesh Engagement Manager Beroe Inc. Dialing in from:

India

Moderator

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5

•Case Examples

Integration of Contract Packaging Services into Packaging Strategies

Pain Points during Peak Season Demand

Situational Importance of Contract Packaging

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Packaged FMCG/CPG product for sale

Primary Packaged Product

Warehouse/Distribution & Fulfillment

Retail Shop

Packaging Material

Secondary Packaging Unit

Customized Packaging Unit

DID YOU

KNOW?

Billion Dollar

Spend

7

13%

22%

11%

North America

Vancouver

Olympics

2010

FIFA World Cup

2010

South Africa

China

Beijing Olympics

2008

38000

42000

46000

50000

54000

58000

62000

Aug-0

9

Sep-0

9

Oct-

09

Nov-0

9

Dec-0

9

Jan-

2010

Feb-

2010

Mar-

2010

Apr-

2010

May-2

010

Jun-2

010

Jul-2010

Aug-2

010

Christmas Spurt

Soccer Wave

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South African Retail Sales Statistics:

• Event Examples: Known Demand Conditions with

standard packaging requirements. For example- Gift sets, or prestige promotional items

• Markets: Established markets . Not prone to seasonal demand spikes.

• Event Examples: Market entry into areas such as Brazil, China, India.

• Markets: Nascent Markets or Market entry

conditions with demand uncertainty.

• Event Examples: Christmas, New years, Festivals/Sports with or weather related events with customized packaging requirements. Peak Seasons

• Markets: Customized markets with customer

centric approach and demand variability.

Se

rvic

e

Cu

sto

miz

ati

on

Hig

h

Lo

w

Non-Critical Categories

Strategic Category

• Event Examples: Product value chain falls under core competency with dynamic packaging. For examples- Diapers for a CPG company.

• Markets: Established markets. Demand dictated by end use industry.

Leverage Category

Bottleneck Category

Long Short Service Lead Times

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Contract packaging Necessity: Contract packaging Necessity:

Contract packaging Necessity: Contract packaging Necessity:

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Package Design Component / Materials Sourcing

Material Handling

Process/ Packaging

Warehousing Shipping/ Logistics

Cost and Quality Concerns

• Quality and Cost -

• Melding service costs to final

product cost.

• Maintaining internal quality levels when using contract

packaging.

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Package Design Component / Materials Sourcing

Material Handling

Process/ Packaging

Warehousing Shipping/ Logistics

Maintaining Inventory Levels and lead times

• Quality and Cost -

• Melding service costs to final

product cost.

• Maintaining internal quality levels when using contract

packaging.

• Maintaining Inventory Levels

and lead times

• Matching Inventory levels

with Demand. • Meeting short run demands

or demand spurts.

• Managing Seasonal Demand

needing customized

packaging

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Package Design Component / Materials Sourcing

Material Handling

Process/ Packaging

Warehousing Shipping/ Logistics

Seasonal barriers and road congestion

• Maintaining road freight

services

• Infrastructure

• Tighter time frame • London Olympics Data

(2012):

• 11 million visitors were

expected

• Congestion was expected to increase by 30%

• Journeys through London

were expected to take 20%

longer on an average

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Package Design Component / Materials Sourcing

Material Handling

Process/ Packaging

Warehousing Shipping/ Logistics

• Quality and Cost -

• Melding service costs to final

product cost.

• Maintaining internal quality levels when using contract

packaging.

Labor Issues

• Maintaining Inventory Levels

and lead times

• Matching Inventory levels

with Demand. • Meeting short run demands

or demand spurts.

• Managing Seasonal Demand

needing customized

packaging

• Labor conditions

• Availability of skilled labor

• Poor staffing

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Package Design Component / Materials Sourcing

Material Handling

Process/ Packaging

Warehousing Shipping/ Logistics

Increased SKUs

• Quality and Cost -

• Melding service costs to final

product cost.

• Maintaining internal quality levels when using contract

packaging.

• Maintaining Inventory Levels

and lead times

• Matching Inventory levels

with Demand. • Meeting short run demands

or demand spurts.

