Value Engineering Better Packaging Functionality for Fewer Resources

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1 Value Engineering Better Packaging Functionality for Fewer Resources Packaged. The 6 th Global Summit. Vladimir Zernin June 19 th & 20 th, 2017

2 Agenda 1. Kraft Heinz Company (KHC) presentation 2. Value management program in KHC 3. Value engineering methodology 4. Global trends identified by KHC 5. Summary 1

3 Kraft Heinz Company 2

4 Kraft Heinz Brands overview 3

5 Packaging in Kraft Heinz company 4

Introduction Vladimir Zernin Value Engineering Consultant and Procurement Expert GLOBAL VALUE ENGINEERING LEAD Utrecht, NL Develop and implement Value Management Program FLEXIBLE EURO BUYER Utrecht,

6 Introduction Vladimir Zernin Value Engineering Consultant and Procurement Expert GLOBAL VALUE ENGINEERING LEAD Utrecht, NL Develop and implement Value Management Program FLEXIBLE EURO BUYER Utrecht, NL Shape and lead EU strategy for flexible resin packaging SENIOR PACKAGING BUYER Saint-Petersburg, Rus Lead packaging materials procurement process in Heinz Russia PROCUREMENT MANAGER Saint-Petersburg, Rus Procurement, projects management, supplier development 5

7 Value Management Process 30% of the time 70% of the time Collect Ideas Project Visibility Business Case Approval Project management and technical approval Impleme ntation VE workshops Supplier Base Transformational Workshops Benchmarking Peers Internal Experts Value visibility (business case) Technical Visibility Operational Visibility Consumer visibility VE Committee Costs Benefits Consumer / Non Consumer Impacts Line Trails Quality Test Specification development Supplier Negotiations (whole process to be defined) VE Committee Final approval Contract management 1 st production Launch Ideas and business cases Execution Global VE, Regional VE Leads and R&D Regional R&D (Cost out Teams) Regional Ops and FSQ 5

8 Value Engineering VE is a process to discover and eliminate all of the elements in a packaging that customers and/or consumers do not value but that cost Brand owner money VE can result in changes to various ingredients or packaging that saves Brand owner money while maintaining or even improving consumer satisfaction 7

9 Value engineering study boarders Target: Increase competitiveness of KHC products, Optimizing a defined packaging functionality and cost Tasks: Developed justified VE Ideas pipeline for short term and long term projects Find additional consumer values Scope: Region and Selected item to be studied Participants: KHC Procurement, R&D team, Manufacturing, Marketing, Logistic (for secondary and tertiary packaging) Supplier Commercial team, Technical experts, Innovation team, Manufacturing experts Time: Min 1 day; max 5 days Outside of the scope: Project implementation, other packaging (sales pitches) 8

Much Fewer Same increase Fewer Resources Resources in

10 Value Equation Much Very much more Slightly More Same more less satisfacation satisfacation Value α α Small Much Fewer Same increase Fewer Resources Resources in Resources Very Much much fewer fewer resources resources

11 Ideas evaluation Total Cost of Ownership Product waste, inefficient production, brand damage Optimal amount of material Excess material, unoptimized portfolio - X % + X % Amount of packaging material Packaging under specification Packaging over specification *Source: Packforsk, Sweden, 2001; Plato product consultants 10

12 Wrong Value Engineering 11

13 Searching for Functions 1. Entire supply chain 2. Components and parts of the product: 3. Why Consumers are willing to pay for packed products? 12

14 Why FMCG companies use packaging? Brand owner/ Co-packer Distribution Center Retail store/ Point of Contact with consumer End consumer 13

15 Consumers requirements No. Customer demands Importance 1 Packaging preserve product taste and texture 7 2 Packaging ensure long shelf life 4 3 Packaging keep product safe (no deterioration or contamination) 6 4 Packaging promote a brand 6 5 Packaging provide information (Nutrition, flavour, recipes) 4,5 6 Packaging is transparent 1 7 Packaging is reclosable 7 8 Packaging is easy to open 8 9 Packaging provide easy access to the product (easy pour, dispense, clean hands) 9 10 Packaging is safe to use (e.g. no cuts, anti choke) 7,5 11 Packaging is recyclable 0 12 Packaging is in the right size (one consumption, family pack) 6 13 Packaging can be reused 0 14 Packaging attracts attention (multicolour, shape) 6 14

