PepsiCo testing semiautomation in repacking

Bottling company collaborates with supply chain to add speed and flexibility in creating variety packs and variety display pallets. Costs could be cut by 10%, with a 30% rise in output.

PepsiCo Inc. is about to launch a pilot project involving contract packaging that would semiautomate some repacking operations on variety packs for its Gatorade brand. The bottling giant hopes to begin test operations in April, citing four objectives: Foremost, validate that basic variety packs, sold in sufficient volume, can be assembled using some

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automation in a standardized repacking-line process that can accept multiple package sizes and configurations. Additional goals are to reduce both costs and the potential for product damage during packout, and also to boost Gatorade sales by providing shoppers with more product options in compact display areas inside stores.

Michael Bilton, national customization manager at PepsiCo, tells Contract Packaging the company’s cost-benefit analysis projects that semiautomated repacking could shave the company’s production costs by at least 10% while also increasing production output up to 30% for Gatorade variety packs. These benefits result from a reduction in manual labor and improved production line capability and reliability.

Jacobson Packaging and Manufacturing Co. (www.jacobsonco.com), a PepsiCo repacker, will produce the test variety packs, and also variety pallets, which are built by mixing single-flavor trays. These packs will appear in club stores in the Northeastern U.S. If the project proves successful, Bilton says, the company might expand semiautomated repacking to its 10 other repackers around the country.

Success could have huge implications for semiautomated repacking in general at a time when product manufacturers frequently need to change multipack configurations. Contract packagers that perform repacking services also could benefit significantly by introducing another value-added service.

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Shoppers and retailers today want continually fresh merchandise in stores, and PepsiCo is representative of the growing number of product manufacturers turning to contract packagers and others in their supply chains to find new areas to automate production and introduce more flexibility in packaging formats.

“Our customers—the retailers and the club stores—are becoming much more customized,” Bilton says. “We’re trying to provide differentiation from our competitors.”

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Logistics and Business Manufacturing: Economic Data Presents Mixed Views for Recovery

At a time when freight volumes remain depressed amidst the recession, coupled with reports indicating that the economy has “bottomed out,” it is very clear that those optimistic for a near-term recovery need to take a long-term view.

Some recent economic indicators for this sentiment include:

* A recent report from the Federal Reserve indicating industrial capacity usage in May, at 68.3 percent, hit a record low in May.
* Retail sales in May fell 4.7 percent year-over-year, according to the National Retail Federation.
* The U.S. trade deficit rose to $29.2 billion in April from $28.5 billion in March, with (adjusted for inflation) exports and imports down 4.3 percent and 2.7 percent, respectively.

The news is not all bad, though. Recently-released data from Panjiva, an online search engine with detailed information on global suppliers and manufacturers, notes that May represents the third consecutive month that there was an uptick in the number of global manufacturers shipping to the U.S. May saw a two percent bump, following gains of two percent in February and eight percent in March. Panjiva said this is the first time it has seen three consecutive monthly increases since it began tracking this metric in July 2007.

Even though these numbers are heading in the right direction, the company cautioned that last spring it also saw some uptick in the number of global manufacturers shipping to the U.S., leading to the possibility that there may be a seasonal component to these findings. Also, the company noted the two percent May gain is “modest,” with the recovery to pre-trade levels likely to be a while.

“We are seeing some encouraging signs, but there is still a low level of overall activity in an absolute sense,” said Panjiva CEO Josh Green in an interview. “It feels like the ‘deer in the headlights’ moment is over.”

Another positive, he noted, is that the sense of economic panic from earlier in the year seems to be gone, but there is still a long way to go. Companies continue to be cautious in their approach to placing orders, according to Green, and they are much more cognizant of the risks that are in their supply chains.

Examples of this risk are directly related to the fallout from last October’s financial crisis, Green noted, with companies not being as diligent as they need to be when it comes to volatile conditions in the market.

“There are a lot of different risks that come with doing business in an international supply chain,” said Green. “One is the risk of companies [like suppliers and transportation service providers, among others] you are doing business with going out of business. As macroeconomic circumstances change, people are going to be looking at a variety of potential risks, like capacity in the medium-term. With so many global manufacturers going out of business, when demand does rebound there may not be enough capacity to serve that demand.”

Looking ahead, there is a possibility that that number of global manufacturers shipping to the U.S. could continue to rise in the coming months.

“Given the weak state of overseas economies, we do not expect the U.S. recovery to be export-led,” said IHS Global Insight Chief U.S. Economist Nigel Gault. “As U.S. recovery does begin to take hold it will mean an increase in imports as U.S. demand recovers. As a result, the trade deficit will likely widen later this year.”

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