Executive Forecast: More of the Same in 2022
The new normal looks like it’s here to stay.
By Kristin Joker, Sam Paul, Derrick Teal
Remember the optimism heading into 2021? Vaccines were on their way. Factories were opening back up. We knew there were issues with the supply chain, but a problem recognized is a problem that can be solved. Yeah … good times.
Little did we know that we were living in a horror franchise that just won’t end. Did anyone of us expect to be starring in Coronavirus Chapter 5: Omicron’s Revenge? The funny thing is, COVID doesn’t even seem to be the main character anymore. It’s sort of serving as the backdrop and letting other things like problems with supply be the star.
Horror film franchises tend to follow the same, or similar, formula from film to film. The characters and places may change, but the structure is basically the same. It’s for this reason that respondents to this year’s Executive Forecast echo much of what was said at this time last year, but have pushed COVID back a bit. It’s still there and much of what is expected in the year to come is based on the continued effects of the virus, but it’s not necessarily seen as the main antagonist.
Yet, again, a lot of what our respondents expected out of 2021 are expected once again in 2022. You might even call it a trend. Or, put another way, the new normal might actually be here to stay. So without further ado, here are the executives we spoke to and their thoughts on the year that was and the year that will be.
From Left to Right: Alex Wakefield, CEO, Longbow Advantage; Philippe Loeb, VP Home & Lifestyle CPG and Retail, Dassault Systèmes; Robert Champion, President, InnoFlex Solutions; Alison Keane, Esq., CAE, President & CEO, Flexible Packaging Association; Rich Benkelman Jr., Vice President, Crown Packaging Corp. Photos courtesy of the companies listed above.
How did the packaging industry fare in 2021?
The flexible packaging industry continued its growth in 2021 despite the continued impacts of COVID-19 as well as supply chain disruptions. Growth continued at a 3.6% rate, well above the GDP of -3.4%. Much of this growth was in the medical and health sectors as well as food and e-commerce.
In 2021, there were inflationary pressures and supply chain issues, but overall the packaging industry did very well in 2021. Crown Packaging has seen an increase in demand for packaging materials driven by higher volumes of e-commerce business. We’ve also experienced a boost in equipment sales as companies have prioritized automation in light of staff shortages.
What is something you consider “the new normal” in the industry?
Building resilience through active collaboration. Nobody can plan for every possible scenario, but teams need to still be prepared for anything. Now companies are realizing that all teams having real-time access to the same data can help each function perform better. Active collaboration also reduces the need for constant reporting and status sharing. If all teams have access to the same data, teams reduce their dependency on each other, freeing up time and resources to focus on core responsibilities and supply chain strategies.
At the beginning of the pandemic, with stay-at-home mandates and retail stores and restaurants closing their doors, e-commerce skyrocketed, experiencing 10 years’ worth of growth in just three months. As consumers became used to the ease and convenience of online shopping, a significant percentage became permanent online shoppers even as brick-and-mortar retail began to open back up. This shift to e-commerce is here to stay and CPG companies will need to explore ways to drive profitability across both physical and digital channels, including direct-to-consumer models.
One of the “new normal” is the use of Virtual FATs and technical review meetings. With the advent of the global pandemic, the ways of conducting business forced new methods on the manufacturing industry. We see the benefit of virtual FATs with the inclusion of VR technology and an evolving robust functionality matrix to validate the design and performance of capital equipment.
Supply chain disruption will continue, with not only workforce issues being exacerbated by the pandemic, but raw material availability and price fluctuations due not only to the pandemic but to weather-related events and global conflict.
The new normal in the industry is the extended lead times to get your products delivered to the consumer due to supply chain issues related to COVID. In addition to labor shortages, there were overseas containers that were delayed in onshoring which cause a delay in receiving your items in a normal timeframe. There’s been a high level of volume in the business-to-consumer space. Everyone probably experienced more packages being delivered to their homes because online ordering volumes have increased due to COVID. We predict demand for e-commerce packaging will remain high due to the convenience of online ordering consumers have come to expect.
Are there any machinery / manufacturing / technology innovations that companies are implementing?
Rising vendor expectations. Companies are starting to demand more from their vendors in terms of functionality, cost-effectiveness and reliability. Supply chain teams now need tools that work, use their data in ways that haven’t historically been done and provide a competitive advantage. Companies are no longer settling for clunky, one-size-fits-all WMS/LMS systems that come with costly upgrades and don’t work the way teams need them to in the new realities of today’s business world.
Many companies are now implementing Digital IIoT 4.0 as part of the total performance management system (processing and packaging) in their manufacturing and operations. The industry is facing pressure to lower MRO (maintenance and downtime costs) and balance the labor learning and technology gap. Digital is a tool and, when done properly, delivers tools for continuous operator training, lowers inventory (part cost) and taxation carrying this inventory. The tool also frees up capital and expense funds to invest in the front side of the business (marketing-innovation-renovation of brands) to maintain and drive growth. Finally, the tool provides captured real-time lessons learned to minimize the gap of replacing the experienced aging work force.
