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© 2013 IBM Corporation BUILDING THE BUSINESS CASE FOR NEW PACKAGING FORMATS Dr Trevor Davis, IBM Consumer Products Expert
© 2013 IBM Corporation Key topics Old kit, new kit, new factory … how to make the best business decision? How to assess the contribution of new packaging to the success of your project? How to work out the real contribution of new products to your company? How to work out the real cost of NPD in your organisation?
© 2013 IBM Corporation It important to understand the KPIs that count for decision-makers Number of ideas in funnel Cycle times – To market & by stage Proportion of external involvement On-time / on-budget launch Time-to-profitability New product/service development spending by phase Portfolio payback measures Profit contribution Return on Investment Margin Revenue due to new products/services released in past year Project measures Investment (CAPEX, OPEX) discounted cash flow (IRR, NPV) break even point Incremental NPS Cannibalisation Process Performance Measures KPIs
© 2013 IBM Corporation It is important to know what the “case for change” is before you start
© 2013 IBM Corporation Twitter, Pinterest and Facebook involve consumers in packaging For better or worse!
© 2013 IBM Corporation Packaging is getting smarter – not just a supply chain decision Interactive features must provide value to engage the consumer - inspires loyalty in the world of social media, but the purpose of functional labels must reflect the Brand message Ability to provide the consumer with interactive data e.g. remaining volume, temperature, time left until the freshness expiry
© 2013 IBM Corporation A packaging business case has to be viewed in context of the mix Mix Proposition – Product – Pack – Price format / sku strategy Mix Proposition – Product – Pack – Price format / sku strategy Net sales - COGS
© 2013 IBM Corporation The key areas of cost to capture Primary and secondary packaging Multipacks Closures / caps Promotional packs Barcodes / RFIDs / NFC / e-ink etc Factory / equipment costs (incl tax implications) Logistics and co-packer charges Pallet costs (including pallet packaging) Mock-ups and samples Testing Courier costs Artwork, repro’, printing and labels Write-offs / downs (e.g. obsolete stock) Environmental impacts Productivity changes
© 2013 IBM Corporation Success is measured in terms of how consumers and trade perceive the change, and how much extra revenue comes in Breakthrough New Consumer or Trade Benefit Extension/ Variant / Promotion <=£2m Incremental sales Y3 >£2m Incremental sales Y3 >£30m Incremental sales Y3 Value Engineering / regulatory compliance <=£1m Savings p.a >£1m Savings p.a >£5m Savings p.a
© 2013 IBM Corporation In the future, the business case will show contributions across the ‘triple bottom line’
© 2013 IBM Corporation BUILDING THE BUSINESS CASE FOR NEW PACKAGING FORMATS For more information contact
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