A Supply Chain Perspective on Packaging

The tactical issues of packaging and transportation handling often become routine or ignored, therefore, the value of implementing packaging improvements cannot be underestimated.  Organizations may not recognize the bigger picture of how packaging improvements are leveraged for accumulative benefits throughout the supply chain.

Packaging improvement initiatives are often limited to reducing packaging materials or squeezing prices from packaging suppliers.  However, a better package can have a positive effect on incoming materials, packaging process efficiencies, freight, storage, labor and disposal costs. An increase in product density has a positive effect that goes right to the bottom line and continues to pay huge dividends.  Many stakeholders along the supply chain gain from these financial and sustainability benefits.

Identifying Packaging Improvement Opportunities

Since logistics costs are typically 5 to 10 times the cost of packaging materials, greater financial benefits can be found in understanding how packaging affects transportation, handling and warehousing costs.  A smaller package footprint means increased packaging densities, greater throughput and decreased handling and warehouse needs.  When shipping trailers or containers that are not weighed-out, there are opportunities to optimize package size, increasing cubic utilization and obtain savings.  On the other spectrum, if trailers do weigh-out, there are alternatives to reduce packaging weight and maximize unit loads to minimize handling. 

Shipping-related damage may also be a key target area for reducing costs.  Returned shipments, rework or in-field repair add up to a significant increase in dollars, in addition to the cost of potential dissatisfied customers.  In an optimum situation, zero damage may also warrant a review.  Packaging can be initially over-engineered and opportunities exist later to reduce or remove unnecessary packaging.  When optimized, there is a balance between cost of damage and cost of packaging.

Basis for Sustainability

There is a direct link between package-leveraged supply chain cost reductions and sustainability improvements.  Reducing the costs of packaging and distributing products is a common business driver, as margin preservation is the key focus for many companies.  Savings associated with reducing materials, such as corrugated, lowers the consumption of trees.  Using less packaging foam reduces petroleum usage and decreases disposal concerns and cost. Reducing numbers of trucks and containers not only lowers transportation costs, but reduces diesel consumption and fewer emissions.  These types of cost savings are clear environmental sustainability improvements.    

Although “sustainability” can be defined in a number of ways, the Wal-Mart Packaging Scorecard may be viewed as an industry benchmark tool for packaging improvement and sustainability.  Developed to help reduce packaging by 5 percent by 2013, the Packaging Scorecard features nine metrics that suppliers use to evaluate their performance against their peers.  The three most relevant metrics for driving sustainability into the packaging supply chain are:

• Product/Package: product to package weight ratio;
• Cube Utilization: cube ship unit to overall transportation unit volume; and  
• Transportation: shipping unit to overall transport unit volume.

Improving weight, cube and material reductions metrics also have cost reduction benefits to all parts of the supply chain.  Not only are these improvements measured in terms of sustainability, but they have financial motivation as well.  These practices will deliver bottom-line sustainability for your organization.

Seek Outside Expertise

Collaboration with a third-party packaging expert can be beneficial.  Supply chains are dynamic and optimization is always a moving target.  A one-time initiative or implementation of a specific process is unlikely to endure the constant changes of the supply chain environment.   Regular review and assessment of the packaging supply chain is required, and outside experts can provide the necessary skills, perspectives and support.  Few companies have packaging as a core expertise, therefore, utilizing external resources can be a great way to bolster in-house supply chain resources.

Summary

Packaging creates a ripple-effect in the supply chain.  The amount of packaging materials, cube utilization requirements, transportation method and costs, handling and warehousing are all influenced by packaging.  The benefits are numerous to all functions in the supply chain by utilizing packaging optimization.  Maintain a competitive advantage and achieve your sustainability bottom line in the marketplace by including packaging in your supply chain perspective.

About Adalis

Adalis is a global packaging and supply chain solutions company with expertise in optimizing packaging, reducing costs and helping to deliver sustainable packaging solutions.  Adalis provides unbiased packaging and supply chain expertise for packaging design and development, product distribution and logistics cost reductions.  Adalis advises clients to obtain complete system improvements that result in improvements to our client’s bottom line. For more information, please visit www.adalispackaging.com.

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