The issues faced in export packaging
|✅ Paper Type: Free Essay||✅ Subject: Marketing|
|✅ Wordcount: 5370 words||✅ Published: 25th Apr 2017|
The 90’s have indeed begun well for India. The new economic policy, the elimination of different controls on industrial and export development, imaginative incentive programmes to develop international trade, the revision in the value of the rupee and an effort at allowing it to find its own level, the easy access to foreign currency for business and travel, the open air policy, etc., introduced over the last three years have opened up, not only the markets in India, but also our eyes to the potential threats, challenges and opportunities for Indian business, especially, in the field of consumer goods.
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As a result of these measures exports have assumed a critical role for the survival of every business and, at the same time, it has been made financially rewarding, not just fashionable, to be involved in exports. Competition within the country is beginning to be felt. The opening up of the skies within for the Satellite TV has enhanced effective communication and its reach. Markets are opening up and so is the awareness among the consumers. Packaging is no more frowned upon as an added cost but its value is beginning to dawn on the decision-maker in the industry and the common consumer, though for different reasons.
Specific mention may be made of the advent of the a number of MNCs in the food processing sector for, it has begun to accelerate the velocity of packaging improvements even for domestic sales.
As a result one does not need to discuss anymore whether packaging is a necessity, but how to use it effectively to meet the competition in the home market and survive, penetrate sustain and expand one’s presence in the overseas markets.
For the Indian exporter the emphasis has begun to shift from cost reduction to value addition using packaging as the tool for the product he exports. Much more than the needs of the product alone, which used to dominate his decision making in the past he has to come to terms with the changing and challenging needs of the markets to which his products are directed. This would mean new efforts at identification and satisfaction of the identified needs of the markets.
Experts have maintained the view that it is only when domestic packaging standards reach international levels, competitive exports, because of economies of scale, will be rendered feasible. Dual standards, one for local sales and the other for exports, have never been advocated as a good strategy for growth. That stage is beginning to emerge, at least where large-scale exports are attempted, irrespective of the size of the exporting units. A factor, desirable or otherwise, responsible for the upgradation of packaging for domestic markets has been the lowering cost of packaging in proportion to product costs for many basic food items.
ROLE OF PACKAGING IN THE DISTRIBUTION SYSTEM
The term distribution is sometimes understood only as a collection of limited activities relating to the physical movement of goods from the producer to the end customer, such as local deliveries by truck or a system of regional warehouses/distributors, etc. In order to relate the reference terms for packaging to the distribution system and to define the scope of this paper, it is, therefore, necessary to examine a few definitions in this context.
Distribution is defined by the Oxford English Dictionary as:
“the dispersal among customers of commodities produced”.
Webster elaborates the term distribution costs as:
“costs incurred by a producer incident to activities connected with placing a finished product in the hands of a customer; any cost incurred by a wholesaler, retailer or distributor”.
Distribution, as we can see, needs planning, implementation and control. These functions are handled through physical distribution management. The Australian Physical Distribution Management Association gives the following terms of reference:
“Management of the flow of products from the production plant to the user, which includes a wide range of activities, needed for the efficient movement of materials, components and finished articles, from the producer to the Customer”. Key elements of the physical distribution system are:
Its equivalent body in the United States of America, the National Council of Physical Distribution Management, says:
“Physical distribution management, the term, denotes the integration of activities for the purpose of planning, implementing and controlling the efficient flow of raw materials, work-in-progress inventory and finished goods from the point of origin to the point of consumption.
These may include:
parts and service support
plant and warehouse site selection
return goods handling
salvage and scrap disposal
traffic and transportation
â€¢ warehousing and storage.”
As we can see from the definitions given above, distribution, in broad terms, is an integrated system of several functions, required to move a product from producer to customer. Therefore, the role of packaging in this context will be examined in relation to all the different components of a distribution system.
PACKAGING IN DISTRIBUTION SYSTEMS
An ideal distribution system makes its products available anywhere in the world, anytime, irrespective of local or otherwise variables. New, exotic products find new consumers in nascent markets where they did not exist earlier. Advanced processing technology and improved methods of preservation add to the shelf-life of foodstuffs and helps in the fight against the problem of food spoilage. All this would be impossible without proper packaging, developed to meet the several requirements of a modern distribution system.
Present levels of packaging vary widely for each country and mainly depends on the industrialization within the country. In a simple, agrarian economy, minimum or no packaging is required for foodstuffs as they are consumed, more or less, locally. Urbanization increases the strain on the distribution system in order to supply pre-packed food, and a number of other commodities, in the quantities and qualities needed, as the population starts concentrating in urban centres.
