Digitization in the Packing Industry - Are we facing an ostrich effect?

packaging international November 2015

Digitization transforms industries and rewrites the rules of competition. Whereas some markets have already inhaled the digital air into their business lounges, others are still struggling to bridge digitization to their business. The packaging industry is known for being somewhat cautious when it comes to the adoption of new technological trends. In an age where everybody seems to talk about digitization, voices claiming that the packaging industry soon won't be able to catch up are getting louder. In order to get a clearer understanding of the situation in the packaging world, we met up with Matthias Giebel (Berndt & Partner Consultants) and Franciska Bárdos (Iconparc).

Packaging International: Mr. Giebel, a few months ago you published a survey which focus was to find more about the digital situation at the packaging material producers. Could you give us a brief summary about the key outcomes please?

Matthias Giebel: Absolutely! Currently only one fourth of the respondents consider digitization as an important topic. This is interesting, considering that most believe that their customers are more advanced in terms of digital maturity. It will be exciting to see how this gap will impact the long term relationship between the two parties. The majority believes that digitization will increase its priority on their agenda in the near future dramatically.

Packaging International: Why is there such little digital involvement in the packaging industry?

Matthias Giebel: The main reason mentioned in the study is a shortage in resources. That is budget, time and man power capacity. The lack of digital competency within the company is also being seen as an issue. Poor involvement of the higher management is another factor. What makes it especially challenging for this industry is the little margin. Budgets are simply tight and any investment needs to be thought through very carefully.

Packaging International: Miss. Bárdos, you council companies from different industries for e-business related topics which is one area of digitization. What is your impression about the packaging industry when it comes to their digital fitness?

Franciska Bárdos: I can definitely confirm the insights of Mr. Giebel. The people in charge are open to hear about digitization, however when it comes to setting up concrete actions, companies hesitate to commit. Mainly due to other priorities and budget shortages. However, I believe that the lack of digital priority is just a superficial symptom for deeper underlying reasons.

Packaging International: Can you tell us a bit more about those reasons?

Franciska Bárdos: Overall, I believe that the packaging industry is overstrained with the digital topic. There are industries that by nature have a higher affinity for digitization. Take the financial sector or the media world for example. Since they deal with digital goods, it is quite easy to develop digital scenarios for these industries. The packaging industry however deals with physical goods. The goods itself will always stay physical. Hence, it is only the processes throughout their supply chain and certain services that can be digitized. Grasping processes is abstract and often very complex. It requires a helicopter view into the company and there are not many people who have this holistic knowledge. In addition to this, I see an increased level of complexity in the packaging world. Packaging is a horizontal topic that touches many other industries. If you produce containers for the pharmaceutical market, the food industry and for personal care products, you must be a subject matter expert with the regulations and the specific needs in each of the mentioned markets. Digitization is a topic that cannot be delegated to the CIO only but also equires the involvement of the CEO. Considering all the other topics on the agenda, this is certainly not an easy business venture.

Packaging International: Hearing all this, can easily create the impression that the digital undertaking is almost impossible in the packaging industry.

Matthias Giebel: Well it is definitely challenging, but not impossible. Our survey showed that the majority of participants is seeing more chances than risks associated with digitalisation and at the same time does close to nothing to take these chances. I fear, someone will take these chances and they will not necessarily come from the packing industry itself. Therefore it is not like the packaging industry has a choice in the long run. Digitization will come, it is only a question about time. One way to approach this topic is to develop more concrete digital scenarios that are graspable for the industry. This is something we will work on in the next months. The foundation of this is to ensure a common understanding about the subject. Today we often get our wires crossed, depending from which area of the supply chain the counterpart comes from.

Franciska Bárdos: I certainly agree. When we talk about digitization to people in charge from the Research & Development area, one thing that comes to their mind are 3-D-prototype simulators. The Head of production thinks about mass customization and the internet of things, whereas the Sales Director thinks about e-commerce platforms and so on. Don't get me wrong. These are all valid associations. However, it is very crucial to be absolutely clear from the beginning what we are talking about. More importantly we find a way to leave the isolated discussions and develop a holistic digital strategy for each company. The packaging industry for sure is very complex which is why it is more important to bridge digitization in a structured way to the whole company itself.

Matthias Giebel: One thing is for sure, digitization is not a trend that can be sat out. In other words, not doing anything and applying the ostrich effect will certainly not help. Starting now to develop the necessary knowhow for the digital transformation process of the business and become a frontrunner seems to be a much better alternative to me.

Packaging International: Thank you for your time!

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