Gartner: Chief procurement officers can navigate packaging shortages by centralizing packaging specifications, segmenting packaging types, and collaborating with suppliers, which are now operating at maximum capacity and can pick which orders to fulfill

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STAMFORD, Connecticut , April 14, 2022 (press release) –

Supply Instability and Rising Costs Prompt CPOs to Adopt New Approaches
Chief procurement officers (CPOs) dealing with supply instability for packaging material should use three tactics to navigate rising costs, delayed deliveries and sustainability concerns, according to Gartner, Inc. They should centralize packaging specifications, collaborate with suppliers, and segment the different packaging types.

“Shortages of packaging materials such as pallets, plastics, corrugate, metal and glass are wreaking havoc across supply chains, and it remains unclear when – or if – these constraints will subside,” said John Blake, senior director analyst with the Gartner Supply Chain practice. “Packaging procurement is highly complex, as it requires coordinating many different suppliers. To further complicate matters, there has been a lack of investment in technology that would allow for seamless collaboration across the supply chain.”

To successfully navigate in this environment, CPOs must adopt new tactics that drive greater resilience, manage the rising costs of packaging, and improve packaging sustainability. The three actions for CPOs to reduce the impact of packaging supply constraints include:

Centralize Packaging Specifications

Packaging specifications are traditionally linked to a stock keeping unit (SKU) or bill of materials (BOM). However, this practice prevents CPOs from being aware of all the packaging specifications across the organization. A better way is to centralize all specifications across the organization. This allows CPOs better visibility and enables improvements, such as harmonizing similar materials, establishing more sustainable alternatives, and fluidly switching suppliers in the event of a shortage.

“Ultimately, procurement teams need to build a packaging supply ecosystem, but they must first obtain full transparency of packaging specifications across the enterprise. Currently, we still see very limited adoption of advanced SaaS applications that would enable such a step. This is a massive investment gap for CPOs to close,” Blake said. 

Collaborate with Suppliers

As packaging suppliers operate at maximum capacity - either from demand or due to availability of raw materials - they are now in a position to select which customers and orders they choose to fulfil. CPOs must establish a close collaboration with suppliers and make it easy for them to fulfill orders.

Collaboration can take the form of agreeing on suitable material substitutions, alternative production facilities, incentives, or a streamlined supplier onboarding. “Suppliers with limited capacity will prioritize customers with the most favorable commercial conditions. CPOs must align the interests of the suppliers with the internal requirements of manufacturing and R&D to chart the best path forward,” Blake said.

Segment Packaging

When CPOs have a holistic view of all packaging requirements in the organization, they can use packaging segmentation to break down silos and identify the possible opportunities and risks that each segment presents.

For example, primary packaging is in direct contact with the product and must ensure quality over the product’s shelf-life and might require additional certification by the supplier. However, primary packaging carries a unique set of needs that can result in longer lead times or increased upfront effort to qualify alternative materials or suppliers. On the other hand, transport of packaging such as pallets, crates and stretch wrap is often standardized. A switch to reusable packaging could mitigate shortages.

“Each level of packaging has its own set of risks that CPOs must factor into strategies to mitigate supply shortages. Segmenting packaging across the organization provides a better base for decision-making,” Blake concluded.

Gartner clients can read more in “Tactics for Navigating Packaging Shortages”.

Non-Gartner clients can find more information on packaging sustainability in the playbook “3 Steps to Develop a Packaging Sustainability Strategy” and attend the webinar “Supply Chain Sustainability: Progress from Strategy to Action”.

Participants at Gartner Supply Chain Symposium/Xpo can attend the session “Influencing and Achieving Supply Chain Success Through Sustainable Packaging” for additional insight.

About Gartner Supply Chain Symposium/Xpo

Gartner Supply Chain Symposium/Xpo delivers the must-have insights, strategies and frameworks for CSCOs and supply chain leaders to drive impact within their organizations. Supply chain leaders will gather to gain a strategic view of the trends disrupting their business and the insights and frameworks they can use to prepare for disruption, enable digital transformation and build sustainability as a competitive advantage.

Upcoming dates and locations for Gartner Supply Chain Symposium/Xpo include:

June 6-8: Orlando, FL

September 27-29: London, U.K.

About the Gartner Supply Chain Practice

The Gartner Supply Chain Practice provides actionable, objective insights for supply chain leaders and their teams, so they can respond to disruption and innovate for the future through leading-edge supply chain management practices. Additional information is available at https://www.gartner.com/en/supply-chain.  

Follow news and updates from the Gartner Supply Chain Practice on Twitter and LinkedIn using #GartnerSC. Visit the Supply Chain Newsroom for more information and insights.

Contacts
Sarah Hippold
Gartner
sarah.hippold@gartner.com

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Gartner, Inc. (NYSE: IT) delivers actionable, objective insight to executives and their teams. Our expert guidance and tools enable faster, smarter decisions and stronger performance on an organization’s mission critical priorities. To learn more, visit gartner.com.

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