Fast moving consumer goods (FMCG) are often transferred from warehouses to consumers without the customer having any human interaction at any point of the supply chain. Intelligent packaging plays an essential role in quality assurance and the provision of information.
Consumer goods carry more and more added value that needs protection. When the quality and movement of products are monitored using RFID technology, we can be certain we have a genuine, precisely identified product, made and shipped by a specific manufacturer at a specific time. Technology has become an efficient tool in the fight against counterfeit and fake products, rip-offs, and incorrect information distributed by various parties in the supply chain.
Improved technologies and packaging methods greatly improve the quality of service, which, in turn, increases the added value. RFID technology decreases the quantity of human errors.
‘The supply of products equals the demand, loss is minimised, the quality corresponds to customer promises, and the price levels are right. Customers get what they order more often than before’, explains Sohrab Kazemahvazi. Kazemahvazi works as the Innovation Director at Stora Enso Packaging Solutions and develops solutions related to product commercialisation, such as intelligent packaging.
‘We are developing new ways to utilise technologies and related grassroots-level solutions, including various packaging materials.’
Intelligent packaging increases retail business profitability
When retailers adopt a storage and sales system based on RFID technology, they should add all relevant products and functions at the same time. ‘There is no point in running overlapping systems if you want 100% of the benefits offered by the system’, Kazemahvazi says.
For many daily consumer goods, unit margins are low but volumes high, making it sometimes difficult to estimate the break-even point of a product. One reason for the growing popularity of RFID technology is that it has significantly cut costs as it has evolved further. On the other hand, Kazemahvazi thinks that the adoption of a new, product-specific monitoring method has been delayed by the relatively recent major investments in barcode systems by many retailers in the sector.
‘Profitability is based on several factors. In addition to cost savings, close monitoring of products by means of RFID technology offers various other benefits, too. You can keep track of the product’s temperature, vibration, chemicals, and weight changes. Changes indicate quality-related problems.’
The entire supply chain works more efficiently if, for instance, the retailer’s IT system shows how many bananas are left in the shop on the basis of the box weight and how ripe they are on the basis of their odour or aroma.
‘Planning becomes easier: you can make more precise orders using the right quantities and deliveries will be made at the right time. Primary producers can also be integrated into the system’, Kazemahvazi continues.
eMarketer predicts that global retail e-commerce sales will increase to $4.058 trillion in 2020, making up 14.6% of total retail spending that year. Asia-Pacific will remain the world’s largest retail e-commerce market throughout the forecast period, with sales expected to rise to $2.725 trillion by 2020.
The growth of E-commerce and RFID technology enable retailers to offer more individualised services to customers
Kazemahvazi believes industrial companies have benefitted greatly from the adoption of RFID technology because, as errors have decreased, all necessary parts in a shipment have been precisely the right ones. ‘Consumer requirements and behaviours are, of course, subject to ongoing change. E-commerce helps retailers respond to these expectations, because it can adapt to changes much more easily compared to traditional retail commerce.’
There are clear sector-specific differences in the utilisation of the technology; for instance, some 90% of books are already sold by online vendors.
The opportunities are excellent for the grocery sector, too, and Kazemahvazi sees this change as a fundamental one. ‘All of the necessary technology is already available to us, and each retailer just has to choose the actual type and shape of the system they want to use in their business. The basic premise for planning must be how to best produce business value.’
Changes in buying behaviour and more direct connections between producers and end users have brought brands closer to consumers in many product groups. The growth of e-commerce and the increase of brick-and-mortar shops run by producers who support e-commerce enable production and deliveries that are more tailored to individual needs.
Kazemahvazi is excited to discover how the technology will be utilised in the future. ‘All the opportunities are already available. You only have to adopt your solution. ’
Three key takeaways from intelligent packaging in FMCG:
1. Quality and efficiency: The packages convey information about the product’s weight, vibration, temperature, and other quality-related factors. This makes the entire supply chain more efficient.
2. Capital: Retailers need much less working capital when only the required quantities of products are delivered and stored. This also reduces shipping weights and volumes.
3. Customer experience: Intelligent packages and the related technology generate new opportunities for brands to approach consumers. The technology has also proved an effective tool in the fight against counterfeit products.