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International Journal of Production Research

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Environmental innovation in industrial packaging: a supply chain approach

K. Verghese & H. Lewis
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Centre for Design , RMIT University , GPO Box 2476V, Melbourne, Victoria 3001, Australia Published online: 03 Dec 2010.

To cite this article: K. Verghese & H. Lewis (2007) Environmental innovation in industrial packaging: a supply chain approach, International Journal of Production Research, 45:18-19, 4381-4401, DOI: 10.1080/00207540701450211 To link to this article: http://dx.doi.org/10.1080/00207540701450211

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International Journal of Production Research, Vol. 45, Nos. 1819, 15 September1 October 2007, 43814401

Environmental innovation in industrial packaging: a supply chain approach

K. VERGHESE* and H. LEWIS

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Centre for Design, RMIT University, GPO Box 2476V, Melbourne, Victoria 3001, Australia

(Revision received May 2007) Community concerns about the environmental impacts of packaging have prompted governments to introduce policies and regulations which impose ecotaxes or deposit-return systems, require companies to take-back and recover their packaging, or promote voluntary product stewardship programmes. Until recently these programmes have focused almost exclusively on consumer (retail) packaging, but increasingly companies are starting to address the environmental impacts of industrial packaging. This is being driven as much by regulation as it is by the need to reduce costs and increase efficiency in supply chains. This paper argues that environmental innovation in industrial packaging systems requires a cooperative supply chain approach to ensure that environmental and commercial costs are reduced and efficiencies optimized for the chain as a whole. This is based on a review of the literature and an industrial packaging supply chain research and demonstration programme conducted between 2003 and 2005 in Australia. Keywords: Industrial Cooperation packaging; Environmental issues; Supply chains;

1. Introduction Most of the debate about packaging and its environmental impacts has focused on consumer (retail) packaging. Concerns about the resource consumption and waste generation of consumer packaging have resulted in the introduction of government policies and regulations internationally to promote product stewardship and increase levels of recycling. Increasing attention is now being paid to other forms of packaging; for example, the first Australian National Packaging Covenant (NPC) (19992005) targeted the life cycle management of consumer packaging. (Life cycle management is defined as management of the potential environmental impacts of a product in all stages of production, distribution, use, collection, re-use, recycling, reprocessing and disposal of that product: The National Packaging Covenant, 15 July 200530 June 2010, p. iv.) The second NPC (20052010) now includes transport packaging. While consumer packaging represents approximately 7080% of the value of packaging (BIS Shrapnel 1999, DTI et al. 2003), the remaining 2030% is still significant in terms of cost and environmental impact.
*Corresponding author. Email: Karli.Verghese@rmit.edu.au
International Journal of Production Research ISSN 00207543 print/ISSN 1366588X online 2007 Taylor & Francis http://www.tandf.co.uk/journals DOI: 10.1080/00207540701450211

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The integration of environmental, economic and social performance to achieve sustainable development is recognized as a major business challenge for the 21st century. Packaging contributes to the success of product supply chains, enabling efficient distribution of products, and reduced environmental impact of product spoilage and waste. Packaging, however, has environmental impacts that are not sustainable in the long term. Impacts include consumption of non-renewable resources, generation of air emissions in production, transport and use, and production of solid waste requiring disposal in landfill (James et al. 2005a). As goods pass through industrial supply chains the associated packaging waste is often a forgotten or ignored by-product that is poorly managed. This results in litter, poor recycling or re-uses rates and unnecessary waste to landfill. Poor communication between supply chain partners and a lack of responsibility for wastes generated further down the supply chain not only leads to undesirable impacts, but also limits the potential for improved packaging solutions that simultaneously meet the functional needs of the supply chains operating environment while reducing environmental impacts and supply chain costs. A recent United Kingdom (UK) study into the competitiveness of the UK packaging industry found that more effective communication between packaging manufacturers and their suppliers was a key area that needed further attention to improve efficiencies across supply chains (DTI et al. 2003). This paper focuses on the life cycle management (LCM) issues associated with industrial packaging. It is based on the premise that the drivers for change and the opportunities for innovation in this packaging market are different to those in the consumer packaging market for a number of reasons. These are briefly explored in section 2. The environmental issues associated with industrial packaging throughout its life cycle are then discussed. The results of a recent research and demonstration project on a supply chain approach to industrial packaging waste reduction are presented in section 3 and used to draw general conclusions about the potential for environmental innovation in industrial and transport packaging in section 4. The paper concludes with directions for future research.

