A.T. Kearney lays down fundamentals of a plastics exit strategy before 2021
Procurement teams across the EU will need to adjust their mindset alongside their supply chains in preparation for the upcoming ban on single-use plastics set to take effect in 2021. A.T. Kearney highlights how shifting consumer expectations are driving a transition away from plastic in their Out-of-Plastics Strategy report, with a special emphasis on packaging in the food and drink industry. The report lays out key factors for procurement professionals to consider while they work to reconfigure their supply chains, reduce waste, and uncover the best possible cost basis for their requirements in light of the upcoming regulations.
The Out-of-Plastics strategy report was developed using A.T. Kearney analytics and professional network, drawing on experiences and case studies from the Product Excellence and Renewal Lab (PERLab) programme which specialises in product teardowns and analysis, securing proper suppliers at the right cost, and implementing changes to the supply chain by means within existing business capabilities.
The report notes, via Nielsen and GFK, that 66 percent of EU and US consumers are willing to pay a premium for sustainable products that reduce or eliminate plastic, while just under half say they consider a business’s sustainability record before making a purchase and are willing to give up some degree of convenience for environmental benefit. A.T. Kearney views these trends as an opportunity for forward-thinking businesses to win new customers through the use of innovative packaging and material designs and by focusing marketing campaigns on sustainability improvements and milestones. Some global corporations with large EU market share have already committed to sustainability goals to bolster their brand reputation with Nestlé, Mondeléz, and Unilever all publicly planning to implement either 100 percent sustainable or recyclable packaging by 2025.
Teams tasked with upgrading the sustainability of products and packaging are often faced with the prospect of notably higher costs when seeking alternatives to plastics that may have been in use for decades. The report outlines some key points of consideration for procurement when building a roadmap to greater sustainability including seeking maximum transparency on costs to leverage the most competitive possible pricing from available suppliers, while also ensuring selected suppliers have enough capacity to meet existing production needs and accommodate future growth.
Significant changes need to be considered in the context of the supply chain where they can potentially affect shipping configurations and warehouse stacking, or may require a larger or more controlled environment for storage. Finally, procurement leaders should take some consideration of the full life cycle of the product they are buying and how consumers are likely to recycle or otherwise dispose of their purchase – products that are unlikely to make it into the recycling stream, like glitter or confetti, should strive to be biodegradable as well as recyclable.
In many cases sustainability improvements like these are developed by innovation leaders who will command a price premium. Procurement professionals should work closely with other teams to monitor consumer sensitivity to cost changes and make intelligent decisions about how much can be passed on to the final price and how much should be absorbed by the business to sustain demand.
Since costs for innovative packaging can be expected to be higher than for existing plastic solutions, A.T. Kearney also offers a few tips on savings strategies gleaned from PERLabs experience with sustainability consulting. Reducing complexity and simplifying product and packaging design as much as possible will help reduce overall materials costs and practices like flat-packing can help reduce transportation costs.
Simple designs are also easier for supply chain partners to implement and help increase competition to lower prices, and companies with the capabilities are encouraged to work within the supply chain to help develop machining and other tools that move innovations towards becoming standardised. In less critical components of the design, companies can also find cost savings by using less expensive materials – one A.T. Kearney client used a lower grade of wood pulp in paper packaging for their food products on sections that did not have direct food contact.
As non-plastic supply chains become more common and robust, costs will fall and create savings that can be passed on to customers or used to strengthen the business, it says.
- Price – provide transparency on costs and ensure competitive pricing by new suppliers
- Volume – Ensure sufficient capacity of the new packaging suppliers to cover the required volumes
- Recyclability – assess impact on recyclability pathways by assessing full life cycle of new packaging format to ensure environmental compatibility and protect the product
- Beyond procurement – manage supply chain and logistics due to different packaging performance, such as changed pallet stackability or new warehouse space requirement
The full report can be downloaded here