In several developing countries, there generally is a scarcity of essential diet items and other day-to-day necessities. In such cases, government intervention is required to secure distribution at controlled, subsidized prices. Such products should be pre-packed, in fixed quantities and according to fixed quality specifications to avoid losses and restrict unfair trade practices in the distribution process. Special variables of the local market, such as income levels, refrigeration and storage facilities at home, etc. have a decisive impact on the consumption pattern and the choice of package sizes, types, etc. In developing countries, packaging for the domestic distribution of goods has to take the scarcity of such factors into consideration.
It is, thus, also appropriate to consider the role of packaging in a broader sense for the development of a country’s economy and industrialization. Packaging helps in the struggle against hunger and disease by protecting food against losses during storage and distribution. A better conservation of the nutritional and vitamin values of food can also help in rationalizing production and saving on distribution costs. Up to a certain point in a country’s development, it is fairly easy to adapt the demand for, and supply of, packages and packaging materials to the quality requirements of the domestic distribution system. Very soon, however, and often in the early stages of the development of a country’s economy, the need will arise for products to be exported in order to balance foreign trade. When this happens, quality requirements for packaging suddenly rise to new, high levels. Even if exports are directed only to neighboring developing countries, the packages will have to withstand new transportation strains, often under severe conditions. If they are directed to highly sophisticated industrialized markets, the products and their packages will have to compete at a level at which quality requirements are very difficult to meet. The product may be of excellent quality, but it will never achieve customer acceptance unless it is, at least, adequately packed for distribution.
A clear distinction between packages for domestic distinction and packages for exported goods should be made. In this context there are two basic points to consider:
â€¢ Although it is appreciated that domestic packaging needs upgrading in most developing countries, the quality requirements in this case should not be over-estimated, but should be kept on a practical yet still efficient level. Among other things this means that the quality of the packaging should be such as to primarily protect and preserve, and minimize damage, waste and contamination of the goods. This is an area where indigenous raw materials should be utilized as much as possible. Domestic distribution systems, even in less developed countries, are currently undergoing relatively fast changes, for instance, through the introduction of more and more supermarkets/self service stores, often set up by the governments in order to secure a balanced distribution of goods with controlled quality specifications and reasonable prices. Such changes in the distribution system will have a profound effect on the development of packaging since practically all products need to be pre-packed in some way or another to fit into the self service system.
â€¢ The quality requirements for the packaging of exported goods should, on the other hand, never be under-estimated. Structural .strength and sales appeal (e.g. good printing quality) in export packaging are properties which are very often overlooked by exporters. This becomes particularly important when exports are directed to sophisticated industrialized markets with high living standards, and consumers who are accustomed to high quality packaging. The most effective policy to apply would probably be to stick, as far as possible, to locally produced packages for the domestic distribution system, and use more sophisticated package raw materials and packages, imported if needed, for products intended for exports.
ADAPTATION TO DISTRIBUTION REQUIREMENTS
The product and its package need to be adapted to the requirements of the distribution system on three levels:
The product itself must meet the needs and taste of the final consumer,
The package must technically protect and contain the product and, at the same time, fit into the existing distribution system (weight, dimensions, handling equipment, etc.),
The promotional design of the package must appeal to the final consumer’s taste and carry all the necessary information about the product and its use.
The necessity for every producer to adapt the products to the needs and taste of the customers – be it on the domestic or on the export market – should be evident to everybody. Product adaptation does not fall within the terms of reference of this paper but it suffices to say that much remains to be done in this connection for products exported from developing countries. In relation to packaging, the general rule is, of course, that the package must adapt itself to the product. This statement, however, is not entirely true. In some cases, modifications in the product itself can make it easier (and more economical) to pack. A good example of this is furniture, which can be made collapsible or designed to be packed in a nested way, or other protruding parts which make package design more difficult, in other words, the product itself should be adapted to fit the package.
Many developing countries have literally centuries long experience in exporting their basic commodities, such as rubber, tea, coffee, spices, cocoa, rice, sugar, wool, cotton or even bananas. The distribution system was established generations ago, business contacts are good and no immediate or major problems seem to be likely. However, the rapid development of the distribution system with regard to packaging technology, transport and handling methods, equipment, etc., may pose new, sudden and difficult problems, even for well-established products and exporters. A case in point is the recent trend towards new alternatives for the traditional plywood tea chest for the packaging of tea in bulk. This solution, which was originally intended for shipments on the tea clippers, is likely to become outmoded when more and more of the tea exported is shipped in freight containers.
