When is it Time to Make the Move to an Omni-Channel Package?

Michael Gorges
Managing Director, More from Less
 
The question I will attempt to answer in this paper is “When is it time to make the move to an omni-channel package?”.  The way the question is posed, there is an implicit suggestion that all product lines can be converted to an omni-channel package.  The truth of the matter is that some product lines will never be omni-channel packed.  That said, the main problem is that in order to answering the question you generally require a design solution to evaluate before arriving at a decision.  In other words, across product lines, you need to have an actual omni-channel package design to evaluate before you can decide if it will work for you or not.
 
Let’s first start by agreeing on the basic meaning of an “omni-channel” package.  For the purposes of this discussion we are going to use the following definitions:
 
Omni-Channel: the method or process through which the consumer identifies and acquires possession of a product, this includes, brick and mortar (B&M), e-commerce, purchase online and pick up at the store (aka click and collect), and the various derivatives of these channels.
 
Package: an object and/or material which protects the product and optimizes its supply chain journey, more importantly it re-enforces and/or extends your brand promise and customer experience.
 
With the above definitions, one might quickly conclude the idea of a single packaging solution or design capable of meeting all or even most of these requirements is extremely difficult at best.  When you factor in the conflicting demands each channel brings in particular as it relates to the brand message and evolving customer demands the problem becomes exponentially more complex.  The most obvious example of this is with CPG products.  In the B&M channel, the packaging needs to engage and prompt the customer to interact with the product in order to execute the sale.  With e-commerce, the “zero moment of truth” is well before physical “contact” with the product.  In this instance, the packaging needs to re-enforce the brand promise more so then execute the sale (i.e. affirm the that the customer made the right choice).
 
Now that I have sufficiently discouraged and demoralized you with regards to the great promise of the designers “holy grille”, a.k.a. an omni-channel package solution, let's discuss how we might attack this challenge.  Where to begin?  Well, before jumping right into a full-on re-design you first need to maximize your probability of success.  The way we approach this is through a macro analysis of the product lines you are considering.  This can be achieved via an assessment relative to three variables; channel mix, transformability, and brand promise extensibility
 
Channel Mix is the relative ratio of material flow through each of your primary supply channels.  It varies by product line, but our experience says that when distribution in any two channels is 20% or more, it is likely that you should start the process of investigating omni-channel packaging solutions.  Why is this important?  You may need to make some qualified compromises as it relates to cost and expected outcomes.  Therefore, you need to know the relative packaging and supply chain costs within each channel, from there you can calculate the weighted average cost across all channels and arrive at an omni-channel impact assessment.  Clearly this is not a static picture, as such some sensitivity analysis may be required.
 
Transformability of a product line is the compatibility of its packaging to an omni-channel solution.  The best way to explain this is with an example; wine glasses are exceedingly difficult and costly to transform into an omni-channel package. Therefore we would say that wine glasses have a low transformability.  Batteries are, alternatively, relatively simple to convert into an omni-channel pack. Therefore we would say that batteries have a very high transformability.
 
Brand Promise Extensibility this is perhaps the most challenging area to assess, fundamentally the question being asked is how does the packaging extend and support the brand promise.  There are instances where this is relatively straightforward; a specific example is a product which crisscrosses all supply chain channels in its transit packaging (i.e., some furniture products) or where a brand’s sustainability message is the brand.  Alternatively, razors for men in the B&M channel require a strong visual stimulus (great looking handle with three complementary blades), this same visual characteristic is less critical and potentially problematic for the ecommerce channel.
 
Before getting started you will need to get comfortable with one other reality, two of the three variables requiring evaluation are qualitative in nature, no way around this.  My advice here is to develop a ranking system 1 through 5 and force rank the product lines you are evaluating. 
 
From this point, the process is relatively straightforward select the product lines and run them through the evaluation process based on the criteria.  Once the evaluation process is completed, select the product range which has the highest likelihood of success.
 
It is at this stage you can cut your designers loose.  It is likely that as a result of the extensibility and transformability analysis, your design team has already put some thought into the challenge before them, but now it is time to turn discussion and “blue sky” thinking into tangible solutions.  The development of a sound well-vetted design is a process unto itself that, I will not elaborate on in this document, other than to say owing to the universal impact of omni-channel packaging it is critical to integrate your packaging team, supply chain team and branding team early in the process.
 
Once your design team has developed a solution or series of solutions for the product line being reviewed, you now also need to aggregate the cost impact of the design options.  Assuming you have limited or incomplete data as it relates to vital parts of your supply chain cost curve and customer response sensitivity, I recommend that you approach this next stage of the process in three phases;
  • Phase 1 - Comparative Critical Cost Analysis
  • Phase 2 - Pilot
  • Phase 3 – Refine & Decide
 When starting Phase 1 it may be helpful to know that most companies do not, in fact, have the quantity and quality of information necessary to make a solid data based financial analysis.  In truth, it is my experience that, it is more the exception than the rule.  I am referring specifically to such things as impact on e-commerce return rate sensitivity and damage causality.  If this is the world you live in, we recommend that you approach this problem using two broad principles, define and use only the critical cost drivers and brand traits for that product line, applying the “80/20 rule”.  Second, rather than defining a cost/benefit analysis in absolute terms, define them in relative terms using where you are today as the base case.  Following a comprehensive iterative Phase 1 review, refine your solution, develop consensus and move onto Phase 2.
 
The objective of a pilot (Phase 2) is to validate your Phase 1 assumptions and to fill in the missing data components which would permit you to develop a cost/benefit analysis based on absolute costs and brand messaging consistency.  Upon completion of Phase 2, you are in a position to make a “go” or “no-go” decision (i.e., Phase 3).  Again, here I condensed a tremendous amount of work into one paragraph.
 
So, to answer the questions “When is it time to make the move to an omni-channel package?”, the answer is once you developed the right design and have validated the data.  To get to this point however, you need to maximize your probability of success.  This is particularly important for companies who are only dipping their toe into the omni-channel packaging arena.  Developing the skills and expertise necessary to take on and vanquish this challenge will take a genuine commitment, but it will also take a few early successes.  As such, it is critical that you put yourself in a position to succeed.
 
I concede that I have packed a lot into this short article and with all things the devil is in the details.  That said, I would like to leave you with one final thought, I want to remind everyone that “the process of omni-channel packaging design and development” is one of discovery.  We need to remember that this is, in fact, a new frontier not solely for packaging but also for supply chain management as well as branding.  Unlike the traditional brick and mortar channel, e-commerce packaging and by extension omni-channel packaging is in its infancy.  Within this omni-channel world, we are only at the very beginning of understanding how we meet our ever-evolving customer needs and wants.  Expanding and understanding the boundaries of this new frontier will require thoughtful analysis, innovative design and a willingness to take risks.  Risk, more specifically, as it relates to an organization’s desire to experiment, learn, and evolve, which will by its very definition mean failure in some cases.  It is at those times this quote should be remembered “failure is simply the opportunity to begin again, this time more intelligently”, Henry Ford.

This technical paper was presented by Michael Gorges at ISTA's 2018 Forum held in San Diego, California.

Michael Gorges Biography:  Education: MBA with Operations Concentration, Bachelors in Mechanical Engineering.