CSCMP's Supply Chain Quarterly
January 20, 2020

Smart packaging: challenges and opportunities in the supply chain

New packaging technologies have the ability to monitor a product and its environment and act on any changes in the two. These innovations have the potential to dramatically improve supply chain operations, but companies must first overcome some significant challenges.

Enhancing product traceability—or the degree to which product information and locality can be ascertained at any given point within the supply chain—is one of the most critical supply chain improvements that a company can make.1 Traceability ensures that every node in the supply chain can be confident in the authenticity of the product because it can track where the product has been. It helps members of a supply chain detect whether products did not come from the manufacturer, were diverted during transport, were introduced or re-introduced at inappropriate times and locations, or re-entered the supply chain after they were identified to have been administered already. In other words, by improving traceability, companies are better equipped to know whether a product has been diverted, counterfeited, or otherwise tampered with during transportation and storage—serious concerns for many supply chains.

One way that companies can improve product traceability is by using innovative new packaging technologies known collectively as smart packaging. Smart packaging solutions have the potential to greatly enhance the effectiveness and efficiency of supply chains, particularly in industries such as food and beverage and pharmaceutical and health care. However, some major challenges still lie in the way of full-scale adoption of these packaging technologies. Companies should be well-versed in both the benefits and challenges of smart packaging before they pursue potential applications.

What is smart packaging?

A smart package is anything that offers "something extra" in addition to the containment of the product. These "extras" could be anything from extended shelf life to displays and indicators for temperature, pH, moisture, and freshness, to a tracking device. In this sense, smart packaging is closely related to other terms for innovative packaging products, such as active packaging and intelligent packaging.

Active packaging: The main aim of active packaging technology is to sustain product quality and prolong shelf life. Active packaging responds to a triggering event (such as exposure to ultraviolet light or a decrease in pressure) by releasing or absorbing substances from or into the packaged product or its surrounding environment. Typically, this involves different components,such as moisture or gas scavengers or antimicrobial films, being embedded into the packaging itself.2,3 A good example of active packaging is oxygen scavenger technology that is used in packaging for oxygen-sensitive products such as pharmaceuticals, cosmetics, food, and additives. Oxygen scavengers remove or decrease the level of oxygen in the package, which can help maintain product safety and extend shelf life.

Intelligent Packaging: According to most packaging experts, intelligent packaging is mainly used "to monitor the condition of a packaged product" and to "capture and provide information on the quality of the packaged good during transport and storage."4 A simple definition of intelligent packaging is "packaging which senses and informs." Accordingly, intelligent packaging systems consist of hardware components, such as time-temperature indicators (TTI), gas detectors, freshness and/or ripening indicators, and radio frequency identification (RFID) systems.

Smart packaging: Smart packaging has been introduced as a combination of intelligent and active packaging. This type of advanced packaging system can monitor changes in a product or its environment (intelligent) and act upon these changes (active).5 It can actively monitor and control the environment of a package and communicate with an external interface (either electrical or optical).

Smart packaging often uses sensors or smart labels to monitor product quality, storage conditions, or the outside environment.6 For example, smart packaging with TTIs can record both time and temperature and provide a partial or full temperature history of a product.7 Another example is RFID-based packaging. Sensor-based RFID technology can be integrated into the product's packaging to track and trace the origin of the product and any sources of contamination or tampering within the supply chain.

The ultimate goals of these three packaging innovations include shelf-life extension, freshness monitoring, exchanging information on quality with consumers, safety improvement, improving convenience, enhancing traceability, and improving targeted recalls, among others. As reported by a 2018 Market Research Future research report, the global smart packaging market is currently estimated at US$46.74 billion and is forecast to grow at a healthy compound annual growth rate (CAGR) of 5.16 percent from 2017 through 2023.8 The expected growth of smart packaging suggests that companies need to continue to learn more about these packaging innovations in order to keep pace with their competitors.

Supply chain applications

There are many potential applications for smart packaging in areas where traditional packaging has not been able to adequately handle heightened customer expectations and increased product complexity. Consumers are looking for cost-effective, easy-to-transport, and aesthetically pleasing packaging that not only can guaranteethe freshness and integrity of the product but also can inform them about product history and/or condition. Smart packaging can be used to relay this information—sometimes through interacting with the consumer's smartphone or other device.

In particular, there is a great potential for smart packaging in industry segments where traceability is a top priority, such as food and beverage and pharmaceutical and health care.