2. Drivers and opportunities for packaging innovation 2.1 Types of packaging Packaging is often described as having three major categories (Saphire 1994): . Primary, consumer or retail packaging is the basic package which is used to contain a product until the product is consumed (e.g. bottle, closure). It also has an important marketing role in appealing to consumers and stimulating product sales. . Secondary packaging is additional packaging which is designed to facilitate self-service sales, prevent theft or further advertise and market the product (e.g. paperboard carton). This part of the packaging is generally thrown away when the product is opened. . Transport, distribution or logistical packaging is used to ship goods from their point of origin, such as a farm or factory, to their destination. It often

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includes boxes, crates, pallets, void fill packaging or cushioning material (e.g. expanded polystyrene). The emphasis is on protection, functional performance and shipping considerations. For the purposes of this paper a distinction is made between packaging which is used in the consumer supply chain, i.e. for products intended for consumption by individual consumers or households, and packaging which remains in an industrial supply chain (industrial packaging). This includes both packaging used to contain industrial products, such as farm chemicals or raw materials for a manufacturing process, as well as transport packaging used to facilitate the movement of filled primary and secondary packaging. The two supply chains, for consumer and industrial packaging, have different drivers and therefore different opportunities for environmental innovation. Packaging has three significant functions which relate to both marketing and logistics (Prendergast and Pitt 1996): . For marketing, the package sells the product by attracting attention and communicating. . For logistics, the package protects the product whilst being moved. . For both marketing and logistics reasons, it provides convenience in the handling and storing the product. Consumer packaging plays a far greater role in marketing than industrial packaging, and most marketers view the ability of a sales package to sell a product as more important than its compatibility with the environment (Prendergast and Pitt 1996). Consumer packaging is also subject to greater scrutiny of its environmental performance (particularly its recycling ability) by regulators and environment groups than industrial packaging. These and other drivers are discussed in more detail in the following sections.

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2.2 Packaging and logistics Packaging plays a significant role in a large integrated system which involves many actors throughout a supply chain ranging from materials handling and inbound logistics operations, purchasing, manufacturing, filling, warehousing, transportation, and retailing (Jahre and Hatteland 2004). According to Jahre and Hatteland (2004, p. 126): . . . packaging interacts with most logistics activities and thus impacts on costs including vehicle investments and operational costs, production, material handling and inventory costs, and costs related to information processing and purchasing. The use and disposal of different types of packaging in a generic supply chain is illustrated in figure 1. The supply chain for consumer packaging includes raw material suppliers, packaging manufacturers, brand owners and product manufacturers, transport companies, wholesalers, retailers, consumers, local government, waste contractors and recyclers. Local government provides waste

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Inbound transport packaging Raw material supplier

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Inbound transport packaging Inbound transport and secondary packaging Brandowner and product manufacturer Used transport packaging Transport packaging on filled product primary and secondary packaging Inbound transport packaging Transport company and wholesalers Used transport packaging

Transport packaging on raw materials

Packaging manufacturer Used transport packaging

Transport packaging on primary retail packaging components

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Transport packaging on filled product primary and secondary packaging

Retailers

Filled product primary and secondary packaging

Consumers and households

Empty primary and secondary packaging in waste bin and recycling bin

Local government, Waste contractors, collectors and recyclers

Used transport packaging

Figure 1.

Packaging supply chain.

and recycling services for residents and may also become involved in waste education programmes. The primary and secondary packaging used by consumers is heterogeneous and ends up widely dispersed in millions of households. The variety of materials and small quantities which make up the packaging waste generated by individual consumers means that it is relatively costly to collect and sort for reuse, recycling or incineration (Twede 1995). The costs associated with packaging waste are discussed in section 2.3. Organizations involved in industrial packaging supply chains include packaging raw material suppliers, packaging manufacturers, transport companies, product growers or manufacturers, wholesalers, distributors, waste contractors and recyclers. Local government is not involvedmost businesses (unless very small) are not covered by municipal waste and recycling contracts in Australia and must therefore organize and pay for these services directly. Like transport packaging, primary industrial packaging is more homogeneous than consumer packaging. The most common types are corrugated boxes, plastic or metal drums, plastic bags and film, wooden or plastic crates and woven polypropylene bulk bags. The reduced number of materials and packaging types also makes recycling more cost effective. Twede (1992, p. 82) eloquently sums up the role of transport packaging and the need for a supply chain approach to any change in packaging: The same shipping container is transported, sorted, and stored throughout a firms distribution channels by each participant. It must meet each channel members functional requirement for protection, communication, and efficiency. Logistical packaging is a unique activity that facilitates productivity throughout the logistical system, spanning the boundary of the organization that designs the package, flowing out into the distribution centres, retail outlets, and vehicles

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of many separate organizational units. A switch from corrugated fibreboard shipping containers to plastic packages involves cooperation throughout the channel to implement new handling methods, new damage perceptions, new material disposal alternatives, and results in more productivity for some channel members than for others.

