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Hanko Kiessner founded Packsize in 2002. He has worked with a leading German corrugated supplier. He started the business EMSize in Germany, where he grew up, but returned to Utah, where he attended school at the University of Utah, to develop a new business model and the Right-sized Packaging on Demand® concept.
David Maloney, Editorial Director, DC Velocity 00:01
Can the U.S. Postal Service right the ship? The booming logistics market increases the demand for warehouses and distribution centers. And supply chains seek the benefits of sustainable packaging. Pull up a chair and join us as the editors of DC Velocity discuss these stories, as well as news and supply chain trends, on this week's Logistics Matters podcast.
Hi, I'm Dave Maloney. I'm the editorial director at DC Velocity. Welcome.
Logistics Matters is sponsored by Material Handling Systems, a single-source systems integrator based in Kentucky. MHS is driven by a customer-first mentality to go above and beyond for distribution and fulfillment operations. They provide automated systems that combine robotics, sortation, software, controls, and more, with full support over the entire lifecycle. To learn more about MHS, please visit MHSglobal.com.
As usual, our DC Velocity senior editors Ben Ames and Victoria Kickham will be along to provide their insight into the top stories of this week. But to begin today: C
limate change continues to bring a greater awareness of the effects of our supply chains on the environment. One major area of waste is in packaging. Not only should we look at packaging materials that could be easily recycled, but we should also consider the ripple effects from packaging that are the wrong sizes for the products that they contain. This is where a sustainable packaging strategy comes in. So, what is sustainable packaging? To answer that question, I spoke earlier this week with Hanko Kiessner, the chief executive officer of Packsize, a company that manufactures right-size packaging systems. Here's our conversation.
David Maloney, Editorial Director, DC Velocity 01:50
Hanko, thanks for joining us today.
Hanko Kiessner, Chief Executive Officer, Packsize 01:52
Hey, David, thank you so much for having me.
David Maloney, Editorial Director, DC Velocity 01:55
Hanko, you've been a proponent of sustainable packaging over the years. Could you explain to us what sustainable packaging means to you?
Hanko Kiessner, Chief Executive Officer, Packsize 02:03
Yeah, you know what, sustainability was one of the founding principles when I came to the United States and started Packsize. I wanted to create a company that not only has a great solution for its customers, but also a sustainable one. And so, sustainable packaging, to me, means a lot of things. First of all, it starts with a sustainable material. We know that paper is sustainable, because it is reusable, it is recyclable, and it is biodegradable. There are quite a few nonsustainable packaging materials, like plastics. We all know about the plastics, oceans, kind of problem that we have. We know that plastic molecules don't degrade or are not decomposable. But then, also, the supply chain has to be sustainable. A package needs to be the right size. It needs to be shippable in the most sustainable way, to where we have the least carbon footprint as we move packages from A to B. But then it also needs to deliver a great experience, and the customer who opened the package, who then is responsible for recycling it, also needs to have a great experience with it. And if all of this can be orchestrated in a way where we can—where you can do it forever, then to me, it is sustainable. And this being able to do something forever came from a trip that—I had the privilege to travel through Alaska a few years ago, and it was the native people who actually shared with us what their interpretation of sustainability is, and they said, If you can do it forever, then it is truly sustainable, and that is that is the standard that I really liked and I want to hold ourselves to, and that I would like to see implemented in the packaging arena.
David Maloney, Editorial Director, DC Velocity 03:54
I like that example. Why is this important for supply chain professionals to get behind, and what relevance does it have to managing our supply chains?
Hanko Kiessner, Chief Executive Officer, Packsize 04:06
Yeah, I like the word "supply chain," David, because, really everything flows. All the products flow, and they flow through the entire supply chain. And what we need to be aware of is that every step of the way along the supply chain needs to be documented and verified to be sustainable. And only then you have a reliable and efficient method by which packaging arrives where it's needed, and then is used to be shipped, and then it's opened, and then it is recycled. And so, I think one has to take a supply chain perspective to really get this done in the right way.