The utilization of indigenous, locally readily available materials for packaging and distribution of goods is a legitimate interest of every developing country. For domestic distribution this is usually quite feasible and even if more modem packaging has already been introduced, traditional packaging may still be used side by side with the modern packaging for a long time to come. In the street markets of Hong Kong, for instance, one can find processed foods packed in retortable pouches next to foods wrapped in lotus leaves. In Egypt oranges are packed in plastic crates, corrugated boxes and still, to a large extent, in crates made out of the veins of palm leaves. Many of these traditional packaging forms are perfectly suitable for the local distribution system and will continue to be used for a long time. Abandonment of such indigenous packaging methods would also have serious repercussions on the employment situation in rural areas.
In the distribution of goods for export, however, traditional types of packaging, using indigenous raw materials, are likely to cause problems of compatibility with modern distribution methods, particularly in highly developed industrialized countries. Some examples of this are baskets for fruits and vegetables (stacking strength, utilization of shipping space in freight containers and on pallets), jute bags (hygiene aspects), wooden boxes/crates (handling and disposal problems), etc. In trade between developing countries, particularly within the same geographical region, it may well be possible to use traditional and indigenous packaging solutions for many years to come. Possibilities may also exist for the development/adaptation of such traditional packaging tot the distribution requirements of developed industrialized countries, for instance, by combining indigenous raw materials with more modern packaging materials, such as a combination of wood and corrugated board, or of textile fibers and plastic films, etc.
Unfortunately, very little development work is done to this end; the research is beyond the resources of the developing countries themselves and the subject itself is not of much interest to researches in industrialized countries.
When adaptation of packaging to the target market distribution systems is discussed, it is usually only the necessity for developing country exporters to adapt which is considered. There is no reason why producers in industrialized countries should not adapt their packages for export to developing countries, in order to fit better into the local distribution systems and consumption patterns. This might mean completely different packages for longer shelf-life expectation in non-refrigerated conditions, smaller unit sizes, better protection against insect attack, etc. Unit loads might pose problems if no handling equipment is available at the destination – the use of slip-sheets, for instance, would cause problems in almost every developing country at this moment.
The promotional design:
The promotional design of packages for consumer products, distributed to the public through supermarkets, department stores or specialty shops, plays a very important and active role in the last link of the distribution chain – marketing the product to its final consumer. On the domestic market this seldom poses any particular problems – the products and their producers are well-known and often operate in a monopoly or oligopoly market situation. However, when export of the same products is considered, they enter the world markets facing severe competition from a large number of experienced rival producers. Now promotional package design becomes a vital element in the marketing strategy, particularly if the producer cannot afford to use other promotional media such as advertising or TV to support the sales efforts. The package, as the consumer sees it on the shelf in the shop, thus becomes the only means of communication between the producer and the customer – it represents the “face” in the final stage of the distribution system. In this situation the role of the package is to:
Attract the customer’s interest in the product,
Create consumer confidence in the product and its producer,
Give the customer detailed information about the product, its origin, how to use it, etc.,
including all the mandatory information pre- scribed by legal regulations. It goes without saying that good packaging design cannot compensate for bad product quality – it might sell the product once but if the product does not live up to the expectations created by a good promotional design, the customer will never come back for a repeat purchase. In this context, a producer/exporter actually has a kind of national responsibility – if the product does not live up to customer expectations, other products originating in the same country might acquire an unfavourable overall image.
THE ADDED-VALUE CONCEPT
Developing countries will not long be content to export their products in bulk as raw materials or in a semi-processed form but, in the future, will strive towards increased local processing of their indigenous raw materials. There is much discussion of the necessity to upgrade export earnings so that the added value resulting from processing benefits the producing country. This added-value concept, which means that the producers have to assume responsibility for organizing the whole distribution themselves, will develop slowly and involve a lot of difficulties in technology, trade policies and marketing methods. There is no doubt, however, that this process has started already and will be accelerated during the next few years.