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2.3 The private costs of packaging waste Differences in the way that waste packaging is handled in consumer and industrial supply chains provide different financial incentives to those who manufacture, use and dispose of it. Most households in Australia pay for their waste and recycling services through their local council rates, which means that they pay a flat fee regardless of how much waste they generate (the exception is communities that pay for rubbish collection through a pay-as-you-throw system, in which the fees are directly related to the amount of rubbish disposed of). In contrast, most businesses pay for rubbish disposal on a fee for service basis, and often have to pay for recyclables to be collected as well. This provides the end-user (the organization that ends up with the waste packaging) with an incentive to minimize the amount of waste being generated and to maximize the amount being recycled. While the costs of waste management can provide a potential incentive for firms to recycle, these costs are normally a small percentage of their total budget and therefore not a significant driver of production decisions (Productivity Commission 2006). However, the costs associated with industrial and transport packaging wastes are not limited to disposal or recycling costs. A more complete analysis of costs would also consider material costs, production costs of packaging and filling, cost of distribution equipment, handling and labour costs, freight costs and storage costs (Saphire 1994, Saghir 2002), but these costs occur in different parts of the one business or at different points in the supply chain (table 1).

2.4 The external (environmental) costs of packaging While there are economic and environmental benefits of using industrial packaging for the safe delivery of products through a supply chain, there are also environmental costs which are not borne by individual firms. These occur throughout the packaging life cycle, from raw materials extraction and processing through to disposal at end of life. Table 2 provides an overview of the life cycle stages and some of the associated environmental impacts which may occur with respect to industrial packaging. As table 2 illustrates, environmental impacts can range from land degradation associated with the extraction of renewable and non-renewable resources, through to energy consumption, generation of greenhouse gases, air and water pollution and impacts associated with litter. When selecting an industrial packaging system the aim should be to ensure the efficient use of materials with the lowest environmental impact whilst providing sufficient protection to the contents inside.

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K. Verghese and H. Lewis Table 1. Cost of packaging waste. Who bears the cost Product manufacturer

Cost item Packaging material

Description The cost of packaging may be a small percentage of the product cost (e.g. expensive electronic equipment) or a relatively high percentage (e.g. bottled water). These include the labour and equipment costs associated with packaging the product (e.g. loading and wrapping pallets), warehousing and unpacking the product. Cost-efficient transport requires optimum utilization of available space in transport vehicles. This includes the cost of storing empty packaging before use, the impacts of packaging design on the efficiency of storage in warehouses, and the costs of storing used packaging (e.g. baled cardboard or film ready for collection) This includes the handling and labour costs of managing waste packaging (e.g. removing waste, baling cardboard) as well as collection or disposal charges. The costs associated with reusable packaging include labour, freight, cleaning and repairing containers. Packaging is used to protect products in transit. If it fails, the cost of the lost product can be many times the cost of the packaging itself.

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Handling and labour costs

Product manufacturer retailer/distributor customer Product manufacturer retailer/distributor customer Product manufacturer retailer/distributor customer

Shipping (freight) costs Storage costs

Disposal or recycling costs Reuse costs Damaged products

Retailer/distributor customer Product manufacturer Product manufacturer

Table 2. Life cycle stage

Life cycle stages of packaging and associated environmental impacts. Impacts Land degradation Biodiversity loss Pollution from oil spills Energy consumption Emissions to air and water Global warming Solid and toxic wastes Air pollution Global warming Energy consumption Solid wastes Energy consumption Litter Air emissions from landfill Leachate from landfill in groundwater

Growing, harvesting or extraction of raw materials Manufacture and packaging of product

Transport of products to wholesaler and retailer Retailing of the product to the consumer Use of the product (refrigerated product) Waste disposal and recovery

