Despite being critical to successful business operations, digital management of packaging, artwork, and labeling are often underfunded and undervalued – leading to costly inefficiencies and quality issues. John Blake, senior director analyst at Gartner, takes a look at how the packaging industry can address this issue.
In recent Gartner research focused on trends shaping the future of supply chain, one of the three areas identified where supply chain can drive value is rethinking the digital economic value of intangible assets. Specification data, artwork and labeling content have lacked this recognition of having value, as being an asset to drive top and bottom-line growth.
Instead, underinvestment has led to these areas being viewed as drags on the organization, thought of as unstructured and disruptive processes that have hampered efficiency and innovation.
Nondeclared allergens, mislabeling and inaccurate packaging graphics continue to be leading causes of launch delays and product recalls costing manufacturers millions of dollars in lost sales, recalls and lost brand trust.
In addition, consumers, retailers and government agencies require greater product traceability and visibility than in the past, exceeding what is traditionally listed on the product packaging. Packaging strategies have rarely fulfilled the bold sustainability pledges made by ambitious leaders and leaving their organizations vulnerable to greenwashing claims.
We are currently enticed by topics like AI, machine learning and generative AI to drive real-time decisionmaking and increase productivity. When supply chain leaders are asked how their packaging and labeling strategies fit in to such an efficient and productive future, most are stuck with realizing they have a problem, but with little idea of how to make a start in solving it.
How did we get here? And what are the solutions? Can packaging, labeling and specification data meet the digital moment that is clearly upon us?
Packaging and labeling: the unsustainable status quo
Digital maturity in packaging, artwork and labeling remains significantly underdeveloped regardless of industry or size of organization. These business-critical functions and intangible assets remain weighed down by unsupported legacy tools, homegrown systems, inadequate applications (such as share drives) and an over-reliance on manual processes.
Many client discussions on packaging, artwork and labeling default to continued reliance on spreadsheets and manual processes. These practices not only cut into profitability, they do not cover the minimum requirements to utilize the fast-growing digital enablers helping to drive decisionmaking in our supply chains.
Gartner’s analysis of over 100 labeling and management software client inquiries reveal that existing processes and systems have become untenable liabilities in areas including costs, quality and compliance. Manual processes are leading to quality issues, recalls and excessive manual intervention, driving costs and draining resources.
On the packaging front, many organizations still lack the capability to effectively gather, maintain and utilize package specification data that is increasingly becoming a requirement due to sustainable packaging legislation.
Digital maturity is low, but can be improved
Gartner research shows that many organizations still lag when it comes to practices to support packaging and labeling. This has been an unresolved legacy issue frustrating many in the industry.
Perhaps packaging and labeling have been viewed as lacking priority, being an on-cost, or a necessary but minor, part of our businesses. Many organizations are still in the early stages of the data management maturity model (see Figure 1 below) having recognized there is a problem but lack a vision to resolve it. They are often siloed in their approach to solutions to addressing the latest challenge or request for data.
Leading organizations are realizing that packaging and labeling connect critical aspects of the business and they are investing in enterprise-wide data management solutions that will manage packaging and labeling data as a valuable and competitive asset.
In the labelling and artwork management (LAM) space, three categories — enterprise labeling, e-labeling and artwork management — all share the same objective: to create compliant artwork and labeling for regional and global markets.
Composable applications enable data competence
In seeking applications to optimize and modernize packaging and labeling processes and data management, adopt applications that embody the principles of composability. Gartner’s research on the impact of composable applications suggests leading organizations will mark this decade as the era when they reinvented their business thinking by applying the core principles of composability.
As packaging and labeling processes are of low maturity, there is a clear opportunity for organizations to leapfrog the middle stages of the maturity cycle by adopting composable data solutions. Utilize the core design principles of composability to pressure test current approaches and validate new applications. The leading LAM solutions are embracing composable features within their applications, including:
- Autonomy — Building blocks can be easily changed.
- Orchestration — Building blocks agree on their method of interaction.
- Discovery — Building blocks are identified, monitored and managed.
- Modularity — Building blocks partitioned into manageable components.
Supply chain technology leaders responsible for packaging and labeling should look for these properties new potential software suites and identify where they lack these principles in current tools and processes. Lacking any of the four properties often results in the challenges and lack of ability to cope with current demands as heighted earlier.
Supply chain leaders must confront digital challenges
Gartner’s Future of Supply Chain survey points to a lack of investment in building adoption of digital tools being a challenge for all respondents. When asked about the challenges in achieving digitalization goals over the next three years, respondents most often cited managing data integrity, a lack of dedicated teams to design digital tools and tech and concerns with new digital processes simply adopting—rather than reimagining—legacy processes.
These findings may indicate a lack of maturity across some areas of the supply chains that are not yet sufficiently developed to adopt newer and more innovative digitalization practices. We find this is widely the case for packaging, artwork and labeling, highlighting the need to adopt technologies and apply resources to close these gaps.
Simple questions to test digital maturity
A simple test to evaluate your organization’s mastery of packaging specification data is to ask your R&D or procurement leader how long it takes to pull material data together for an RFP. With purpose-built spec solutions this can be minutes (compared to days or weeks with legacy processes).
The next question should be “What is your level of confidence in the completeness and accuracy of the data?” I recently heard the statement, “The margin is in the mystery.” This sums up the fact that our packaging suppliers often have much more detail about how our packaging is made than we do ourselves. This puts supply chain leaders at a disadvantage when it comes to optimizing materials and costs.
The same holds true for artwork and labeling. Ask your graphics or procurement lead, “How many artworks or labels are printed in 5, 6, 7 colors?” Again, this often requires manually reviewing the files and taking a manual tabulation. So how do we know we are getting the best pricing for these printed materials? How do we know if the artwork agencies have designed the artwork files for the best cost optimization for final materials from our converters?
Is packaging, artwork and labeling ready to meet the digital moment? I argue yes, it is, and the opportunities to drive efficiency, quality and innovation are boundless once we embrace the tools to digitize these fundamental aspects of our supply chains.
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