Adaptation in the Digital Landscape

Investing in technology—or at least preparing to invest—is a must to avoid falling behind

By Lin Grensing-Pophal
author based in Wisconsin, a frequent contributor to AICC’s BoxScore
Published April 2, 2018

As more companies are adapting to new technology, digital printing and converting is becoming increasingly prevalent—at least from a “thinking about it” perspective.

Packaging manufacturers aren’t the only manufacturers—or organizations—faced with critical go-forward decisions about the role that digital transformation is likely to play for their organizations.

According to MuleSoft, a software-as-a-service firm based in San Francisco, “nearly all IT decision-makers are executing on digital transformation, but they are facing challenges and obstacles along the way.” Their 2017 Connectivity Benchmark Report, based on input from IT decision-makers across a variety of industries, supports that the concept of “digital transformation” is top-of-mind these days—88 percent of respondents say they are either executing on digital transformation now, or will be within the next three years. The goals for digital transformation include “improving business processes, creating great customer experiences, and improving workforce productivity.”

They’re the same goals that packaging industry professionals have as they consider the implications that digital printing and converting may hold for them. And they are facing the same constraints and concerns. One-third of the respondents to MuleSoft’s survey indicate that they are currently moving forward with digital transformation, while two-thirds are taking a wait-and-see approach.

“Anyone who has not already moved over to relevant digital processes will lose, if [they have] not lost already, significant market share in 24 months.”
— R. Andrew Hurley, associate professor of packaging science, Clemson University

A Few Obstacles in an Environment of Promise and Potential

SMC Packaging Group is one company that is taking a cautious approach, while recognizing the potential. Mark McNay is senior vice president and general manager. SMC has very limited capabilities in the area of digital printing currently, says McNay. “We have a small HP FB750 digital printer, which we use for samples/prototypes and small-volume specialty jobs. We see the enormous potential that digital can provide, but are currently evaluating which technology best suits our needs.”

He’s not alone.

A recent AICC survey suggests that many are taking a wait-and-see approach to digital transformation. As one member responded: “The market has not matured. The technology is in front of the need, not to mention the technology is changing quite rapidly. There will be an entry point, but we are still waiting to assess the timing.” Another noted that “this is truly disruptive technology.”

Chip Tonkin is director at Sonoco Institute of Packaging Design and Graphics at Clemson University. One of the challenges that manufacturers face, says Tonkin, is the fact that the technology is under rapid development and change, “so investments may only have a three- to five-year useful life, instead of the 20 years typical in the past.” Consumable costs—inks, parts—are also an issue. “They are largely controlled by equipment manufacturers, which greatly reduces the converters’ ability to negotiate and/or reduce costs over time, as well as minimizing the innovation in niche areas.”

Another challenge: “The compatibility with end-use requirements, health and safety implications, and sustainability implications of the ink and other materials are, in many cases, unknown, so there is a great deal of need, and opportunity, for this knowledge base to be built.”

The most cited obstacles to achieving digital transformation, according to respondents to the MuleSoft study, are time constraints (41 percent), business and IT misalignment (40 percent), legacy infrastructure and systems (40 percent), and integrating siloed apps and data (39 percent).

There certainly is great promise and potential for the use of this technology, though.

Early Adoption Shows Promise

Andrew Hurley is associate professor of packaging science at Clemson University. “The digital print revolution is changing the way we manufacture and distribute products,” says Hurley. “Now, we are able to simultaneously launch 10 different package designs in 10 different locations.” His prediction: “Anyone who has not already moved over to relevant digital processes will lose, if [they have] not lost already, significant market share in 24 months.”

There are some early adopters in the packaging industry. Packaging Logic Inc. is one of them. Richard Parrette Jr. is president and CEO of Packaging Logic, Inc. He says: “We believe there is a great future for digital print technology. We have been using digital print since its beginning, when HP presented the first large-format digital printer.”