The first and relatively easy step is to start distributing the products under the trade name of an already established distributor, using their labels and packages. The advantages of such arrangements are many but there are certainly disadvantages also: prices tend to be low and the producer/exporter does not create an own identity for themselves or their product on the market. To set up an own independent distribution system will mean entering into direct contact with consumers in target markets, using own brand names, introducing new types of products and maintaining competitive package/label designs at high quality levels. This will bring about new and, often, difficult problems for the packaging industry in developing countries, as well as for exporters who are often unfamiliar with, for instance, the requirements of the supermarket distribution system, or who have difficulties in understanding the role of packaging and the basic concepts of package design in this context. In the beginning, exports are often small in volume and distributed through specialized importers and specialty shops to the often fairly large colonies of migrant compatriots abroad. In this case there is little need to change the promotional design since the prospective customers will easily recognize the products as coming from their own home country – a nostalgic feeling towards the product should be encouraged. The only thing which needs to be done, is to adjust the text, and possibly the illustrations, used in the design so that they conform with the packaging and labeling regulations of the importing country. Many developing countries find it easier, particularly in the beginning, to direct their exports to other developing countries, particularly those with a high purchasing power, such as oil exporting or newly industrialized countries. In this case it is dangerous to under-estimate the importance of a modern, effective, promotional design of packages and labels since these countries also import, more or less freely, products from the industrialized countries, bearing well-known brand names and very sophisticated promotional designs.
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PACKAGING AND THE MODE OF TRANSPORT
In the distribution of goods, the selection of the mode of transport has a great influence on the selection of types of packages and their specifications. In the domestic distribution system, goods can be transported by rail, truck, sea and fair (and in some cases even by very primitive means such as camels, donkey carts, etc.), whereas in international trade one is usually restricted to sea or air transport. The reduction in strength requirements for packages distributed by air is considerable, but one should not forget to analyze the entire cycle of distribution. A package, primarily designed for air transport, for instance, usually has to go through several additional types of transport, e.g. by rail or truck to and from the airports, before it has gone through the full cycle of distribution from the producer to the ultimate customer. Generally speaking, however, distribution by air requires lighter and, consequently, less expensive packaging than that necessary for shipment by sea. As a matter of fact it can be more economical to ship by air than by sea even if the basic freight rates are much higher for air freight.
There are several reasons for this – a faster turnover and, consequently, less capital costs, lower insurance rates and less pilferage, but the most decisive factor in the total cost comparison between air and sea freight is the cheaper cost of transport packaging for air transport.
In addition to savings in material costs for air freight packaging, weights and volumes are reduced and, very often, also the labour costs for the packaging operation itself. The interrelationship between the cost of packaging for transport and the selection of the mode of transport is also very real in the domestic distribution environment. For a manufacturer of home appliances, such as electronic stoves, refrigerators, TV’s, etc., a viable alternative to expensive transport packaging might be distribution in special trucks without packaging. This is often the case e.g., in the furniture industry, while ready-made garment manufacturers can save a lot of packing and pressing costs by delivering the garments hanging on racks in specially constructed trucks or containers.
PACKAGING IN SHIPPING AND WAREHOUSING
One of the most important functions of packaging in the distribution system is to adapt itself to the materials handling equipment and methods used during transportation and storage. There are two major aspects in this con text:
The packages must be dimensioned to take up the minimum amount of shipping volume, i.e. be able to utilize the available and expensive space as efficiently as possible. This might be the inside volume of a freight container or an aircraft “igloo”, or it might mean that the surface area of a standard size pallet – usually 1,000 mm x 1,200 mm or 800 mm x 1,200 mm – should be covered as completely as possible.
The packages must be constructed to withstand the strains of transportation and storage under severe conditions. This again might mean extreme stacking heights in warehouses or ship’s holds, excessive sideways pressure of trucks with clamping devices, etc. Whenever unit loads, e.g. pallets, are used, the loads must be stable through the use of shrink- or stretch-wrapping, palletizing adhesives, etc. Woven plastic sacks in this context pose some difficulties unless the surface of the sacks is treated with an anti-slip compound. Interlocking patterns of stacking paperboard boxes on a pallet is effective for this purpose, but it should be realized that this stacking method weakens the compression resistance of the boxes considerably.
A freight container is not a substitute for packaging. Only in rare cases, when a container load of goods is delivered door-to-door from the manufacturer directly to the final retail outlet, would it be possible to reduce, to a certain degree, the amount and strength of the packaging used. In most cases, however, the packages will be taken out of the container, put into a central warehouse and only after some time reloaded into a truck, a rail car or another container for transport to their final destinations. This means that the package will be subjected to several manipulations during storage and transport, during which the package is handled individually.
