Every day, on calls with Cleo customers, I am learning first-hand how leading supply chain-driven businesses are adjusting to the COVID-19 pandemic. In this blog series I share insights about how companies in various industries are responding. Their agility is remarkable, and something we can all learn from. Hope this helps everyone think differently.
Blog #2 - Packaging Industry
If there’s one thing consumers want when they order something online (besides the item being delivered on time), it’s having confidence in the safe and secure delivery of that package, everything arriving as it should.
The U.S. packaging industry is a $600 billion market, and it’s growing significantly due to busier lifestyles and demand for on-the-go products. Within the U.S., the corrugated packaging industry is a key subset that continues to expand. The corrugated packaging industry has shown rapid growth because it’s often preferred due to its strength, durability, lightness, recyclability, and cost-effectiveness. Secondly, the growth of e-commerce has fueled a rising demand for corrugated boxes.
The corrugated packaging industry is one that is both highly competitive and fragmented, especially in the mid-market where companies compete based on price, design, innovation, product line, quality, and service. COVID-19’s impact created immediate demand shocks due to growth in online orders, as well as with retailers stocking up on essentials such as food and beverage, and pharmaceutical products.
One of our customers, a mid-sized corrugated packaging manufacturer, experienced significant demand spikes in late February with the advent of COVID-19. While some of its customers’ businesses in certain discretionary consumer segments have slowed (e.g., automotive, sports/recreation), overall demand for the company’s packaging products has spiked due to demand surges from other segments, most notably health care, personal care products, food & beverage, and e-commerce in general. And their ability to quickly add new/additional partners from these surging segments is only adding to their growth opportunity.
While their ability to pivot to capitalize on the short-term opportunities is commendable, the next question is: What will this company do to position for the longer term?
Fortunately, the packaging industry itself is largely self-sufficient, with U.S. box manufacturing companies embracing automation to require lower levels of direct labor. This process-driven approach and high degree of automation has allowed our customer to focus less on production issues and more on fulfilling demand from existing and new customers, while at the same time empowering company leadership to create the opportunity to capture new business and onboard new customers quickly, all to drive more predictable future growth in their highly competitive industry.
They are actively doing this in three specific ways:
- Introducing more sophisticated EDI capabilities to steadily reduce fines / chargebacks that negatively impact the company’s financials due to SLA violations resulting from too slow or mismatched integration capabilities. This alone is saving them millions
- Thinking about EDI more strategically and seeing its potential to be a differentiating competitive weapon in their sales team’s arsenal, thus ensuring that the company can dependably deliver on customer / prospect compliance requirements in the future
- Using the market downturn to move faster than their competition – to not only identify new prospects and close new customer contracts but leveraging a highly flexible ecosystem integration platform that will enable them to onboard any and all new customers very quickly, giving them demonstrable competitive advantage
By first recognizing how integration technology will help them create value, and having the confidence to do all this now, we expect these actions will create greater supply chain agility and market readiness for this company, so that, 6-12-18 months down the road, what will they have? A vastly more diversified customer portfolio that wholly enables them to better control their revenue streams -- on their own terms – regardless of how the various market segments they serve ebb and flow.
COVID-19 has heightened awareness of the need for supply chain agility, flexibility, business process integration, and the role of cloud-based integration technologies, all of which are helping this packaging company differentiate themselves in a highly crowded, but lucrative, market.
Our packaging industry customer is managing to thrive during the pandemic for a few key reasons:
- Integration Confidence: The company knows it has the ability to execute in its supply chain processes, which has proven critical to capturing demand growth at a time when there happens to be a demand shock
- Choice & Control: While tending to its day-to-day execution, they’ve also been able to focus on capturing new customers and onboarding them quickly
- Viewing Integration Strategically: This company clearly understands that integration technology is mission-critical to rapidly onboarding customers and suppliers, as well as for flawlessly executing order-to-cash and procure-to-pay processes, all of which are viewed as strategic to the business
- Value Creation: Looking ahead, as inorganic growth (fueled by acquiring other players, for example) becomes increasingly realistic, the critical role that business-process integration plays in keeping their expanding supply chain streamlined, will make ecosystems integration an engine for further value creation and growth
The main benefit for this packaging company is that it knows it has enough confidence in its integration solution to control the way its supply chain responds to market forces so it can gain a strategic advantage – agility -- that creates sustainable value for its business, and strengthens customer relationships.
As always, please reach out to me on LinkedIn with any questions or comments that you might have. And refer to Cleo’s COVID-19 FAQ guide for more suggestions to help you navigate these difficult times.