The packaging sector is at a pivotal moment, confronted with mounting pressure to drive sustainability while simultaneously maintaining efficiency and profitability. As advancements in technology, particularly artificial intelligence (AI), the Internet of Things (IoT), and automation, present new ways to optimize operations, reduce waste, and develop more sustainable products, packaging businesses are faced with the challenge of adapting to these innovations. However, many companies struggle to balance the urgency of addressing immediate needs with their long-term strategic objectives, especially in a highly competitive environment defined by tight margins and shifting customer demands.

Edward Falck, brand partner specialist at IBM Consulting, discusses the challenges and opportunities businesses face today. According to Falck, despite the growing availability of smart technologies, many packaging companies remain cautious about embracing them, often viewing these innovations as too advanced or cost-prohibitive. But in a sector where margins are already stretched and sustainability demands are rising, is delaying the adoption of these technologies a missed opportunity? Or even a potential competitive disadvantage?

The need for innovation in sustainability

As sustainability becomes a decisive factor in securing contracts and retaining customer loyalty, Falck emphasizes that investing in solutions that reduce waste, enhance recyclability, and improve overall efficiency is no longer an option for the future; it’s quickly becoming essential for long-term success. “There are two main areas I want people to think about,” Falck told Packaging Innovations & Empack. “First off, there’s technology – AI, IoT, machine learning, whatever it may be. Even though there are many use cases and applications today, it’s still considered somewhat futuristic and often viewed as out of reach. Many manufacturers might think they can’t utilize these technologies at the moment. But the truth is, there are already many areas where these technologies can be applied now.”

The key to success, he suggests, is recognizing that sustainability isn’t merely about cutting costs. It’s also about embracing technology that enables businesses to become more agile, reduce waste, and optimize operations. Falck continued, “The first question businesses should ask themselves is: ‘What are the small steps we can take right now to start implementing these smart technologies—whether it’s green tech, AI, or something else—to improve our business?’ The technologies are already there, and companies in various sectors—whether in food packaging or car manufacturing—are already reaping the benefits.”

The second area of importance is ensuring that AI, a commonly used buzzword, is deployed where it adds value. While it’s tempting to adopt AI simply for the sake of being “tech-forward,” Falck stresses that it’s crucial to understand how these tools can be integrated into existing processes in a way that directly delivers measurable improvements. “The key point is being strategic with AI,” he says. “It’s not about implementing it just because it’s popular. It’s about using it where it will truly make a difference, whether that’s improving sustainability, cutting down on waste, or enhancing operational efficiency.”

Driving operational efficiency

This approach is particularly relevant for packaging companies, where margins are often slim, and even minor inefficiencies can result in significant financial losses. Optimizing the use of raw materials, minimizing production downtime, and improving defect detection can have a compound effect across large operations. By clearly defining business objectives and projecting potential outcomes, companies can make informed decisions about where to direct resources and prioritize technology investments.

The decision to implement new technologies is not just about achieving immediate financial returns; it’s also about ensuring that the company is well-positioned for the future. As sustainability continues to become a critical purchasing factor and regulatory pressures grow, demonstrating measurable improvements in areas like waste reduction and recyclability can help companies enhance their reputation, secure new business, and maintain long-term success.

“There’s always a business case for any change you make in your business – whether it’s adding a new technology or investing in sustainability. Someone is paying for it, and they want to know what they’re paying for,” Falck notes. He provided an example from his experience working with AI and visual inspection. “In manufacturing, we use cameras and AI models to detect defects or faults in the production line. When you first hear about the technology, it might seem like the cost of implementation outweighs the potential benefits. But when you dig into the numbers, you see the ROI is significant.”

For example, production lines often generate waste due to human error, machine malfunctions, or other inefficiencies. The integration of AI and machine vision can detect these issues early, reducing waste and improving efficiency. “Understanding the problem and defining the goal is crucial,” states Falck. “Once you know what you’re aiming for – whether it’s waste reduction or efficiency improvements – you can model potential outcomes and create a business case that justifies the initial cost. In many cases, the investment will pay off within six months, and the rest will be profit.”