MARKING FOR SHIPPING AND HANDLING
One very important role for the package, particularly in international distribution of goods, is to carry the identification of the consignment through- out the chain of distribution. The necessity for a clear and orderly marking of packages to facilitate the faster and more effective handling of goods in transit and during storage is obvious. And yet, a visit to any harbour, airport or goods terminal in the world will disclose a large number of consignments with insufficient or unclear shipping and handling instructions. Obviously, proper attention is not given to this matter -perhaps, because of missing or faulty shipping marks. Most countries, in addition, have mandatory regulations issued by port or customs authorities which must be complied with, while for hazardous goods, there are international conventions on standard marking specifications. Pictorial markings (ISO Standard R780) should be used as much as possible.
A serious problem, related to both the domestic and international distribution of goods, is pilferage. Even though the transport package, generally speaking, should be attractively printed to advertise its contents, in many cases, particularly for especially attractive goods, such as garments, electronics, alcoholic beverages, jewellery, etc., it would be safer to use plain markings, e.g., in code, in order not to attract attention and unnecessarily invite pilferage.
In conclusion I would like to draw your attention to some of the recent developments in distribution techniques and the changes in the behavior of the customers they service and how they affect packaging requirements and norms.
Change in Needs
Quite a few variables in the needs of the markets exist, which need to be analyzed. The following discusses briefly what those considerations are, not all of which may be relevant for every export product/market. Just like products need to be different for different markets variations are also found in the packaging. Even within India one sees the difference in food items e.g. cooking oil varies from location to location and so does the taste. So while the product appears to be the same the local variations come in. In other words a standard product has to be offered in different formulations. Depending upon the food habits the quantities required for one time serving varies and the variation in pack sizes result.
In many developing country situations the transformation is from selling what one produces to satisfying the overseas’ consumer needs in the first stage. The next stage is creating the needs and satisfying them as the situation develops. In most cases India is passing through the first stage of transformation. The effort needed here is much less. When India can create the needs for new products that are typically Indian, a costly experience, the results will be quite rewarding. Packaging will be one of the components in both cases.
The transition is from that of a controlled/regulated/protected market to an open, fiercely competitive market offering unlimited opportunities. The following dimensions of the market are relevant for packaging:
â™¦ Consumer â™¦ Location â™¦ Time â™¦ Quantity â™¦ Quality levels
The consumer may be grouped as Industrial unit, Trader, Household/domestic, Defense, etc.
The packaging in respect of an Industrial Consumer is influenced by
Unit Size â™¦ Handling
Inspection / Q. C. requirement â™¦ Internal Distribution
Inventory Management Systems â™¦ Redistribution
Storage â™¦ Regulations
The variables result from the nature of industry, viz.: Consumer Goods, Industrial Goods, and Processing Industry
Where a Trader is the Consumer the considerations emerge depending upon the nature of his Trade namely, Wholesale, Distribution, Retail – Shop /Department Store / Super Market:
Unit Size â™¦ Storage
Intermediate Pack Size â™¦ Redistribution
Bulk Pack size â™¦ Inventory control
Unit Load handling â™¦ Display
The Defense Consumer has a different set of critical criteria : Location of use
Long Term Inventory â™¦ Distribution System
Safety Level Beyond Normal Shelf Life â™¦ Inspection / Q. C. Systems
Guaranteed Performance (Often Excessive) â™¦ Standards
The Household Consumer, the most common man, is often the more difficult one, for his needs vary with reference to Socio economic level, Age Group, Sex, Literacy level, family Size and they cover:
Quantity / Pack Size
Location : The aspects relevant to Location are
Distances â™¦ Handling â™¦ Journey Hazard
Transport â™¦ Storage
Time : This period is from production to consumption. The pack has to meet the needs of
Shelf Life â™¦ Seasons (in fashion goods)
This consideration ensures that the quantity needed per single use can be dispensed and influences
â™¦ Sizes â™¦ Dosing
This is to be properly interpreted as the acceptable quality level, not the ideal quality, and varies with reference to target consumer.
The pack is required to
Retain the inherent quality such as flavour, aroma and
Prevent external influences affecting the product adversely such as by light, oxygen, odor, humidity and the like.
While the examination of each of the above features is expected to lead to a more appropriate package one would like special emphasis on the following :
Communication : Packages are not works of art. They are expected to communicate a favourable association of the content and a desirable connotation motivating the consumer to buy. This requirement is covered under the above discussion in two places – one under the Trader requirements and the other under the Household Consumer requirement.
Confidence in the product can be generated by the pack design and graphic design. The Communication capability is conditioned by :
The name of the product â™¦ Colour Scheme
The theme â™¦ Pack Shape/styling ,
The illustration â™¦ Overall execution
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