IMPLEMENTING ENTERPRISE-WIDE PACKAGING OPTIMIZATION A product’s packaging can have far-reaching effects on all aspects of the organization’s supply chain — optimizing this component is one of the smartest steps you can take. By Jack Ampuja
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ost likely, packaging is not the first place to look for operational savings. Perhaps it should be, even if packaging is not your specific responsibility. Inefficient packaging design can add needless cost to both warehousing and transportation, as well as make a company less green. Ideally, shipping carton selection should always be a supply chain responsibility because it is a multi-functional decision with conflicting goals advanced by groups with different interests. The process can generate contentious results, as seen in the following examples: Marketing managers usually prefer big, colorful cartons that convey value through their size; the bigger, the better. Manufacturing specialists want boxes with extra internal space so production line speeds benefit from loose tolerances. Most quality experts like a box that is able to withstand any condition without
damage, meaning that a metal container would be ideal. Logistics managers need cartons that minimize both warehousing and transportation expense. To the detriment of the enterprise, logisticians are rarely consulted during the box selection process, but their budgets absorb the full impact of ineffective decisions. THE COST OF CHEAP BOXES Many corporate decision-makers focus on reducing packaging expense while striving for sustainability benefit but overlook the impact on warehousing and transportation cost. As a result, they incur a higher cost for the business, not realizing that packaging is the smallest component in the supply chain, comprising less than 10% of each supply chain dollar. In contrast, warehousing consumes about 25% of the cost, while transportation accounts for as much as 60%. One truism that many executives have learned the hard way is that cutting packaging cost while ignoring warehous-
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ing and transportation is a fool’s errand. One client contacted us for help in reducing shipping case damage because many of their boxes, especially those on the bottom layer of the pallet, were creasing and crushing. When we inquired why they thought there was so much damage, the company president joked that they must be using cheap boxes. As it turned out, all of their boxes were designed for one-pallet-high stacking, while all outbound trucks left with double-high stacks. The president then recalled that he had mandated the purchasing director to reduce the packaging expense. In response, the director reduced the strength of all boxes and collected a nice bonus for his efforts. Meanwhile, damage escalated, customer complaints increased, and freight cost shot up. Our solution was to replace all of the cheap boxes with ones that could withstand two-high stacking, which served to clear up the problems while cutting total cost. As supply chain practitioners prove daily, it