FMCG Deposit Return Scheme Implementation

You will find this page helpful if you are looking to understand how the UK and EU Deposit Return Schemes (DRS) will impact your FMCG business and how to define and implement your DRS Operating Model.

Deposit Return Schemes (DRS) are on the way. The EU has started. The UK has started. In fact a great deal of work is already well underway.

The aim of DRS is to increase the amount of single use packaging that is recycled.  The idea is that if consumers pay a deposit for the plastic bottle of their drink, for example, they are more likely to return it for recycling – as they want their deposit back.

The impact on Producers and Retailers will be profound.  As many are discovering, there is a DRS Scheme about to arrive and the sooner they commence preparations the better.

DRS Operating Model

DRS will be developed within each market and be supported by legislation. Whilst every market will have a DRS model of its own, there will also likely be similarities between markets. So a good place to start will be to consider the various aspects of what DRS will look like – let’s call this a DRS Operating Model.

At Enchange we have developed a ‘Generic’ DRS Operating Model to help organisations prepare for DRS.

The Key Players are:

  • Producer.  The impact of DRS on Manufacturers will be profound – see below.
  • Distributor.  There will be compliance requirements that will be dependent on the nature of the Market DRS Operating Model. 
  • Retailer sells product including a mandatory deposit, and is the most likely Returns Location, involving significant operational challenges
  • Consumer is encouraged to return packaging to recover the deposit. Pricing/coinage will be key here.
  • Returns Location collects empty packaging from the consumer and issues the deposit refund.
  • Collection.  Returned empty packaging is collected by a Reverse Logistics Service.
  • Counting Centre to receive the empty packaging. 
  • Clearing.  Deposit schemes generate credits and deficits between the various players (distributors and retailers) that need a clearing process to handle the reconciliation.
  • Recyclers of the packaging.
  • DRS Cloud.  Materials movement can be tracked in a number of ways.  National ‘DRS Cloud’ solutions could play a key role.

Key issues you must address before DRS legislation

Start with:

  1. What will the DRS look like in my market?  In other words what will be my market’s DRS Operating Model?
  2. What DRS Operating Model would my organisation prefer … and not prefer?  How can I influence the Model before legislation?
  3. Who are the key DRS stakeholders in my market with the most influence to shape the outcome? What outcome will they want?  How does this impact on the likely outcome and my position?
  4. Where could my company develop competitive advantage with DRS?  Data will likely be key.

How will DRS affect you?  Impact on Producers

In short, DRS will have a profound impact and on most parts of the organisation. 

The good news is that DRS has the potential to be source of competitive advantage for those organisations that move early and grasp the opportunity.

Here is just a start of what you should be considering for DRS in your organisation:

  • Overall Strategy.  How can I shape DRS to best suit my organisation? 
    • Where is there potential for competitive advantage? 
    • What are the likely timings in your market until some form of DRS Operating Model is fixed and legislated?
  • Market DRS & Legislation. 
    • It is likely that there will be a Government Department responsible for DRS. 
    • It also likely that there will be a consultation process and possibly a Consultation Body or Steering Committee that will involve industry. 
    • Make sure that you participate and take a lead.
  • Sales Department & Route to Market. 
    • Externally:
      • What will be the impact on the role of your Distributor Partners including with regard to their capability and how can we help?  
      • What will be the role of the retailers and how we can help? 
      • What approach are Key Accounts likely to take and how will this impact on relationships? 
      • Where will the retail space for DRS come from and what impact will that have? 
      • Is there scope to ‘own’ the Point of Sale? 
    • Internally:
      • What will be the impact on Trade Marketing, Sales Representatives? 
      • How will DRS impact Revenue Management (Customer, Brand, Pack, Channel, Region, etc.)?
  • Supply Chain.  DRS will be a new Supply Chain.  It will impact Demand, Planning (Demand and Supply Planning, S&OP), Procurement, Logistics (Warehousing, Footprint, Transportation).  In summary, what will be the impact on our supply chain?  This is a simple question that will likely impact your supply chain in many ways.
  • Marketing & Portfolio. 
    • What will be the impact on my existing and future portfolio?  
    • What is the scope for portfolio innovation with DRS in mind? 
    • What SKUs are impacted? 
    • What is the impact on Branding? 
    • What is the impact on packaging design? 
    • What will be the impact on our relationship with consumers, including different consumer segments?
    • With this in mind, what will be the impact on messaging, pricing, promotion, merchandising, planogramming?
  • Manufacturing.  What will be the impacts from the refined product range in terms of packaging requirements, retooling, capacities, etc.
  • Finance.  What are the impacts on P&L, Balance Sheet, Cash, Capex, Opex, Total Cost to Serve.
  • Information Systems & Data.  
    • Here the impact will be high.  The list includes the probable need for external data exchange including possible registration with an external RDS Data Centre, bar coding or similar and internal systems (e.g. Master Data, ERP) alignment.  
    • There is also a high potential opportunity – e.g. DRS will likely require multiple data capture points including POS … and this data could be very valuable indeed.
  • Legal & Corporate Affairs. 
    • You should consider your key external stakeholders and map likely impact. 
    • There will be legal obligations, external relationships to manage, public relations management and messaging. 
  • HR & Change Management.  DRS is a big deal.  There will be communications (external and internal) to manage, there will be resource implications, likely new hires, and programmes of training and development to execute.
  • Other Producers. 
    • You should consider and map possible organisation vulnerabilities. 
    • There could be potential opportunities for collaboration with non-competing partners, for example with influencing your market’s DRS Operating Model.
  • Other Third Parties.  There will be new relationships to manage including with Reverse Logistics Service Providers, Counting / Clearing Players, Recyclers, etc

What you should do now

  • If you are looking for help with Deposit Return Scheme Operating Model or implementation, claim your Free Supply Chain Session.  During this free phone consultation one of our supply chain experts will discuss your challenges and suggest possible approaches to achieve your goals.