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Using a simplified life cycle assessment (LCA) method, Lee and Xu (2004) concluded that a reusable plastic pallet packaging system had a three-fold lower environmental impact than wooden pallets. A study by Bovea et al. (2006) compared two packaging systems for ceramic tiles and found that environmental impacts could be reduced by 16% by replacing a low density polyethylene (LDPE) shrink bag covering a pallet of tiles in corrugated boxes, with stretch film wrapping. An LCA of alternative packaging systems for refrigerators, including one based on an innovative reuse/recycling strategy, found that recycling can significantly reduce the environmental burden of plastic-based packaging (Ross and Evans 2003). The selection of appropriate packaging materials to protect and reduce the environmental impacts arising from the damage and wastage of products due to poor packaging is also of critical importance. Chonhenchob and Singh (2003) highlighted the importance of cushioning in packaging for mangoes because the fruit will be rejected if it is bruised as a result of impacts incurred during transportation and handling. Shock-absorbing packaging is particularly important to protect goods which are bound for areas where roads are not fully paved (Oki and Sasaki 2000). Due partly to the increased distances between point of production and point of consumption, the role that packaging plays in the distribution environment is increasing in importance (Jahre and Hatteland 2004). The package must fit well in the logistical system but must also meet the marketing system and environmental demands (Jahre and Hatteland 2004).

2.5 Packaging innovationdrivers and barriers Community concerns about the environmental costs of packaging, particularly those associated with waste and litter, have resulted in a wide range of environmental regulations including bottle bills, eco-taxes, take-back and design requirements. This trend reflects broader concerns about the sustainability of production and consumption (Lewis 2005). Environmental regulations have tended to focus on highly visible forms of consumer packaging such as beverage containers, plastic bags and fast food packaging. Their overall impact on packaging design is difficult to evaluate, although there is widespread case study evidence that packaging is changing to reflect environmental design criteria (e.g. Duales System Deutschland 1992, Denison and Ren 2001, Fuad-Luke 2002, Imhoff 2004). Some packaging regulations also target industrial and distribution packaging, but innovation in these applications has been more strongly influenced by the drive to reduce the costs and improve the efficiency of distribution. Twede (1992) studied 10 plastic logistical packaging innovations and found that they were initiated because of cost issues linked to manufacturing, materials, disposal and handling. Nine of the 10 case studies achieved significant savings in both packaging and waste disposal costs. The organizations also reduced the cost of packing by mechanizing operations to improve the speed of packing and to eliminate assembly line downtime (Twede 1992). Twede (1992) also concluded that decisions on whether or not to adopt a new packaging system need to balance the impact on direct costs associated with the package (i.e. materials, fabrication and filling costs) with logistical costs and benefits. The introduction of a new packaging system may solve a problem

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or reduce costs in one organization but may result in higher costs for others in the supply chain. For this reason any decision to change packaging must involve consultation with all stakeholders in the supply chain. This approach is consistent with the trend towards integrated management of transport, delivery and shipping which involves system-wide evaluations of packaging and other logistical activity trade-offs, including the cost of waste disposal. Logistics management aims to integrate a products supply chain and to optimize the cost from beginning to end (Twede 1995). For example, some furniture manufacturers and their customers eliminated the costs of boxes and box disposal by using uncartoned transport which used moving vans with blanket wrapping and strapping. This form of transport is more expensive but there are savings in packaging, transport efficiency (more products per load) and waste disposal (Twede 1995). Reusable transport packaging is becoming more common in industrial supply chains and Saphire (1994) found that these are more likely to be feasible if the following features are present: . . . . Short distribution distances. Frequent deliveries. Small number of parties. Company-owned vehicles.

These conditions are most likely to exist in closed loop distribution systems where the container always goes back to the same point of origin (Saphire 1994). Other studies have identified management issues involved in the successful introduction of a packaging change. Research on the introduction of returnable crates into supermarkets in Europe (Koehorst et al. 1999) concluded that packaging changes require a systematic approach to ensure success. This needs to consider both organizational issues such as who to cooperate with and when, and technical issues such as packaging specifications. Twede (1992) observed that the installation of new equipment for a packaging change involved people from purchasing, production, engineering and logistics, led by a packaging champion. Marketing and/or logistics departments were involved in communicating with those in companies along the supply chain to ensure their acceptance of the new packaging system. Two major constraints faced by companies trying to use more environmentally preferable packaging are resistance to new ways of doing things by different departments in an organization and the costs associated with packaging changes such as the purchase of new materials and expenditure on capital equipment (Kassaye and Verma 1992).

