With Packaging, It's the Thought that Counts

May 22, 2007

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Counterfeiting may be wreaking havoc across the supply chain, but manufacturers are not without recourse, nor are they standing still. The arrival of a broad range of printable-electronics technologies, advancements in smart materials and a sizable market for RFID is making smarter packaging possible.

The global smart packaging market is expected to grow to $4.8 billion in 2011 and reach $14.1 billion in 2013, according to a report last year from market research firm NanoMarkets, LC. The "Smart Packaging Markets: 2006-2013" report found not only that the arrival of a broad range of printable electronics technologies are making smarter packaging possible, but also a sizable market for radio frequency identification (RFID); new power sources enabling smart packaging; the need for smart materials; and, of course, that smart packaging "means fewer mistakes."

For one, counterfeiting has become big business, as IndustryWeek recently pointed out:

The advent of the Internet, increasing complexity of supply chains, and growing sophistication of the people behind these illegal activities are only making the problem worse. Estimates place the costs of counterfeiting and piracy at greater than $200 billion to the U.S. economy and anywhere from $500 billion to $650 billion to the world economy. Of course, given that the activities are illegal, it's hard to know precisely how large a monetary price is truly paid. The U.S. government certainly keeps busy chasing down counterfeiters. Following an extremely productive 2006, U.S. government agencies continue to seize large shipments of counterfeit goods in 2007.

Indeed, a statement from the White House last year had this to report: "In recent years, the problem of counterfeiting has grown rapidly. Counterfeiting costs America hundreds of billions of dollars a year and has harmful effects throughout the economy. Fake products can expose consumers to serious health and safety risks."

Add the loss of brand integrity for manufacturers as customers lose confidence in names they have come to know and trust — and in some cases, businesses close or cut back with worker layoffs because of lower-cost products made by counterfeiters — and manufacturers across every industry sector have clear cause for worry.

Manufacturers are not without recourse in the battle to eliminate counterfeit products from their supply chains. There is litigation, legislation, process improvements and technology solutions.

Technology In addition to governmental efforts, companies are employing technology to decrease the risk of failing to distinguish between authentic product and fakes/knockoffs.

For example, there is the role of nanotechnology in smart packaging, specifically in brand protection. "Despite its high cost and questions about its disposal, nanoscale technology is being developed that provides covert authentication and track-and-trace features for consumer packaged goods," according to consultancy Pira International at Packaging Digest, which goes on to explain that nanotechnology can:

Apply covert information onto products and packaging; Encrypt nanoscale codes for tracking and tracing; and Create nano bar codes.

Pira International continues that a combination of covert and overt works best for foiling counterfeiters. Overt features, such as holograms, can enhance a product's image, and consumers recognize them as marks of authenticity. However, because the technology is widely available, holograms are susceptible to counterfeiting.

On the other hand, under normal circumstances, counterfeiters will not even know covert features exist. If they discover the existence of covert marks, they will be deterred from attempting to copy them for the straightforward reason that invisible marks are difficult to imitate. Moreover, covert features help fight against unauthorized diversion; with information hidden on its products, a brand owner can keep track of where distributors are sending its goods.

All of this having been said, however, nanotechnology is not without its costs on the consumer side, as "each device [using nanotechnology] will cost about $1.25, which means that the technology may not yet be suitable for consumer packaged goods due to its high cost."

Nor is nanotech the only promising technology for smart packaging.

With many more businesses becoming familiar with radio frequency identification (RFID) as a way to speed components through the supply chain and onto retailers' shelves, some are relying on this technology for security as well.

Approximately 1.71 billion tags will be sold this year alone, according to IDTechEx's "RFID Forecasts, Players & Opportunities 2007-2017". The total RFID market value (including all hardware, systems, integration, etc.) across all countries will be $4.96 billion, and the market will rise to $27.88 billion in 2017."

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For example, pharmaceutical products manufacturer, developer and researcher Purdue Pharma L.P. earlier this year announced plans to integrate Gen 2 RFID products into its high-speed pharmaceutical packaging lines to improve pharmaceutical supply-chain efficiency and security. "We're working to implement innovative solutions that will enhance security in the supply chain," said Aaron Graham, vice president of corporate security and chief security officer at Purdue Pharma, in the announcement.

Sustainability While many companies use smart packaging to foil counterfeiters, others within the packaging industry and elsewhere in manufacturing consider sustainable packaging "smart" and are pushing for greater use of it. Taken together, "sustainable" and "packaging" may seem counterintuitive, inasmuch as packaging is disposed of, or in some cases, recycled.

Yet according to Packaging Digest, sustainable packaging:

Is beneficial, safe and healthy for individuals and communities throughout its life cycle; Meets market criteria for performance and cost; Is sourced, manufactured, transported and recycled using renewable energy; Maximizes the use of renewable or recycled source materials; Is manufactured using clean production technologies and best practices; Is made from materials healthy in all probable end-of-life scenarios; Is physically designed to optimize materials and energy; and Is effectively recovered and utilized in biological and/or industrial cradle-to-cradle cycles.

"Building effective, closed-loop recycling and composting systems for packaging materials will be one of the biggest challenges to the creation of a truly sustainable packaging industry, but one from which everyone stands to gain."

No industry is immune to the havoc that counterfeiting and poor packaging can have on the supply chain. The good news is that many manufacturers are not standing still; they are fighting back with smart packaging.

Resources

Smart Packaging Markets: 2006-2013 NanoMarkets, April 18, 2006

Supply Chain Management: Foiling Fakes by Jill Jusko IndustryWeek, May 1, 2007

Fact Sheet: President Bush Signs the Stop Counterfeiting in Manufactured Goods Act White House, March 16, 2006

The role of nanotechnology in brand protection by Rebecca Roberts Pira International (via Packaging Digest), January 2007

Zippo Fights Fakes from Overseas CNBC Nightly News, May 2, 2007

RFID Forecasts, Players & Opportunities 2007-2017 by Raghu Das and Peter Harrop IDTechEx, February 2007

Purdue Pharma Selects Impinj Gen 2 RFID Item-level Tagging Technology moreRFID, Feb. 13, 2007

Purdue Pharma adopts item-level tagging Packaging Digest, April 2007

Sustainable packaging: a definition by Anne Johnson Packaging Digest, November 2006

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