16 Kano Model 15

Identify functions Ketchup example 1 Protect product 2 Keep freshness 3 Prevent oxidation 4 Stop UV 5 Preven leakage 6 Keep integrety 7 Preven damage 8 Absord impact 9 Convey information 10 Inform

17 Identify functions Ketchup example 1 Protect product 2 Keep freshness 3 Prevent oxidation 4 Stop UV 5 Preven leakage 6 Keep integrety 7 Preven damage 8 Absord impact 9 Convey information 10 Inform Consumers 11 Support printing 12 Provide convinience 13 Provide reclosability 14 Fit refrigirator 15 Control dispensing 16 Use whole product 17 Dose product 18 Occupy less space 19 Leave left overs on cap 20 Facilitate opening 21 Facilitate carrying 22 Provide first opening evidence 23 Withstand supply chain 24 Ensure runability 25 Save logistic cost 26 Contain product 27 Attract consumer 28 Provide shape 16

18 Functional Tree How? Why? Protect product Keep freshness prevent oxidation Stop UV Preven leakage Preven damage keep integrety Absord impact Inform Consumers Convey information Support printing Provide convinience provide reclosability fit refrigirator control dispensing use whole product dose product occupy less space make mess leave left overs on cap facilitate opening facilitate carrying Protect consumer (baby) Withstand supply chain Attract consumer provide first opening evidence anti choke No cuts ensure runability Prevent stilling ease moving in the shop Save logistic cost Contain product Stand up Pouch provide shape support multi-colour printing 17

19 Functional Specification Packaging Type Quantitative Packaging Function Specification Soy Criteria Chili Criteria Protecting Product Providing Clearance Dimension Width max. 1 mm variance. max. 1 mm variance. Absorbing Impact Tensile Strength N/mm >50 N/mm Press Test 80 kg/direct 70 kg/direct Stacking Test 0.023% max. leakage 0.023% max. leakage Transportation Test 0.023% max. leakage 0.023% max. leakage Facilitate Sealing Sealing Strength > 3000 kgf. > 3000 kgf. Prevent Water Vapor WVTR/ MVTR < 7.9 g/m2/d < 0.1 g/m3/ d Prevent Oxidation O2TR < 54.4 cm3/m2/bar/d < 0.5 cm3/m2.atm.d Maintaing Freshness Shelf LifeProduct 26 months 14 months Provide Convenience Facilitate Packing in Production COF 0, OEE No. of Joints 1 /1000 m roll length 1 / 750 m roll length 18

20 Functional cost Function carrier Cost Control Protect product Inform Consumers Provide convinience Protect consumer Withstand supply chain Attract consumer 1 Pet (12+12) 6% 6,07 0,0 3,0 0,0 0,0 0,0 3,0 2 Ink 6% 6,28 0,0 1,3 0,0 0,0 0,0 5,0 3 Adhesive 14% 13,80 6,9 0,0 0,0 0,0 6,9 0,0 4 Alu 9 12% 11,52 8,1 0,0 0,0 0,0 3,5 0,0 5 PE (130) 31% 31,40 15,7 0,0 0,0 0,0 15,7 0,0 6 Spout 15% 15,00 1,5 0,0 6,0 6,0 1,5 0,0 7 Conversion cost 16% 16,00 4,8 2,4 1,6 1,6 4,8 0,8 % - Share of overall cost 36,9% 6,7% 7,6% 7,6% 32,3% 8,9% 19

21 Target functionality 0 = No influence at all 3 = Low influence 6 = Medium influence 9 = High influence Packaging preserve product taste and texture Packaging ensure long shelf life Packaging keep product safe Packaging promote a brand Packaging is transparent Packaging is reclosable Packaging provide information Packaging ease access to the product Packaging is safe to use Packaging is easy to open Packaging is in the right size Packaging attracts attention Functions Sum % Protect product % Inform Consumers % Provide convinience % Protect consumer % Withstand supply chain % Attract consumer , , % 20