3. Case studies from an Australian industrial packaging supply chain demonstration project Between 2003 and 2005 a research and demonstration project was undertaken to investigate the benefits, drivers and barriers to a supply chain approach to reducing industrial packaging waste (James et al. 2005b). The aim of the project was to demonstrate the benefits of supply chain partnerships to advance the development

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of sustainable industrial packaging and to understand the critical success factors in such approaches. The project was undertaken by the Sustainable Packaging Alliance (SPA) (comprising the Centre for Design at RMIT University, Packaging and Polymer Research Unit at Victoria University and Birubi Innovation Pty Ltd) in partnership with EcoRecycle Victoria, a state government agency. The research involved two components: . Three action research projects with industrial packaging users and their supply chain partners to redesign industrial packaging; and . Interviews with six other companies that had already redesigned industrial packaging systems. The nine projects were used as case studies to investigate issues such as drivers for change, challenges involved in implementation, key learning from the implementation, and commercial and environmental benefits achieved. The funding agency also intended to promote the outcomes of the project to demonstrate the benefits to other companies. Table 3 presents a summary of the findings for each of the nine case studies, with company names removed for confidentiality reasons. The three action research projects involved collaborative research between company staff and the research team over a period of six to 12 months. The process undertaken included: . An initial meeting to identify project objectives, to gather background data on the existing packaging system, and to plan the remainder of the project (actions, timelines and responsibilities). . Further investigation, testing or design work by the research team which varied between projects (see below). . Documentation of project outcomes for dissemination to a broader industry audience. Research undertaken for the three action research projects varied significantly. The office furniture project involved interviews with management and observation of product packing at the warehouse and then unpacking at a building site. The objective was to identify key functional requirements and problems with the existing packaging system. A new packaging concept was then developed by the designer on the research team and documented in detailed CAD (computer aided design) drawings. The building material (brick) project involved interviews with manufacturing staff and visits to residential building sites to observe current waste management practices. A streamlined LCA study of alternative packaging systems was also undertaken. The outcome of the project was a report to the manufacturer with recommendations for an alternative packaging system. The final action research project was undertaken with a dairy products manufacturer to investigate the feasibility of a new stretch tape packaging system which was expected to reduce material consumption and waste by up to 95%. The project involved a series of product trials which were held on site at one of the factories. Variables which were tested included the time required to wrap pallets using the old and the new system, the technical feasibility of packaging different pallet configurations, pallet stability, cost implications and the amount of waste

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Table 3. Action research: building materials Interview: printing Re-design ink and varnish packaging to reduce product residue going to waste, and to improve recyclability at end-of-life. Ink supplier/filler. Ink supplier, packaging manufacturer and packaging designer. Review of building materials waste and regulations and review packaging for a building material (bricks). Builder/end-user. Brick manufacturer, Centre for Design RMIT University, Birubi Innovation and EcoRecycle Victoria. Environmental Management Plan (EMP) for the 2006 Commonwealth Games Athletes Village which included a target of 95% diversion from landfill for building waste, and future NPC requirements. Dairy manufacturer/ filler. Determine the feasibility of replacing stretch film with stretchable tape for pallet stabilization. Action research: dairy (e.g. yoghurt) supply chain

Summary of the nine case studies. Interview: fresh produce market Design and bring to market a reusable packaging system for fresh produce to deliver a cost efficient and sustainable alternative to traditional one-trip cardboard cartons. Packaging supplier. Packaging manufacturer, plastic manufacturers, produce suppliers and retailer.

Action research: office furniture and fit-out

Objectives

Design a flexible and environmentally improved packaging system for electrical work station components.

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Initiator and position in supply chain Partners engaged

Product designer.

Product designer, product manufacturer, Centre for Design RMIT University and EcoRecycle Victoria.

Drivers

High product protection. Meet Australian NPC and European Packaging Regulations.

Stretch tape machine manufacturer, stretch tape supplier, logistics company, retailer and Centre for Design RMIT University NPC action plan. Part of large site upgrade project.

Government and customer pressure to reduce environmental impacts of the printing industry.

Improve efficiencies of fresh produce supply chain and deliver lowest end-to-end costs.

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Challenges and resistance encountered

See packaging waste as the responsibility of the supplier and have done little to assist recycling.

Verifying tape performance through trials. Planning and conducting tape trial. Communicating to internal and external stakeholders.

