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Customized contract packaging encompasses not only the product box that customers touch and feel, but also pallet or cardboard displays, says Mabon. “Think of the big box retailers like Costco, Sam’s or Home Depot,” he says. “Everything you see in these stores is a package display of some sort. Otherwise there would just be big brown boxes everywhere. The display packaging is what attracts your attention.”
Warehouse-format stores like those mentioned above are among the biggest consumers of contract packaging, but it is a growing service across retail supply chains, Mabon says. “Retailers are trying to make retail stores a destination with an exciting shopping experience, versus buying online, which means more visuals and special displays,” he says.
Often, this trend gets pushed back to manufacturers, who are being challenged to provide the displays or special packaging configurations, such as two products wrapped together, Mabon says.
“It’s important to handle contract packaging as a manufacturing process and not a logistics process,” Mabon says. “As a manufacturing process, you have quality control, production planning and packaging engineers doing the line layouts and embedding these operations, as well as resources like automation and robotics.”
This is a huge area of opportunity because margins in contract packaging are in the 30 percent to 45 percent range, compared with margins of 7 percent to 10 percent for most value-added services, Mabon says. “For this reason, a lot of third parties are moving into this space. Conferences and consulting groups are being launched and software is being developed to capitalize on the trend,” he says. “It’s similar to what we saw with reverse logistics a few years ago, which has now become a cornerstone of most supply chains,” says Mabon. “Contract packaging will be the next big thing.”
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