It is amazing to see what the packaging industry has accomplished during the peak of the COVID-19 health crisis in terms of supporting essential businesses. The crisis is not yet behind us, but it is already time to start looking at the current environment as the “new normal”, at least for now. Before we enter this “new normal”, let’s look at what has already changed in the packaging industry due to the COVID-19 pandemic.
COVID-19 Disruptions Faced by the Packaging Industry
Many packaging companies have become inundated with orders. The increase of consumer demand for essential items during the pandemic is one of the major causes of the rise in orders for packaging manufacturers. These included segments, such as Food & Beverage, Home & Personal Care, and Pharmaceutical/Life Sciences, to name a few. This situation has been confirmed in enough regions worldwide to make it a global trend.
Some packaging manufacturers have reduced capacity and are, for the moment, operating less efficiently. This is due to three driving factors:
- The extra time spent cleaning combined with newly instituted wipe down procedures.
- Social distance mandates resulting in manufacturers being forced to operate with a smaller workforce.
- Disruptions in the supply chain that may impact production, costs or both.
New work-from-home norms and reduced site visits. The pandemic has introduced a new way of working for many packaging manufacturers. There are now new processes and procedures in place for operational management/supervisory personnel. In some cases, this has happened more often than desired.
Workflow disruptions. The changes mentioned above have impacted workflows on the shop floor which disrupts admin worker roles and responsibilities, approvals and tracking procedures, to name a few.
Strains on working capital as a result of increased order volume. Some packaging manufacturers reported over 60% or more increase of orders. This, in turn, forces companies to buy more raw materials and components that require capital, and some will see the payment from customers in 30, 60 or even 90 days.
The “New Normal” in the Packaging Industry
What is the “new normal” in terms of industry activities during COVID-19 compared to those pre-COVID-19? Companies and experts alike are still trying to figure that out. But it is reasonable to assume that these activities will fall somewhere between pre-COVID-19 conditions and those during COVID-19.
Moving forward, packaging companies are likely to see their overall volume fall slightly. The “new normal” will mean social distancing regulations will be relaxed, but not eliminated, and therefore operations inefficiencies will continue. The good news is that consumers will still eat and drink more at home, which in turn, will sustain the increased level of demand and volume for packaging.
Key Disruption Trends to Watch
Even as many disruptions to the packaging industry have already been identified, there are likely more to come as things progress. Below is a list of key disruption trends to watch and monitor over the coming months.
- Get used to COVID-19 disruptions as they will be here for a while. Safe practices such as cleaning/wipe downs, social distancing and remote work will likely continue for some time. Further disruptions, including working capital, additional costs, demand for higher prices from vendors and inefficient processes will also be present.
- Demand for packaging will most likely be higher for a while longer, but no one really knows for sure how long this “ while longer” will be. Getting used to any “new normal” will also mean looking at better ways to achieve efficiencies, especially during stressful moments like now.
- Greater demand for lower prices is expected from packaging manufacturers’ customers. Companies will have to get creative with targeting their customer base due to high unemployment rates and greater economic hardships. Packaging manufacturers will need continuous improvement in processes such as lean manufacturing to drive efficiency.
- SKU proliferation might have given packaging manufacturers a break during the pandemic, but it will certainly be high on every brand owner’s agenda.
- Packaging manufacturers are learning that there will need to be some smart decisions made on technology to better manage all processes and areas of the business that were made vulnerable through the crisis. These will include all necessary business systems such as ERP, the supply chain, supplier communication and quality, but not exclusively to those systems. An in-depth analysis of cloud computing, if not already underway, will need to be performed.
Technology investments will need to contemplate full data exchange between key departments and functions and eliminate manual spreadsheets and workarounds. Cloud-based solutions will also be necessary to reduce infrastructure hardware investments. This will free up capital for investment in productive assets, ensuring business continuity, mitigating risks and reducing costs related to the IT network.
- Experts, especially those in the medical field, do not see this as a one-time occurrence, but rather in waves. With this in mind, food and beverage manufacturers will need to have a clear risk management/mitigation strategy in place as well as a strong focus on the issues that have already been identified.
Disruption is a Foundation for the “New Normal”
The packaging industry, like many others, has always been under disruptive forces in the marketplace. The issue we see with COVID-19, and the eventually long-lasting effects, is that both the speed and magnitude of disruptions are accelerating. Innovative and intelligent technology will certainly play an important role to help the industry adapt to a “new normal” and be ready for future disruptions.