This document provides an overview of the two main packaging markets: logistics and product packaging. It also examines the makeup of the smart packaging ecosystem, the spectrum of technologies available, the different outcomes that enterprises might desire, and how these varied outcomes affect an enterprise’s possible technology choices.
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The value chain for the smart packaging market is relatively straightforward, consisting of three primary levels:
- Unconnected Product Vendor: These can be manufacturers of primary/secondary/tertiary packaging; a brand or shipper selling a packaged product (e.g., Nestlé, McDonald’s, Walmart, etc.); or a logistics provider (e.g., FedEx, DHL, UPS, etc.).
- Data Carrier Vendor: These vendors create and sell a physical product identifier, with technology options ranging from barcodes, Quick Response (QR) codes, Radio Frequency Identification (RFID), or Near Field Communication (NFC) all the way to Short-Range Wireless (SRW) or Wide Area Network (WAN) technologies. Vendors sell tags or the means to print the tag/data carrier.
- Software Vendor: These consist of digital Identity (ID) vendors, enterprise systems, often with digital ID modules; and supply chain visibility data aggregators that may use these pre-existing databases of information to enhance a variety of data streams and build additional use cases.
In the market for logistics packaging, there have been two main ambitions in making packaging smart in the decade from 2010 to 2020: automation and cold chain assurance.
First and foremost, enterprises have wanted to accelerate and bring efficiency to their supply chains, given the growing number of suppliers, geographies, goods, and distribution channels with which they must contend. This has led to a large drive to add auto ID capabilities to packaging moving between facilities or between enterprises.
These auto ID capabilities usually take the form of barcodes or RFID codes. This was one of the first big drivers in smart packaging, usually applied at the Unit Load Formation (ULF) level or at the tertiary packaging level (when different).
The second big area for smart logistics packaging has been in cold chain packaging, as increasing regulations and more complex supply chains make the need for protecting perishable goods (high-value pharmaceuticals, in particular) more important. Much of this market has been governed by temperature loggers and other data carriers for temperature readouts.
“More broadly, ‘smart packaging’ is defined as end-user or logistics packaging with some form of data carrier affixed that can upload data to a cloud or server.” – Tancred Taylor, Industry Analyst at ABI Research
Key Decision Items
Work with Global Standard Bodies
The majority of packaging today is made smart through digital IDs, rather than active communication technologies. This gives a vital role to serialization and digital ID technology vendors, which should look to position themselves at the center of the smart packaging market.
Smart packaging vendors should look to work with Global Standards 1 (GS1), a global standard body with Digital Link and Digital Product Passport initiatives. Working with standards will help facilitate adoption and the possible use cases of smart packing technologies that can be built on digital ID data carriers.
Regulatory Bodies and Enterprise Outcomes Can Be Harmonious
Smart packaging adoption is brought about by two primary driving forces: regulation and operational excellency. On one hand, regulatory bodies are pushing sustainability and traceability agendas, targeting a wide range of industries like food and pharma, batteries, automotive, apparel, and many others.
At the same time, industrial enterprises want to use smart packaging technologies to reduce costs, promote supply chain resiliency, create new value streams, and improve customer engagement.
While these are two very different motivations to push for smart packaging in industry, there’s no reason these outcomes cannot be compatible.
Regulatory bodies mandating digital IDs for sustainability and traceability agendas are creating a high level of penetration of digital IDs on smart packaging. In turn, enterprises can use digital IDs for their optimization purposes. Enterprises looking to achieve other goals, such as real-time tracking and condition-based monitoring, can work with regulatory bodies and technology vendors to ensure that new data carrier tools are accepted within standards and regulatory frameworks.
The Need for Smart Packaging Software
Software is crucial to the smart packaging market, with three levels to discuss:
- First and foremost, digital ID software vendors are the key to driving ease of use and the first layer of value from smart packaging.
- Second, supply chain visibility data aggregators can make use of these data and other more real-time data for further use cases.
- Third, enterprise software (Enterprise Resource Planning (ERP) systems, in particular) are important in aggregating data from these vendors (or offering modules of their own), and making use of these data within the enterprise, while sharing relevant data with supply chain partners.
The Pivotal Role of the IoT
Internet of Things (IoT) technologies play an important role in the next phase of growth of the smart packaging market. This is especially true on the logistics packaging front, as it offers more real-time data, more types of data, and more autonomy from people or infrastructure.
Smart labels will be transformational in this market, creating a bridge between passive technologies and full-blown IoT devices. They offer a lower-cost alternative to the latter and enhance the case possibilities from the former.
Still, IoT technologies will continue to be an optional extra for smart packaging due to their cost and complexity, as a way of enabling more advanced or more complex use cases. IoT data will enhance data collection efforts and complement digital IDs, but this will remain a proportionally small side of the market.
What Are the Emerging Opportunities in the Smart Packaging Market?
There are new opportunities for all sorts of technology companies in the smart packaging market, including the following examples:
- Data carrier vendors can greatly benefit from offering software capabilities to customers.
- Printing vendors can work with brands and packaging providers alike to print data carriers at the source, including new flexible printable IoT label technologies.
- Packaging providers are looking to offer Packaging-as-a-Service.
Smart packaging also enables brands to transform their business and service models with new types and quantities of data gathered from all sorts of customers.
Key Market Players to Watch
Dig Deeper for the Full Picture
Our analysts provide a comprehensive take on smart packaging in ABI Research’s Smart Packaging Solutions and Technologies: Enabling the Next Level of Asset Visibility Innovation research report. This report will allow you to:
- Pinpoint the most significant smart packaging segments.
- Decipher the various enabling technologies that provide benefits to enterprises.
- Understand practical use cases for smart packaging solutions.
Get the report here.
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