Convincing customers to accept the change in packaging.

Environmental innovation in industrial packaging

Key learnings

Packaging needed to accommodate varying product lengths, packing/unpacking efficiency, assist in assembly of product, be recyclable and a model for use in other world assembly centres. Importance of eliminating many different materials used in the system and ensuring high packing/unpacking efficiency. Almost all packaging materials used on building products are recyclable; need for the development of guidelines and facilitating packaging separation facilities on building sites; the environmental impact of losing one or more bricks through damage is more significant than the impact of producing the packaging materials. Non-technical barriers to change need to be addressed, including perceptions of risk. Good communication, both internally and along the supply chain, is important during the trial stage. Implementation of a new system can take time, as customers get used to the idea of change. An environmental benefit is not sufficient to convince customers of the need to changecommercial benefits need to be promoted.

Efficient return logistics including timely return of used crates; meet sanitary requirements; enable efficient post-harvest produce conditioning. Not all major retailers are currently using the system Communicating key features and associated supply chain partners responsibilities are crucial for performance of system; efficiency of return logistics including sanitation and reconditioning essential for commercial viability.

(continued)

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Table 3. Action research: dairy (e.g. yoghurt) supply chain The tape reduces plastic consumption by 77% compared to stretch film. Other benefits associated with improved product handling include less product loss, elimination of cleaning associated with spills in cooling cells, and reduced solid and liquid waste disposal. Downstream distribution benefits.

Continued.

Action research: office furniture and fit-out Demonstrated importance of supply chain approach to minimization and recycling of packaging within the building industry and understanding the relationship between the product and packaging system.

Action research: building materials

Interview: printing Carton made from 55% recycled fibre and is 100% recyclable; less product (ink and varnish) going to waste; reduced costs of disposing of packaging as prescribed waste, less waste to landfill, increased recycling of packaging.

Interview: fresh produce market Allows for maximum cleaning efficiency, permits reusable plastic crates parts to be replaced if damaged, venting pattern enhances pre-cooling and airflow to extend the shelf life of produce, product damage from bulging, breaking and collapsing cartons has also been eliminated.

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Benefits and value

The new packaging design requires minimal assembly and will accommodate all product length varieties. All components delivered to installation point and one material (cardboard) used for easy recyclability.

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Interview: automotive Develop a generic plastic packaging system that differentiates the product (10 litre pail). Packaging manufacturer. Filler Costs savings and efficiencies throughout the supply chain, user convenience, market differentiation; packaging reusability and recyclability. Raw material (plastic) manufacturer Supply chain efficiencies both in packing, warehousing and transporting products from supplier to customer. Logistics and warehousing company. Eliminate the need for packaging and warehousing of bulk commodities such as mineral and chemicals, polymers and food.

Interview: dry groceries

Interview: polymers

Interview: agricultural chemicals

Objectives

Develop a unique global system of reusable plastic packaging including logistics service for components for new engine.

Initiator and position in supply chain Partners engaged

Engine manufacturer.

Reduce environmental impacts of agricultural chemical packaging, particularly disposal of product residue and packaging waste. Packaging supplier Chemical companies, farmers and retail agents Bans on single-use containers in landfill due to chemical contamination, customer and EPA pressure for change.
(continued)

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Drivers

Packaging manufacturer and supplier and engine component suppliers Introduce reusable strategy to reduce packaging as part of National Packaging Covenant commitment; product protection.

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Table 3. Interview: dry groceries Despite the cost efficiencies brand owners are reluctant to adopt due to concerns relating to consumer reaction to a new system. The new system radically changes existing supply chain logistics and requires some new capital expenditure. The benefits although large need to be clearly communicated and the logistics company does not always have direct contact with key decision makers in the chain. Interview: polymers Interview: agricultural chemicals

Continued.

Interview: automotive

Challenges encountered

Design brief: small efficient packaging to suit tight space tolerances of the plant; high variety in components (type, size, density, fragility); packaging which could be moved by hand; nesting of packaging and design for ease of cleaning; avoiding any distortion or shrinkage of containers during cleaning and washing at high temperatures. Opportunities exist to differentiate packaging and deliver significant reductions in environmental impact. Facilitating discussions with supply chain partners on behalf of their customer was the key to implementing the new system.

Many customers have a poor understanding of total packaging costs (therefore hard to promote benefits of more efficient system).