David Maloney, Editorial Director, DC Velocity 04:46
Hanko, your company makes right-size packaging. Can you explain to someone who may not be familiar with that term what "right-size packaging" means?
Hanko Kiessner, Chief Executive Officer, Packsize 04:54
Yeah, David, I would probably start with what is not right-size packaging, and that is when you receive a package, it is too large, it had a lot of filling material in it, that is—and it cost way too much to ship, it used way too much carbon footprint to produce, to ship, and then to recycle, that is not right-size packaging. And that is the experience of what we all see every day. Too many companies are still not using rightsize packaging. So then, what is right-size packaging? You start with the products that were ordered. Then you define what the minimum and best-protecting package would be to ship these products, and then you come up with the right-size package for that specific order. It means that you have infinitely many packaging configurations that are provided at the point of the packaging station. And so right size packaging, then, ships most efficiently through the supply chain It delivers a great experience when customers open it up. When you receive right-size packaging, you notice it right away, because it is a smaller package, there is very little or no filling material in it, and then it is a very easy and very comforting recycling process, because you know that, as a customer, you did not contribute to waste. And so that is, those are those are the benefits, in my opinion.
David Maloney, Editorial Director, DC Velocity 06:20
Yeah. And your company makes machinery that actually produces a package that is the exact size needed for whatever products are being shipped, correct?
Hanko Kiessner, Chief Executive Officer, Packsize 06:29
That's That's exactly right. For every package, there should be the right packaging type, and the right packaging size. And that is what we call right-size packaging. And we deliver equipment to our customers that enables every customer to create right-size packaging by themselves, and then deliver that experience to their customers.
David Maloney, Editorial Director, DC Velocity 06:50
So, instead of having pre-prepared boxes, these boxes are made on demand to meet the product that's being shipped at that moment. So they're produced as it's ready to ship.
Hanko Kiessner, Chief Executive Officer, Packsize 07:01
Yeah, that's exactly right. It's basically a miniaturized, high-speed, fully automated packaging creation process and equipment and software that we install at our customers'. It runs fully automatically at high speeds, but it delivers the most amazing customer experience, but also the most amazing cost structure. Because you save money along the way, all the way around. You save on corrugated, you save on filling material, you save on labor, you accelerate your fulfillment process. And then you have less freight costs, less transportation costs to the customer. And now you have a great customer experience at the very end of all of this, which is just a tremendous, tremendous return to do this.
David Maloney, Editorial Director, DC Velocity 07:49
You just shared some of the benefits of right-size packaging, but in the overall idea of sustainable packaging, when people think of sustainable packaging, they think "Well, that's going to cost more for me," or "To have a sustainable program is going to create more expense for my company." Could you share a little bit about what's some of the benefits and the cost analysis of doing sustainable packaging?
Hanko Kiessner, Chief Executive Officer, Packsize 08:13
Yeah, I actually believe, David, that sustainability and savings and profitability are all connected in the long term, and if you take a holistic view, then sustainability actually reduces cost. It is usually faster. It is more reliable, in most instances, and it delivers a great customer experience. And so, the fact that we are sustainable from the material, to the volume of materials that we are using, all the way to throughout the entire supply chain, I believe that sustainability and profitability are actually connected, and that is what this right-size packaging or sustainable packaging actually delivers. It's not an either/or decision. Often there's this this mindset that, "Well, if it is sustainable, it has to be more expensive." That is not at all the case. In this case, sustainability actually means lower cost, faster processing speeds, more efficient and lower-cost processing speeds, and greater customer experience in the end.
David Maloney, Editorial Director, DC Velocity 09:21
And with freight rates rising just about everywhere because of increased demand for freight services, having the right size package really makes a difference in being able to save money on that freight, right?
