Usually, trading down to fewer shipping cases may deliver some unquantifiable reduction in complexity, while total costs increase substantially. Time and again, we hear this objective of reducing complexity but have yet to encounter a company that can assign a specific monetary benefit to it. Luckily, the client requested a detailed analysis of the total cost effect of reducing shipping cases back to 16. Here is the impact of that seemingly small change that was being advocated: Cube utilization reduced by eight percent Cubic feet of freight shipped annually increased by 240,000 Dimensional weight of freight shipped annually increased by 863,000 pounds Client’s total annual logistics cost increased by $250,000 The above results clearly serve to confirm that intuitive thinking does not suffice in packaging optimization. A
thorough scientific analysis must be performed to get the best answer. Managers who shortcut the analytical process later wonder why their costs have inexplicably increased. Others do not even realize that packaging efficiency has a direct impact on freight expense. One company we went to visit warned us that their president was going to sit in on the meeting because he did not understand how packaging can impact freight cost. Furthermore, the connection between packaging and freight cost is often not recognized at all because packaging cost and shipping cost are managed by different departments. SYNOPSIS When managers fully comprehend the opportunity that exists in packaging and approach the process scientifically, the cost reduction and performance improvement potential is immense. More than one client has concluded they must have provided us with inaccurate data
because the cost reduction in packaging optimization could not possibly be as big as what we had projected. So, what is possible? From 25 years of experience in packaging optimization, we have learned that the typical manufacturer can achieve 10% cost reduction from their total cost of packaging, warehousing, and transportation. While faced with much more complexity, pick-pack shippers have an even greater opportunity, with the average company cutting total costs by 15%.
Jack Ampuja is President, Supply Chain Optimizers, the North American leader in packaging optimization, with more than 500 completed projects. Jack is also a recognized educator, having taught MBA classes at four universities including the top-ranked online program of University of Massachusetts. Join him at 9 am on September 20 for his PARCEL Forum session dealing with this topic of packaging optimization.
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