Contract Packaging

Introduction

A generation ago, Marshall McLuhan coined the phrase, "the medium is the message," to convey how the method of communication affects how people transmit and receive information. Today, it would not be far off to say "the packaging is the product."
 
McLuhan did not mean to say that the medium constituted the whole of the message, but rather that the medium of communication and the message are so intertwined that it is not possible to separate the impact of one from the other. Similarly, saying "the packaging is the product" does not suggest that the contents of the package are immaterial. However, more than ever before, the packaging itself has become a significant influence on how consumers think about, choose, and use their products.
 
For manufacturers, this represents both a challenge and an opportunity. The opportunity is to use packaging to add value and differentiate a product in new ways, not to mention using packaging processes to gain financial advantages. The challenge is that a firm's competitors will be doing the same thing, and with packaging innovations coming fast and furious, it is difficult for a manufacturer to keep up. By using an outside packaging company, a manufacturer can tap into the latest packaging expertise and technology without the fixed cost of building and maintaining this function internally. Those packaging services can be used to pursue a range of competitive advantages.

Use Packaging Services To Gain A Competitive Advantage

The role of packaging in a product's competitive positioning can be seen with respect to the following six issues:

1. Packaging has long been used to promote brand identity, and marketers have often studied the role of color, logo, etc. in eliciting desired customer responses. Much like the 100-meter dash, though, while this same race has been run for many years, the pace has quickened so radically that participants from decades past would today appear to be left in the starting blocks. In 2007, for example, Pepsi switched its container designs every few weeks, after having made only 10 changes over the prior 100 years.
2. Automation in packaging is increasing rapidly, with U.S. shipments of food packaging machinery alone exceeding $6 billion in 2007. The reasons for this accelerating financial outlay- Greater efficiency, reduced labor, and manufacturing flexibility, among others.
3. According to the Environmental Protection Agency, every year Americans discard 970,000 tons of paper cups, 730,000 tons of Styrofoam and plastic plates and cups, and 2,810,000 tons of plastic containers and bottles. Public awareness of this waste has risen in recent years, and for a growing segment of the consumer population, the use of environmentally friendly packaging has become an important decision factor.
4. Ease of use, whether it is how a package opens, how easy it is to carry, or its use as a cooking and eating container, all are particularly strong examples of how the characteristics of some packages have become part and parcel of the products themselves.
5. A series of product recalls and the ever-looming threat of terrorism have raised concerns about health and safety in food, pharmaceutical, and a host of other products. Packaging is key to health and safety integrity, from the conditions under which products are packaged to the ability of packages to indicate tampering and keep contents fresh.
6. Return on investment is a crucial metric of financial competitiveness, and all of the above packaging demands can be a challenge to this metric. The ongoing expense involved in equipment, labor, and materials put constant pressure on return on investment. This makes efficiency and reduction of fixed cost through outsourcing paramount.

All of the above competitive issues require highly advanced and constantly evolving equipment, workforces, and expertise. Increasingly, manufacturers are finding that contract packaging is the best way to tap into these resources. For example, in a 2007 survey of food manufacturers, 32 percent reported using contract packaging to speed time to market--double the percentage from just four years earlier.
 
Perhaps the best way to think of the role of contract packaging is that if a manufacturer is not leading on the above competitive issues, it is falling behind. Packaging companies help manufacturers stay ahead of the game.
 
Industry Examples of Contract Packaging Services

The role of packaging services is manifested differently across a variety of industries. The following are just a few examples:

• Food Service: Here the key issues include security, cleanliness, freshness, and the appropriate type of sealing (e.g., permeable vs. non-permeable). Also, marketing plays a huge role in this industry.
• Pharmaceuticals: Safety is a paramount concern in this industry, evidenced by the importance of serialized tracking, dosage bar coding, package purity, tamper-resistance, and usage-appropriate delivery formats.
• Beverages: As with food service, marketing plays a leading role in beverage packaging, but environmental friendliness, freshness, safety, and durability are all prominent concerns as well.
• Cosmetics: In the cosmetics business, packaging is a major part of brand image, and since packaging may also be part of the delivery system, convenience is also a significant consideration. At the same time, there are also health and safety concerns of freshness and purity to be addressed.

Packaging is a competitive element in a variety of industries, but each industry has its own set of priorities and concerns. Those industry-specific priorities and concerns should be a factor when trying to find the right packaging companies for your business needs.

How to select a Contract Packaging Company?

Fortunately, manufacturers can evaluate and compare contract packaging price quotes based on a range of different attributes, such as:

• Advanced automation
• Packaging security
• Sealant and materials used
• Facility cleanliness
• Packaging weight and durability
• Design resources
• Ease-of-use
• Compliance with U.S. and international regulations
• Industry and packaging type specialization
• Run size, as it relates to the manufacturer's production cycle
• Flexibility and time-to-market
• Cost

Note that cost is listed last. While it is always important, the advantages gained or lost based on the other attributes may overwhelm a majority of cost differentials.
 
Conclusion

Manufacturers have traditionally focused on what goes into the product and on how to market it. Increasingly, packaging has become a crucial bridge between these two efforts. Just as it might be appropriate to say that "packaging is the product," it is also true that packaging is the marketing. Contract packaging is a way to tap into state-of-the-art resources for this aspect of production and marketing, without any increase in fixed costs.