• Managing Seasonal Demand

needing customized

packaging

• Labor conditions

• Availability of skilled labor

• Poor staffing

• Specially during major

events like festivals and

sports

• Difficult to maintain balance – between increased SKUs

and one’s infrastructure

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Package Design Component / Materials Sourcing

Material Handling

Process/ Packaging

Warehousing Shipping/ Logistics

Lack of Transparency

• Quality and Cost -

• Melding service costs to final

product cost.

• Maintaining internal quality levels when using contract

packaging.

• Maintaining Inventory Levels

and lead times

• Matching Inventory levels

with Demand. • Meeting short run demands

or demand spurts.

• Managing Seasonal Demand

needing customized

packaging

• Labor conditions

• Availability of skilled labor

• Poor staffing

• Specially during major

events like festivals and

sports

• Difficult to maintain balance – between increased SKUs

and one’s infrastructure

• Communication:

• Demand forecasts

• Capabilities

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Package Design Component / Materials Sourcing

Material Handling

Process/ Packaging

Warehousing Shipping/ Logistics

Automated v/s Manual

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Why is this important and what can we do ?

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LEARN

PLAN

ENGAGE

ADAPT

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LEARN

PLAN

ENGAGE

ADAPT

Strong Technology & IT Systems

Location

Reliability and Experience

Must Haves

Buyers

Alternate Delivery Options

Equipment Functioning

Labor Shift Detail

Service Providers

Demand Forecasting

Selecting the Right Supplier

CDL Logistics – London Olympics

• Warehousing and delivery teams were expanded • Sourced 20 additional vehicles • Embraced night time and weekend deliveries

Preventing Seasonal Barriers and road congestion

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LEARN

PLAN

ENGAGE

ADAPT

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Pricing Bases

Suppliers

Distance to

Focus Markets

Outsourcing

Practice

Global Contract

packagers and 3PLs

Local Contract

Packagers and 3PLs

Both Global and

Local supply base

Near Focus markets Within Focus

Markets Overseas delivery

Product Volume

Based Pricing

Pricing based on

Service fees

Time & Material

Pricing

Value Added Service

Based Pricing

Customized Co-

packaging

Requirements

(E.g. Seasonal demand spurts such as Christmas and

New Year or Chinese New Year etc.., or non standard

product packaging etc.).

• Internal Co-Packaging Expertise: Medium

• Operational Complexities/Risks : High

Full-Outsourcing

Strategy

Hybrid/Embedded

Operations

In-Sourcing or Self

sourcing Strategy

• Location- USA

• Number of Facilities- 6

• Peak Season handling Strategy- Establishing packaging lines in customer distribution center.

Benefit for buyer- Greater control over quality.

• Client – COTY

• Peak season estimates- 8 million packs over 3 million in off season

• Practice- Establish new packaging lines self site or customer site.

• Increased transparency with client.

Meet the increased demand of 5 million packs

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Coregistics – Embedded operations

Saddle Creek Logistics – Christmas

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Pricing Bases

Suppliers

Distance to

Focus Markets

Outsourcing

Practice

Global Contract

packagers and 3PLs

Local Contract

Packagers and 3PLs

Both Global and

Local supply base

Near Focus markets Within Focus

Markets Overseas delivery

Product Volume

Based Pricing

Pricing based on

Service fees

Time & Material

Pricing

Value Added Service

Based Pricing

Customized Co-

packaging

Requirements

Full-Outsourcing

Strategy

Hybrid/Embedded

Operations

In-Sourcing or Self

sourcing Strategy

(E.g. New product launch in a nascent markets)

• Internal Co-Packaging Expertise: Low

• Operational Complexities/Risks : High

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LEARN

PLAN

ENGAGE

ADAPT

Cross Road Centers

• Logistic providers in the USA

• Were approached by another warehousing and transportation provider • Developed partnership

• Result – Delivered ahead of time

Bottleneck

Category

Demand

Variability Reactive

Plan B

Educate

Weekly Forecasts

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LEARN

PLAN

ENGAGE

ADAPT

Are we ready?

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Necessity for Contract

packaging

Situational importance of

Contract packaging

Pain Points in peak seasons

Planning for Peak Seasons

Engaging in Peak Seasons

Adapting in peak Seasons

Are we ready?

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Direct Impact on retail

sector:- 600-700 million Lira