Food supply chain: Packaging has become an essential technology in the food chain to ensure safety, avoid undesired reactions, satisfy consumer expectations, and increase food shelf life.9 It is not surprising, then, that the food and beverage sector is currently the largest market for smart packaging, accounting for more than 45 percent (or US$10.8 billion) of global sales in 2015.10 Indeed most smart packaging solutions were developed and targeted toward the food supply chain in an effort to reduce food loss and waste.

According to the Food and Agriculture Organization (FAO) of the United Nations, each year one-third of all food produced globally for human consumption—1.3 billion tons—is lost or wasted, causing massive financial losses and squandering natural resources.11 In the United States alone, 126 million metric tons of food were wasted in 2017, with approximately 57 million tons of that waste being generated in the consumer stages of the food supply chain.12 Although all actors in the food chain have a role to play in preventing and reducing food waste, the prevalence of household waste suggests that smart packaging's ability to reduce spoilage and extend shelf life can play a large role in addressing this problem.

Many technologies exist today that can either track or test (but usually not both) agri-food products for contamination as they travel through the supply chain. However, these techniques are cost prohibitive, and testing slows down the supply chain since qualification and quantification tests for randomized samples are often performed through external technical and certified laboratories. Also, it is currently difficult to get the data related to testing and tracking to the end-user because of gaps or breaks in the data stream or an inability to share the information with the consumer. Thus, the industry still needs technologies that can seamlessly track, test, and share data about agri-food products throughout the supply chain without requiring any significant change to the existing infrastructure. There is, for example, great interest in the industry in creating an effective detection and monitoring system that can provide data about any exceptions to certain sets of target markers, such as chemical, physical, or biological indicators for organic and inorganic volatile compounds and pathogens. This data could be used in mathematical models to generate predictions about product quality and shelf life.

One example of such a system might be a label-like technology that is applied to food packaging or a container and provides tracking and sensing. The data from the label would be uploaded on the Internet without any human intervention for information sharing and analysis. For example, smart RFID tags could be integrated with a sensing element such as a chemical responsive coating, litmus paper, or conductivity electrode that would detect any changes in the food that might indicate spoilage. This information would then be read by smart RFID tag readers, allowing the company to track not only the location of the food but also its quality. Although RFID infrastructure is well-developed and has gained significant momentum over the last decade, there are currently only a few commercially available smart packaging systems that use RFID tags to track and record food quality.

Pharmaceutical and health care supply chain:Pharmaceutical and health care industries are also large potential markets for smart packaging. As reported by the 2018 Market Research Future report, the health care segment accounted for around 15 percent of the global smart packaging market in 2015 and is expected to grow at a CAGR of over 12 percent from 2016 to 2024.13

The health care and pharmaceutical segments are seen as a major growth market for smart packaging because there is such a big need to improve supply chain visibility in these industries. Smart packaging solutions (such as RFID-enabled packaging, Wi-Fi-enabled devices, and smart automatic dispensers) could help companies better detect potential theft, counterfeiting, or contamination of medications. In order to ensure that patients receive authentic, quality medications, companies must be able to trace the individual product back to the originating manufacturer and track and monitor the product as it leaves from and arrives at the various nodes throughout the supply chain. They also want to see in real time when a product is diverted, thereby having the opportunity to intercept the shipment and remediate the risk of lost revenue due to the theft, as well as the potential to use that product to create counterfeits. By providing this level of visibility and traceability, smart packaging could also help companies comply with government regulations and health care reforms.

Smart packaging can also be used to relay information to consumers to help them better understand a product and how to interact with it safely. It can help patients adhere to their prescribed medication regimen. Smart pill bottles, smart caps, smart automatic pill dispensers, and smart medication cabinets, for example, could communicate with the consumers' smartphones, tablets, or other Wi-Fi-enabled devices to remind them to take their medication. These smart packaging solutions could also supply consumers with a dosage schedule for attaining optimum results. Some examples of commercially available products include (but are not limited to) Pilleve, TAD, PillDrill, Baswen, Inpower, MedMinder, and AdhereTech.

Smart packaging applications are not limited to the food and pharmaceutical industries. Other industries, such as personal care, automotive, and logistics, may also beinterested in adopting smart packaging in order to improve product protection and real-time tracking and to prevent incidents of thefts, diversion, organized crime, and counterfeiting.