Still, he acknowledges some challenges:

• For small independent sheet plants, the first question was, is there enough business or market to move in that direction?
• Could the sales team generate enough business to cover the ROI on a $150,000 printer?
• How fast will the graphic use of digital market grow?
• How do you retrain a brown box sales team to sell digital graphics?
• What capabilities will your design team (packaging engineers) have to have to develop high-end graphics?
• How do you compete with plants—both independent and integrated—that had been focused on the display business before digital printing?

Despite the challenges, benefits will come from being able to provide existing and new customers with digital print, says Parrette. As marketing changes and more products are sold in the box to customers—off the shelf, he says—the need for small runs of high-graphic packaging will continue to grow. “In the past, litho-abeled boxes manufactured in a quantity under 5,000 boxes were expensive because of the minimum number of labels you had to purchase. Direct print to roll stock was only for very high-volume orders.” Digital print production changes the situation, he says.

“We believe as a small sheet plant we have secured a way to provide the digital print experience to our customers, and with low overhead,” says Parrette. To move forward, Packaging Logic first identified what their digital print market would consist of—short-run displays, headers, and short-run boxes—under 10,000 and as low as 50 or 100. They ensured they had the capability to die cut and glue all styles of boxes. Then, they:

Purchased a specialty folder gluer (auto lock, four or six corner trays, and narrow-width boxes). “This machine not only created opportunities in graphics, but in brown boxes, thus providing the ROI we needed,” says Parrette.

• Hired a packaging engineer with all the needed training in graphic design.
• Aligned themselves with two independent plants with digital capabilities.
• Teamed up with one of the first independent digital print companies that sell only to independents like Packaging Logic, Inc.
• Trained their representative on how to sell short-run graphics.

Today, says Parrette, “we are selling a fair amount of digital graphic packaging.” This has been done, he says, with minimal capital investment and without straying from their “sheet plant” brown box business.

“We chose our target market and have grown to be known now for ‘short-run’ digital print,” he says. For Packaging Logic, being an early adopter has paid off. Moving forward, Parrette says, “We will train and learn from our independent suppliers. Then, once we have a base of business to justify the ROI on digital printing equipment, we will take the next step.”

As marketing changes and more products are sold in the box to customers … the need for small runs of high-graphic packaging will continue to grow.

Moving Forward

Both customers and staff members are likely to drive the demand that will continue the shift from traditional to digital production.

As McNay notes, one driver of adoption for box manufacturing firms is their younger, millennial generation staff members. “As you might imagine, our younger co-workers within our graphic and structural design teams are anxious for us to move forward into the digital age,” says McNay.

Parrette is optimistic about continued growth. “We believe this market will continue to grow, especially for the small manufacturers who are now competing with larger companies,” he says.

“Less equipment is needed now than ever before, and OEMs are rapidly replacing printers and converters,” Hurley points out. “This is in similar fashion to retailers who are quickly displacing the brands they have traditionally served with their own private labels.

“Decentralized manufacturing, distribution, fulfillment, and marketplaces have created a surplus of carriers (3PLs) that have democratized distribution, allowing for logistical automation that has never been easier than today.”

Still, while moving forward to embrace new technology and new production methods, some things will, and should, stay the same, says McNay. “It is critical that we remain true to who we are and what has made us successful while recognizing that there are new technologies, strategies, and concepts outside of our organization which warrant consideration, implementation, and utilization.”

Progress will likely be made in fits and starts as manufacturers explore their options and wait to see what new advancements may bring.

Tonkin predicts: “While the majority of the volume of mass-produced packaging will be done with traditional print technologies for at least the next decade, the good profits will be made on value-added digitally produced items—regional customization, personalization, relevant variable data, etc.” And, he adds: “Because brand owners will expect their converters to seamlessly handle both production streams, they all will have to invest in the new digital technology.”

McNay’s final advice for box manufacturers: “Be prepared to win. Good fortune smiles upon the well-prepared!”

Original Article:
http://www.aiccboxscore.org/2018/04/adaptation-in-the-digital-landscape/