Optimizing the supply chain and improving sustainability

The increasing emphasis on sustainability and efficiency represents a shift in how businesses view technology – not as a distant enhancement but as an immediate necessity for maintaining competitiveness. Falck observes that, moving forward, businesses will increasingly face questions about their sustainability credentials, much like companies in the tech industry are already being asked about their carbon emissions and recycling practices. “In packaging, a 1% improvement might seem small, but when you convert it into monetary terms, it has a massive impact. For businesses operating on small margins, these small improvements make a huge difference,” he explains.

One area that will likely see a significant impact from innovation is supply chain management. Packaging companies face significant challenges when it comes to stock visibility – knowing how much stock they have, where it is located, and how to efficiently transport it. Poor stock management can lead to over-ordering, under-ordering, or missed service level agreements (SLAs), resulting in costly inefficiencies.

AI can help address these challenges by providing better insights into stock levels and improving decision-making. “For example, if you have multiple warehouses, you can track stock more accurately and transfer it between locations to meet demand, avoiding unnecessary delays or shortages. We’ve worked on projects where businesses saved millions in a short period by improving their stock management,” Falck explains.

Increasing efficiencies on the production line

Similarly, the production line represents another area ripe for innovation. By incorporating visual inspection technologies, packaging businesses can identify faults early, reducing errors and waste. For many companies, the production line is their second-largest source of loss, and improving efficiency here could have a transformative effect on margins.

“The goal isn’t necessarily full automation with robots,” Falck notes. “It’s about using technology to catch errors that would otherwise go unnoticed, improving overall efficiency.”

AI and machine vision tools are already showing significant potential in enhancing quality control and reducing waste during production.

Collaboration across the supply chain

A notable shift in the packaging industry is the growing trend toward collaboration across the entire supply chain. Rather than maintaining traditional silos, stakeholders are beginning to communicate more effectively and share information. Falck cites the automotive industry as an example, where manufacturers are increasingly sharing insights into optimizing their supply chains and improving sustainability practices.

“Packaging companies and their suppliers are increasingly working hand-in-hand to streamline operations and enhance sustainability. For instance, AI-driven models can simulate and evaluate packaging designs virtually before physical prototypes are created. This enables more accurate predictions of how material changes will affect product performance and environmental impact,” Falck notes.

Such innovations can streamline the design and testing process, saving both time and money while improving sustainability.

Personalization and sustainability: A balancing act

Personalization is becoming an increasingly important factor for consumer satisfaction, and packaging is no exception. Companies must balance the growing demand for personalized offerings with operational efficiency and sustainability goals. However, as the trend towards personalization rises, so too do its implications for sustainability. Customized products often require more complex packaging solutions, which can increase material waste and impact environmental goals.

Falck acknowledged that while personalization can enhance customer relationships and enable premium pricing, it also requires smarter optimization strategies. “Personalization allows businesses to charge a premium, but as it becomes more widespread, packaging companies will need to find ways to make it both profitable and sustainable,” he says.

He also highlighted that the more customization there is, the more vital it becomes to optimize the supply chain. “Packaging companies are continually reducing the amount of material used in their products. Although there’s still much to be done, the progress made in the past few years, particularly in reducing waste, is significant. But there’s always more to be done, especially given the narrow margins in the industry,” Falck concludes.

The road ahead: Continuous improvement and agility

The journey toward continuous improvement in the packaging sector is ongoing, and businesses that invest in innovation and remain agile will be better positioned for long-term success. Technological advancements such as AI, automation, and machine learning are reshaping operations and providing opportunities to reduce waste, improve efficiency, and meet evolving customer demands. But with increasing pressure to balance short-term profitability with long-term sustainability, the key to thriving in this dynamic environment lies in embracing change, staying adaptable, and fostering strong communication across the supply chain.

As Falck concludes, “The potential for growth is immense. Companies that can identify areas for improvement – whether in stock management, production lines, or sustainability – will be well-positioned to thrive. The road to sustainability and operational excellence is an ongoing journey, and those that stay ahead of the curve will reap the rewards.”