Hanko Kiessner, Chief Executive Officer, Packsize 09:34
Yeah, not only do you save money on that freight, but you also take the pressure off the shipping lanes, because you can now fit roughly 66% more parcels on the same plane, on the same truck, on the same delivery van, which then releases or reduces the pressure on the shipping and carrier companies at the moment, which means that they can be more efficient and don't have to raise their prices. So you really have a macroeconomic benefit and microeconomic benefit that actually helps the economy as a whole, and everyone benefits.
David Maloney, Editorial Director, DC Velocity 10:09
Hanko, what can companies do to improve their packaging, and how do they get started with some sort of a sustainable program?
Hanko Kiessner, Chief Executive Officer, Packsize 10:16
I would say this is more about change. This is not as much about, "Can this be done, or can it not be done?" We have now proven for 19 years that it can be done, and I think this is more about the mindset of, "Do I really want to change my packaging?" And if I do, and if the answer is, "Yes, I really want to do it," then anyone can now assess by how much additional shipping volume they're actually shipping, or by by what factor their packaging doesn't fit. That might be the very first realization, but then it's very easy to to create a business case and to verify that this is a good solution for a company. We can help with that. And at that point, you can actually have the solution, even without any upfront capital deployment, even so. So, this is also not even a question, do I have to now spend a lot of money on capital equipment or automation? No, in this case, we can just provide it, make it happen for the customer without any upfront capital, and the customer starts saving and has more sustainable packaging out of the gate.
David Maloney, Editorial Director, DC Velocity 11:25
And I know with your company, that you don't have to be a large-volume shipper or a large company that makes a lot of packages, or ships a lot of packages every day. You have solutions that fit a wide range of companies with different volumes coming out of those companies, correct?
Hanko Kiessner, Chief Executive Officer, Packsize 11:41
Absolutely, David. We have customers that do 100 boxes or packages per day, and then we have companies that do a million, or even more packages a day, even within the same facility. So, the range is is incredible. Yeah, we have solution platforms for very, very small, and then to very, very large numbers of packages per day. But also, the range of packaging configurations is pretty great. We can we can package entire couch furniture or cabinetry, and then we can then we can also go to package, let's say, a toothpaste item or, like, a consumer packaged-good item, at incredible speeds in very small sizes. So it's anything in between.
David Maloney, Editorial Director, DC Velocity 12:29
And looking at the future, how will sustainable packaging help to shape the future for us?
Hanko Kiessner, Chief Executive Officer, Packsize 12:36
Yeah, I really don't think we even have a choice. I think this principle of "We can only do things that we can do forever," if we come back to that principle, we really don't have a choice but to switch to sustainable packaging materials, sustainable packaging configurations, sustainable packaging supply chains. I don't think we have a choice, we have to look at the next generation. And if you can save money doing all this along the way, I really think that companies that do not adopt a sustainable packaging methodology, and also right-size packaging on demand, these solutions will at one point no longer be acceptable. And that is a decision that I think we all have to face rather sooner than later.
David Maloney, Editorial Director, DC Velocity 13:26
I agree. We've been talking to Hanko Kiessner, the CEO of Packsize, a company that makes right-size packaging systems. Thank you, Hanko, for being with us today.
Hanko Kiessner, Chief Executive Officer, Packsize 13:36
David, thank you so much.
David Maloney, Editorial Director, DC Velocity 13:40
Now let's take a look at some of the other supply chain news from the week. Ben, you reported on the 10-year overhaul plan for the U.S. Postal Service and how that could change some of the basic ways that the nation's mail and package-delivery systems work. Can you tell us more?