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Key learnings

Good communication is essential to successfully implement a new system; change how packaging is managedfrom handling disposable packaging as solid waste to reusable packaging that needs to be looked after and returned.

Change takes timeneed for patience; a change introduced for environmental reasons can also generate considerable efficiency benefits (which can be more important for the customer).

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Benefits and value

Increased supply chain efficiencies and reduced waste; avoidance of 3500 tonnes of cardboard; packaging was developed concurrently with the design of the new engine plant.

Number of 10 litre pails on a pallet increased by 56%, resulting in 30% reduction in the number of pallets and associated transportation and warehousing.

Containerisation and intermodal transport benefits eliminate the need for Intermediate Bulk Containers (IBCs) and pallets and disposal of IBC packaging material, forklift movements in storage, warehousing, pumps to receive raw materials and OH&S risk associated with exposure to airborne dust and handling of heavy goods.

Overall project led to innovation and new business opportunities. 1 million single drums reprocessed. 30 companies using drums.

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Source: James et al. (2005b).

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generated under both systems. A meeting was held with management and production staff to discuss the companys objectives; informal discussions were held with shop-floor staff; and representatives from the cool store involved in distribution of the product were also interviewed. The outcomes of the trials were documented in detailed spreadsheets and a report to the dairy manufacturer, with recommendations. The additional six case studies were much simpler and involved a single interview with a company representative to investigate a project which had already been completed. The methodology used for the project clearly had limitations. The selection of case studies was constrained by the ability of the research team to recruit companies who were willing to allocate time to the project and to have the outcomes documented and disseminated to a wider industry audience. The limited time available for the action research projects meant that the research team could not be involved in implementation and monitoring of the recommended changes. The research would benefit from further evaluation at a later stage, for example to investigate whether the recommendations were implemented and to explore the challenges, limitations and benefits of the packaging change in greater depth. Another limitation which is common to many projects involving industrial partners is the commercial sensitivities which were involved. Some participants were nervous about publishing information which was considered commercial-inconfidence, or which they perceived might upset other supply chain partners. This limited the usefulness of the project for both academic and demonstration purposes. For these reasons the conclusions outlined below should be regarded as preliminary and as a basis for further research.

4. General principles/strategies for life cycle management of industrial packaging A number of preliminary conclusions were drawn from the company case studies described above. 1. Drivers of change The initial driver for a change in packaging can be commercial (such as the need to reduce product damage or to improve supply chain efficiencies), or environmental (such as the need to meet new packaging or waste regulations). Regardless of the original driver, broader benefits can usually be achieved from a well-planned project. For example, a change in packaging to reduce waste will often also save money. A change in packaging can be initiated by organizations at many different points in the supply chain, for example by the designer, packaging manufacturer, product manufacturer (filler) or end-user (industrial consumer). Regardless of who initiates the change, the project will necessarily involve organizations upstream and downstream in the supply chain.

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2. The business case A sustainable packaging innovation will only succeed if it delivers a commercial benefit such as increased efficiency, cost reductions or increased sales. These benefits need to be calculated and promoted to supply chain partners. Many companies have a very poor understanding of their full packaging costs, including the labour and fuel costs of packing and distribution, labour costs of unpacking, packaging waste disposal costs and costs of lost product due to inadequate packaging (lost revenue, labour costs etc). This can make it more difficult to promote the benefits of a new and more efficient packaging system if these costs are not calculated. 3. Planning Planning is essential for a successful project. This must consider a number of issues, including the best timing for a change and the impact on other stakeholders in the supply chain. Existing investments in plant and equipment are a barrier to change. The best time to implement a new packaging system is often when a broader change is underway, such as design of a new manufacturing facility or installation of new equipment. The successful implementation of any environmental innovation in industrial packaging requires the support and cooperation of other organizations in the supply chain and development of a clear market/business development strategy. The project team should carefully consider the impacts of the change on each stakeholder (both positive and negative), and try to address these early in the planning process. Important issues for supply chain partners will include potential impacts on product quality, logistics and cost. The needs and concerns of internal stakeholders also need to be considered; for example, whether or not the project is supported by people in marketing and production. 4. Communication Good communication within the organization and with other organizations affected by the change is essential to the projects success, and should be started as early in the process as possible. Individuals are often risk-averse, and may be unwilling to implement a new packaging system if it is untried or very different to existing practices. The project plan should therefore build in a communications strategy which will engage with internal stakeholders as well as supply chain partners. 5. Systems thinking Any evaluation of environmental packaging innovation needs to consider the product-packaging system as a whole, particularly the role of the packaging in reducing or eliminating product waste. A reduction in packaging with increased product waste is counter-productive. 6. Continuous improvement Packaging sustainability involves a continuous improvement processeven small steps can achieve significant benefits. It should ideally be addressed as part of a broader packaging strategy that supports a companys business plan. This would