Automation is very popular for manufacturing facilities because companies are struggling to get workers to show up and work. In addition, there is a high level of the experienced workforce retiring because of the COVID effect.
When it comes to package design, what trends do you expect to continue?
Consumers have become much more willing to change their purchase habits to help improve the environment. They will continue to invest in brands and products that provide sustainable packaging solutions that may include new materials (recyclable, compostable) or alternative business models (refillable, reusable). The eco-footprint of the package will continue to factor heavily in helping consumers determine value.
All of the above — innovation in the industry continues to grow with recyclable packaging formats, including new barrier materials that enable mono-material construction for easier deconstruction for recyclability. Post-consumer recycled content is being incorporated at higher rates and in new categories, like food packaging.
One of the trends that seems to be more popular than ever is sustainability. Reduce, reuse and recycle is an important theme for Crown Packaging, as reducing material usage is a specialty of ours. With our 200 sales reps nationwide, we can provide onsite expertise to help reduce material usage at every stage of the packaging process. This accomplishes two important issues for the customer. One is to reduce the waste for the environment while reducing the overall cost of each package.
How can the industry capitalize on sustainable opportunities?
In order to support a circular packaging economy, brands need to think about how to keep their packaging “in the loop” and out of the environment. This means a bigger focus on material science in the lab, implementing circular design principles when crafting new packaging and leveraging lifecycle analysis to validate sustainable designs. Virtual testing tools can really help CPG companies significantly reduce costs and get to optimal secondary, tertiary and e-commerce packaging much faster.
Reflecting on what is happening in the industry, the innovation side of sustainability and materials typically is many quarters to years ahead of the capital equipment capability to run them. Required is proactive alignment in the key cornerstones enabling sustainability in manufacturing. Early engagement (manufacturing ecosystem) is required with material suppliers, capital equipment suppliers, operators (resources) and an understanding of internal modes of operation to be able to accept the sustainable materials in an effective way. Seen in the industry is the need for bringing strategic OEMs into the innovation sustainable phase early, before a project or outside group applies pressure on organization to make the change. The approach must be baked in an organization’s DNA, whether multinational or small mom and pop operations.
What will customers be like in 2022?
More consumers will expect sustainable supply chains. Consumers are holding corporations more accountable for their environmental footprints. Inefficient supply chains are not only costly but also hurt the environment more. Expect a growing trend toward companies investing in building more sustainable supply chain processes.
Many of the trends we saw in 2020 and 2021 with the onset and continuation of the pandemic will continue — consumers will continue to rely on e-commerce and delivery of goods and the priority of health and safety of goods and packaging will last.
How can the supply chain improve?
Real real-time visibility. Now more than ever companies are recognizing the importance of real-time visibility in their supply chain. Disruptions are rampant, costs are soaring. Teams need to be more proactive in the way they handle their processes, people and products which can only come with real-time visibility. What’s happening in the supply chain now wasn’t happening two hours ago. The key is to get immediate visibility into issues as they’re happening — across DCs, WMS solutions, shipping, etc.
What are some challenges and opportunities the industry faces in 2022?
An ongoing need to optimize warehouses. Warehouses are expensive to run and maintain. With rising supply chain costs and labor shortages, it has become increasingly important for companies to find new and innovative ways to optimize the warehouse. This would include using technology to fill some productivity gaps, having algorithms complement human expertise and leveraging real-time visibility in the supply chain.
As we are seeing in the back half of 2021, raw material prices and supply chain costs are rising, putting pressure on CPG companies to drive efficiencies so that not all pricing is simply passed on to consumers, causing broad inflation. Industry leaders will build more resilient supply chains with optimized planning tools and reformulate products and packaging with speed to turn these challenges into competitive advantages. And, of course, as demand for products to be delivered faster and with more convenience increases, the pathways for getting products into the hands of consumers must also increase.
One big opportunity on the horizon is applying the first-time-right principles. Today the manufacturing ecosystem is facing pressure from commodity prices, labor shortages and increased shipping timeframes. These headwinds impact the OEM’s and CPG’s ability to execute innovation and renovation plans. The industry is grappling with how to solve the pressure of shorter CapEx investment cycles and a higher guarantee need on ROI. Additionally, the industry, particularly producers of goods, are demanding more efficient and sustainable operations with predictable margins, fixed operating costs and the capacity to innovate. Finally, there is an opportunity on bringing in more automation, specifically robotic technology, to ensure predictable and continuous operations.
The biggest challenge is the biggest opportunity — anti-plastic and anti-packaging sentiment. We must continue to promote the need for and importance of packaging, and the role that plastic plays in the protection of goods and the environment. We also must solve for its circularity by modernizing the U.S. recycling system so there is a clear path for flexibles to get collected, sorted, reprocessed and used in end-markets, whether that is new packaging or other goods.
Challenges in 2022 will be very similar to the challenges in 2021. Continued labor shortages, increased transportation costs, supply chain issues and inflation. We predict that durable goods pricing will stabilize and fall but non-durable goods’ pricing will continue to rise in addition to energy prices. Crown will continue to work hard to provide the best possible service while looking for ways to keep our customers' operations running smoothly and efficiently.
