Ten years ago when packaging consultant Tom Blanck would try to talk to people about the cost-savings potential hidden in packaging, he'd receive a lukewarm reception. It was simply not seen as a high priority. But that all began to change in the past five years. As transportation and warehousing costs rose, companies realized that packaging offered a fresh opportunity to cut waste out of the system, he says.
Despite that newfound awareness, many companies are still struggling to identify where exactly they can cut costs in their packaging without creating bigger problems down the line. A good place to start, say some experts, is with small incremental changes that can add up to big results. Here are a few to consider.
1. Cut the size of your primary packaging. Sometimes, a small change to the product's primary packaging (what the consumer takes off the shelf) can result in a big reduction in overall supply chain costs.
For example, Blanck and his crew of packaging engineers at the consulting firm Chainalytics once helped a food company redesign the packaging for its frozen pizza so that the box's length and height were reduced by 1/16th of an inch and 3/8th of an inch, respectively. "It was almost imperceptible to the consumer," he remembers. But that small decrease allowed the company to use a different size case, which in turn allowed it to utilize the pallet better and fit more boxes of pizzas into a case. These changes ultimately resulted in transportation cost savings of over $500,000 per year. Yet while small changes to the primary packaging can save them big money, some consumer goods companies can be leery of making the cuts. "That's their advertisement at the store level," explains Peter Stirling, executive vice president of the consulting firm Supply Chain Optimizers.
One way to get around that concern is to reduce the depth of the box while leaving the height and width intact. This was the tactic Supply Chain Optimizers pursued with a client that made cake mixes. There was significant "head space," or air, at the top of the primary packaging, but the company didn't want to lose that advertising space. So it changed the depth of the box. "Therefore, the product comes up higher in box, but the consumer still sees the exact same image [on the box], and the advertising value of the primary packaging remains the same," says Stirling. By reducing the depth of the primary packaging, the company was able to increase the number of cake boxes it could put in a corrugated shipping box, which allowed it to fit more cases on a pallet. The warehouse and transportation savings amounted to $100,000, Stirling says.
2. Change the count. Sometimes you don't even need to change the size of the packaging; you just need to reconfigure it so you can fit more product inside. A health and beauty company that Blanck and Chainalytics once worked with saved a quarter of a million dollars by changing the package to allow products to nest inside it differently, which reduced the package profile. The new package also resulted in a smaller case, which saved materials and drove cube efficiencies. "It created a 50-percent increase in product density, so there was more on a pallet," explains Blanck.
When you increase product density like this, it can create a kind of ripple effect, according to Blanck. "It's important to understand that when you increase density and can get more on a pallet, it means that you are gaining efficiencies in warehousing and storage and in transportation, and you are also reducing handling and labor," he says.
3. Alter the size of the shipping case. Making small adjustments to the secondary packaging (the box or case in which the product is shipped) can also produce big savings. For example, by slightly altering the size of a case of product and how it was unitized on the pallet, Chet Rutledge, director of private branding packaging for Wal-Mart Stores, was able to add an extra layer of product on the pallet. That extra layer allowed Wal-Mart to get more product into each truckload shipment. As a result, the retailer was able to cut down on the number of shipments of inbound product by several hundred over the course of a year.
4. Leave a gap. And sometimes the changes to the shipping case don't even have to affect the box's overall size. Walking through the DC one day, Rutledge began to wonder whether he could use less material to create the shipping cases for Wal-Mart's private-label cereals. At the time, the company was shipping its cereal boxes in a "full-coverage" regular slotted carton created by gluing the flaps together. Could Wal-Mart get away with cutting the size of the flaps by an inch? The box would now have a gap in the middle, but it would still be able to safely transport cereal boxes.
Wal-Mart made the change, and it worked. "That [tweak] saved about 20 percent on the shipping case material required, which netted a little over a million dollars in material savings in a year, and all we had to do was adjust the glue nozzles on the case erector," says Rutledge. "We just moved them by an inch."
5. "Rightsize" your carton lineup—which may mean more, not fewer, options. Sometimes, companies try to save money by limiting the number of shipping boxes and cases they use. While that can save money on material costs, Stirling says this often turns out to be a case of "saving nickels by spending quarters."
Many times, this effort to reduce complexity means that the company is shipping products in boxes that are too large, according to Stirling. To keep the product from rattling around in the box and becoming damaged, the company often has to pay more for filler material, and the product takes up more room in the warehouse and on the truck than is strictly necessary. Stirling has been part of projects where increasing the number of boxes available from, say, nine to 12 has ended up saving the company around half a million dollars a year.
6. Buy better-quality corrugate. While using a better corrugated box for your secondary shipping packaging might raise your corrugate costs, using a sturdier box might end up saving you money overall, says Stirling. First off, a better-quality corrugated box can provide better protection to the product, which reduces damage. Second, with a stronger box, you can stack more cases on top of one another, and thus, get more cases on a pallet. This allows you to save money on storage and transportation.BUT DON'T GO TOO FAR!
As you make these tweaks to your packaging, be careful not to go too far. Keep in mind that the primary purpose of packaging is to ensure the product arrives at its destination undamaged, Stirling cautions. The quarter of an inch that you shave off here or the extra product you squeeze in there should not lead to a higher incidence of product damage.
How do you avoid making that mistake? Blanck says that any time you make changes to your packaging materials (especially if you are using a new material), you need to test it to make sure it will work in a distribution environment. He recommends testing the packaging at both the case and unitized-palletload level to see how it handles compression, shock, and vibration. Drop tests, for example, will indicate how well your packaging can prevent product damage.
Rutledge adds that it's important to think about how all of the packaging components (the box, the pouch, the case, the pallet, the shrink wrap) will work together as a total delivery system. It's not about minimizing the costs of the individual components, according to Rutledge; it's about optimizing the overall system. "That's where the real success opportunity is," he says.
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