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involve a risk assessment of all packaging and identification of long term objectives and strategies to improve the environmental performance of all packaging. Policies and standards to integrate packaging sustainability within the business should be developed, such as packaging design guidelines and procurement specifications. These conclusions informed the development of Creating Links and Achieving Change, a two-stage approach designed to assist individual companies to develop and implement a sustainability programme for packaging in conjunction with their supply chain as well as other partners (figure 2). It is intended to be used as an environmental management tool by individual companies, or by consultants working with companies. The rationale for this approach is that a single supply chain company in isolation cannot develop sustainable packaging solutions. This must be done in conjunction with other organizations in the packaging supply chain, such as raw material and packaging suppliers, and those involved in the broader product chain, for example brand owners, retailers and recyclers. While the approach is consistent with existing quality management systems, it has a couple of distinctive features: . It involves communication and engagement with supply chain partners throughout the process. . It specifically applies to the redesign of packaging. This approach to packaging waste minimization was discussed at an industry Round Table in October 2004. Participants including brand owners, packaging manufacturers and raw material suppliers discussed the keys to a successful project (Sustainable Packaging Alliance 2004), which they identified as: The need to have an effective project champion. The need for senior management/CEO support for the project. The alignment of environmental objectives with business strategies. The involvement of important stakeholders at the beginning of the process (possibly including consumers through market research). . Communication and engagement with partners throughout the process. . . . .

1. Form internal team

4. Engage partners and stakeholders

7. Develop project plan 10. Promote, leverage and report for next project

2. Strategic review of packaging 3. Sustainable packaging strategy STRATEGIC PLANNING (PART ONE)

5. Map productpackaging chain

8. Sign-off, implemention, monitoring

6. Brainstorm ideas

8. Evaluate and improve

PROJECT IMPLEMENTATION (PART TWO)

Figure 2.

Creating links and achieving change methodology.

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. Clear and shared objectives, both for the functional requirements of the packaging and re-design objectives. . The collection of relevant data up front, including environmental information (e.g. LCA) and market feedback already received (e.g. warranty claims). . An open mindthe need to look at completely new solutions as well as opportunities for incremental improvement. . Sometimes an initial financial investment is required to make them happen, for example from government grants, co-investment by brand owners or by raising a levy of products sold. . Identification of multiple benefitsto the business, to supply chain partners and to other stakeholders. On a final note, the group concluded that reaching a successful outcome often requires patience and persistence!

5. Conclusions Industrial packaging facilitates the protection and distribution of products throughout a supply chain. Key learning items from the industrial packaging supply chain demonstration project, supported by the literature, were that successful environmental innovation in industrial packaging requires communication with supply chain partners at an early stage of the project, environmental assessment of the product-packaging system as a whole (including positive or negative impacts on product protection); consideration of capital expenditure barriers to the adoption of new technologies (including planning the project to coincide with other investment projects); and the need to understand the full costs of packaging and distribution so that the benefits of any change can be accurately evaluated. The nine industry case studies were used to develop a generic supply chain approach to packaging waste reduction. There are many opportunities to build on this research; for example, by returning to the companies involved in the action research projects to investigate whether the packaging recommendations have been implemented; why or why not; and if implemented, the costs and benefits of the new system. The generic supply chain approach will also need to be tested through trials with a much larger number of companies. Findings from this research could then be used to enhance the methodology for wider dissemination. It is certainly clear from the research that the benefits of a system-wide, supply chain approach to industrial packaging waste reduction are significant. In addition to the life cycle environmental benefits, these include savings in packaging and waste disposal costs as well as other efficiency improvements. Further research on the benefits of this approach, particularly when integrated into existing management systems will help to overcome the perception that packaging waste is a small and insignificant business cost. In a sense this would make the environmental regulation of industrial packaging unnecessary.

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Acknowledgements The authors would like to thank the other researchers involved in the project: Robert Jordan, Associate Professor Kees Sonneveld and Dr. Leanne Fitzpatrick. We would also like to thank EcoRecycle Victoria and the participating companies for their support.

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