22 Functional Cost Comparison with Consumer needs Cost [%] Functions Target Functions Cost Current Functions Cost 21

23 Functions Challanges How? Why? Protect product Keep freshness prevent oxidation Stop UV Preven leakage Preven damage keep integrety Absord impact Inform Consumers Convey information Support printing Provide convinience Protect consumer (baby) Withstand supply chain Attract consumer provide reclosability fit refrigirator control dispensing use whole product dose product occupy less space make mess leave left overs on cap facilitate opening facilitate carrying provide first opening evidence anti choke No cuts ensure runability Prevent stilling ease moving in the shop Save logistic cost Contain product Stand up Pouch provide shape support multi-colour printing Function carrier Cost Control Substitute Combine Adjust Modify Put to other use Eliminate Rearrange Inform Consumers Provide convinience Protect consumer Withstand supply chain Attract consumer Protect product Pet (12+12) 6% 6,07 0,0 3,0 0,0 0,0 0,0 3,0 Ink 6% 6,28 0,0 1,3 0,0 0,0 0,0 5,0 Adhesive 14% 13,80 6,9 0,0 0,0 0,0 6,9 0,0 Alu 9 12% 11,52 8,1 0,0 0,0 0,0 3,5 0,0 PE (130) 31% 31,40 15,7 0,0 0,0 0,0 15,7 0,0 Spout 15% 15,00 1,5 0,0 6,0 6,0 1,5 0,0 Conversion cost 16% 16,00 4,8 2,4 1,6 1,6 4,8 0,8 % - Share of overall cost 36,9% 6,7% 7,6% 7,6% 32,3% 8,9% 22

24 Ideas Evaluation Price-Performance-Portfolio Current packaging Option 1 Option 2 Price [ ] Option 4 Option 5 Option Performance 23

Evaluate options and perspectives Ideate and roadmap Business Cases Participants: 20

25 Developing new products with Value Engineering In July 2016 in Heinz Innovation Center Nijmegen, NL Objectives of the workshop: Identify Global trends for food packaging Evaluate options and perspectives Ideate and roadmap Business Cases Participants: 20 people from Marketing, R&D, Procurement, Manufacturing Outcome: ~50 ideas => 8 Business Cases 24

26 Upcoming Trends in Food industry (1) Smart packaging Internet of the things and Smart packaging is unavoidable future Way of Delivery Develop multi-channels to reach consumers Chef Food delivered at home accessible experience Will we need retail stores in 5 years? Flavor Bio mimicry Cope nature Tailor made products Nutrition only 25

27 Upcoming Trends in Food industry (2) Way of Cooking Enhance cooking 5 minutes any meal Full meal solution 3D food printing Portion sizes Bulk solutions Capsuled food Sustainability Bio degradable / edible packaging Refill 0 waste Industry associations Guilt free packaging 26

28 Conclusions Today FMCG companies expect better packaging functionality for fewer resources In the future Packaging should comply with the new demands Value Engineering as an approach can help to: 1. Clarify Brand owners targets and strategies; 2. Get alignment among all engaged stakeholders; 3. Correlate consumer insight with the packaging 4. Optimize current packaging functionality/cost ratio 5. Encourage new product development 27

29 Vladimir Zernin Global VE Lead for Packaging Kraft Heinz Company Cell:

30 Implemented VE ideas for Flexible packaging Decrease sealing layer thickness Alternative barrier layer Decrease barrier layer thickness Alternative barrier layer Fewer adhesives for lamination Alternative adhesives for lamination Simplify structure (4 layers ->3 layers) Process change (3 layers at 1 go) Use coextrusion process to reduce conversion Decrease sealing area Reduce shelf life for end product Spout and cap lightweight Reel supply instead of premade pouches Deliver only full tracks Simplify secondary packaging for delivering to KHC increase orders MOQ's Longer forecast with KhC commitment Shorter rail holder on the spout Optimize printing (fewer colours) Optimize sizes (fewer formats) switch to Flexo (start with sachets) Optimise palletization for delivery to KHC No print on the sachet back (no masterbatch, no ink) Reduce stock Use coating as a barrier 29

31 Value management 30

32 When to start? 31

Modified Atmosphere Packaging Where next? Joanna Stephenson VP Marketing & Innovation LINPAC Group

Modified Atmosphere Packaging Where next? Joanna Stephenson VP Marketing & Innovation LINPAC Group THE PRESENTATION AND PACKAGING IS EVERYTHING. Quotehd.com Agenda Why MAP benefits and technologies The