Meeting customer's sustainability requirements while remaining cost competitive is surfacing as a new challenge for suppliers, and this is especially true for the consumer products industry.
According to Brian Reilly, senior director at Georgia-Pacific’s Innovation Institute, packaging optimization programs can help suppliers deliver profitability and sustainability at the same time. His thoughts from a recent Q&A:
Q: What is sustainability, and how does operating in a sustainable way affect a company’s ability to do business?
BR: There are many definitions of sustainability circulating today, and as we all know, Wal-Mart has announced that sustainability is a key component of its business model. Wal-Mart defines sustainability as “a revolution of innovation to ensure that future generations can enjoy the same quality of life that we enjoy today.” This cleaner, healthier, more efficient platform combines business, societal and environmental goals to contribute to a common and lasting good.
Our customers have found that operating in a sustainable manner actually helps them achieve greater profitability. For example, a redesigned package may have a smaller footprint that reduces fiber usage, storage space and transportation costs. It may also decrease labor and provide better product protection, resulting in significant bottom line benefits.
Q: What changes have you seen in the consumer packaged goods (CPG) industry over the last few years?
BR: Large retailers are transforming the way CPG companies do business today. CPG companies face intense pressure: retail channels have blurred; there’s a fierce battle for shelf space; CPG companies must hold prices down while maintaining margins and delivering sustainable products. Programs, such as Georgia-Pacific’s Packaging Systems Optimization (PSO) process, can help companies find supply chain savings while delivering sustainability advantages.
Q: What is PSO and how does it help CPG companies adapt to the changing retail landscape?
BR: Packaging Systems Optimization is a system-wide analysis that uses a rigorous, five-step process to improve the efficiency of a company’s packaging supply chain. Performed by a team of Georgia-Pacific Packaging experts and engineers, PSO optimizes nine areas of the supply chain including package design, material usage, shelf impact, SKU consolidation, line productivity, material handling and distribution. By creating highly efficient packaging supply chains, the program delivers cost-savings and profitability, while achieving sustainability goals.
And the cost-savings are significant. Since its inception, PSO has identified approximately $180 million in savings for our customers, and these are dollars that go directly to a company’s bottom line.
Q: How does PSO measure cost-savings and sustainability?
BR: Within three weeks of an initial assessment, the team delivers a PSO Report, which includes a detailed analysis and quantification of potential supply chain savings. These savings are then translated into sustainability metrics, such as reduced fiber content (tons), reduced energy consumption (BTUs) and reduced greenhouse gas (GHG) emissions.
Even small changes to a corrugated box design can result in significant system-wide cost reductions and environmental benefits. For example, reductions in fiber result in lighter weight containers, which when combined with streamlined processing and transportation, decrease energy consumption and GHG emissions.
Q: What specific supply chain and production processes does PSO optimize?
BR: PSO examines all packaging materials and processes from our customer’s packaging line, to distribution, and ultimately to the retail store. Georgia-Pacific’s PSO engineers drill down on every aspect of package performance to uncover hidden sources of inefficiency and waste related to warehousing, cube utilization, automation, and unitizing.
Q: How does Georgia-Pacific Packaging develop innovative ideas to improve package performance?
BR: Many PSO projects have started at our Innovation Institute, a creative, collaborative package design and innovation center that simulates retail, warehousing and packaging environments. Georgia-Pacific’s engineering and design experts work together with customers and retailers in the Institute’s creative environment to identify and reduce supply chain costs, optimize package designs, troubleshoot design challenges, increase shelf velocity and measure sustainability. It also helps ensure that package design concepts work in the real world, so that package redesigns translate into concrete business and sustainability improvements.
Q: The retail landscape grows increasingly competitive. What can CPG companies and their suppliers do to survive, and even thrive, in the future?
BR: Today, retailers have come to expect innovative ideas from their suppliers. The most successful CPG companies – and suppliers to CPG companies - will be the ones that provide solutions rather than products, understand the customer and supply chain, and can adapt quickly to changing retailer requirements.