Challenges ahead

In spite of the promise of smart packaging, several challenges lie in the way of it being more broadly adopted. Here are just a few of the major ones that companies need to be aware of:

Extra cost: Smart packaging solutions are not cheap, especially compared to more traditional packaging solutions such as corrugated boxes, stretch wrap, and pallets. One reason for this extra cost is that smart packaging is not yet in the mass manufacturing stage, which would reduce its costs.

Lack of solid business case: Furthermore, because most smart packaging products are still in the early stage of development, there are no long-term proven successes. This lack of data makes it difficult to develop a solid and robust commercial business model for the product. Moreover, there is not yet any sense of the total cost of ownership for smart packaging. Nor is there any comprehensive estimate about the costs that the technology could take out of the supply chain or the value it could provide. Industry needs a comprehensive end-to-end value chain study that would include the final cost of the packaging solutions, where these solutions can be deployed, key customers most willing to adopt new packaging solutions, and where the technology has the maximum potential to provide a significant impact.

Need for new manufacturing techniques: Before smart packaging can be applied to a variety of products, manufacturers will need to develop techniques for fabricating such sensors and indicators that are compatible with current packaging standards. Printing is one manufacturing technique that has received significant attention from the research and manufacturing community. Researchers have found printing methods to be revolutionary approaches for fabricating smart packaging due to their ability to directly deposit electronics (for example sensors, batteries, RFID tags, and displays) on flexible substrates in an efficient, scalable, and cost-effective manner.14,15,16,17

Sustainability: Many of the components of smart packaging are not completely sustainable and simply do not fit into the environmentally friendly, green world that customers expect. In certain cases, some of these components (for example, batteries, sensors, displays, and circuits) are challenging to recycle. Without some degree of sustainability, the potential for smart packaging's implementation in a "sustainable world" will not be possible. It is vital to understand and measure the environmental impact of smart packaging components and their long-term viability. Solutions might include the use of electronics that could convert natural sources of energy such as solar energy to electricity, or the application of "green" flexible electronics that are mounted on biodegradable materials, such as paper.

Legislation: Smart packaging's complex composition also creates legal complexity. Because smart packaging is made up of so many different components, it is subject to more regulations and legislation than traditional packaging. Tracking and complying with these regulations will require significant time and resources from manufacturers and their customers. Moreover, as innovative solutions are developing fast and manufacturers and customers want to incorporate these new technologies into their packaging, legislation frameworks need to be flexible and easily updated to support and keep up with this highly innovative and fast-moving sector.

Privacy Issues: Security and data privacy issues are also top concerns for smart packaging systems that have real-time monitoring and tracking features. Smart packaging systems may collect sensitive nonpublic information about the customer (such as identity, behavior, location, and preferences). This information must be protected against theft. Cryptography systems and blockchain are among the leading potential solutions to resolve these issues. Cryptography will help smart packaging to store information so that it cannot be read by anyone except the intended recipient. Blockchain is a chain of digital "blocks" that contain records of transactions. Blockchain technology will make it difficult to tamper with a single record without a hacker being detected.

Next steps

Smart packaging has great potential for improving supply chain effectiveness and efficiency. There are many applications that could improve customer satisfaction; increase visibility; improve security and reliability of supply; prevent product diversion, counterfeit, and theft; and reduce product wastage. Integrating smart packaging solutions into the existing end-to-end supply chain could help companies increase sales by improving customer satisfaction and loyalty and reduce expenses by improving key processes, reducing theft, and managing waste.

However, industry must overcome some significant obstacles to the implementation of smart packaging, such as high mass-production costs, the complexity of integrating smart devices into current packaging lines, and concerns about security, data privacy, and sustainability.

In some cases, advanced manufacturing technologies, such as roll-to-roll printing, and the implementation of the Internet of Things and blockchain may hold the answer to these problems. But in order to address and resolve all of the fundamental issues related to implementing smart packaging, cross collaboration among every node in the industrial supply chain is needed. Experts in manufacturing, analytical science, predictive models, data analytics, criminology, and business are needed to define a systematic approach for the integration of smart packaging solutions into the supply chain. Furthermore, both academia and industry need to work together to understand all of the tactical and operational parts of the supply chain that will be impacted by this new technology in the long term. Organizations and research institutes (see sidebar on the Axia Institute) could strive to bridge the gap between academia and industries. In the end, companies will need an integrated systems approach that will help them understand packaging trends and adapt their packaging and supply chain to meet changing demands.

Dr. Bahar Aliakbarian is a research associate professor at the Axia Institute within the Department of Supply Chain Management and adjunct associate professor at the School of Packaging at Michigan State University.

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