Ben Ames, Senior News Editor, DC Velocity 13:56
That's right, Dave. This has been a really interesting story to follow in recent months. Postmaster General Louis DeJoy this week unveiled his plan for overhauling the U.S. Postal Service, which has been losing money every quarterly earnings report for many years. DeJoy and his predecessors have pointed out for a long time that the USPS basically has one arm tied behind its back in terms of becoming profitable, because as opposed to private parcel delivery services, like your FedEx or UPS or a lot of the smaller ones, the Postal Service has to meet standards that are set by Congress, such as delivering to every address in America; having any stamp or rate hikes approved by another council or agency; and also they have to fully fund their pension plans for workers up front instead of on a sort of pay-as-you-go basis. So, since he started in the job in June of last year, DeJoy has indicated that he wants to change certain details to make the Postal Service more competitive with FedEx and UPS, and he actually launched some of those changes last fall, such as slowing down some first-class mail delivery and boosting some charges for parcel delivery, but he then paused those changes, while the nation, of course, was dealing with the pressures of the pandemic, and sky-high e-commerce delivery volumes, and also, of course, a presidential election with mail-in voting. So, now this this week, he's restarted some of those ideas, but with a lot more detail. So, DeJoy said that he wants to focus more on parcel delivery by expanding the USPS offerings to support next-day, same-day and two- or three-day delivery, six to seven days a week. Of course, that would take advantage of a huge swell of e-commerce volumes, so that's really where the market is. And it seems he also wants to boost rates for that service. He didn't give details, but he said he does plan to submit a number of filings with what's called the Postal Regulatory Commission, coming up. And finally, he said that the service would use more trucks instead of planes for delivering items, so that would save money, but of course, it'd be slower in delivery times for mail that's not in those core overnight services.
David Maloney, Editorial Director, DC Velocity 16:09
Well, it does sound like those changes could generate more money, but what challenges does he face in applying that plan?
Ben Ames, Senior News Editor, DC Velocity 16:16
Right. As we referenced just earlier, here, it's not as easy as it sounds to change an agency like the Postal Service, and DeJoy addressed that in his plan—for example, as we said, mentioning that he has to request those rate changes, so he doesn't have the authority to do that himself. He also said that he planned to ask Congress to repeal the U.S. Postal Service's, the retiree health benefit pre-funding mandate. That's a long way of saying that they have to fully fund the benefits instead of, as most private companies do, paying it out of current worker salaries. As well, he wants to ask Congress for extra funding so the agency can buy a bigger proportion of battery-powered mail delivery trucks instead of gasoline-powered ones, and that was revealed in a contract a couple weeks ago for a new generation of mail trucks. Another point is that the plan could even face increased scrutiny from a slate of new members of the Postal Service's Board of Governors. That's a federal agency that are nominated by each president. So, the Postmaster General is actually not named or nominated by a president, or by Congress, but by that Board of Governors. So, that board currently has a Republican majority that's left over from the Trump administration, of course, but if Congress approves the current nominees, then that could change to a Democratic majority coming up. So, of course, none of that probably determines what their decisions might be, but obviously, there's politics involved and everything, so. There are a lot of changing conditions around this whole plan, and it's always hard to predict what decisions Congress will make, so, now we'll have our work cut out in continuing to follow this.
David Maloney, Editorial Director, DC Velocity 17:58
Yeah, it does seem like there are really no easy fixes for the Postal Service, and it remains to be seen if this plan will really solve the long-term problems that's inherent in their business model. Thanks, Ben.
Ben Ames, Senior News Editor, DC Velocity 18:10
Glad to do it.
David Maloney, Editorial Director, DC Velocity 18:11
And Victoria, you wrote about how the booming logistics market is driving demand for large warehouses and distribution centers. What did you find?
Victoria Kickham, Senior Editor, DC Velocity 18:20
Yeah, Dave, that's right. So, we've reported quite a bit on the growing demand, and often short supply, of warehouse space in the last several months, especially, and it looks like that situation's going to continue this year. And that's according to researchers from real estate firm CBRE. The company released its 2020 North America Industrial Big Box Review & Outlook this week—that's a long name for report—but the report examines real estate activity at warehouses and DCs of 200,000 square feet or more, so we're talking about, as you say, big facilities. The research determined that all types of occupiers, including retail, e-commerce, third-party logistics services providers, or 3PLs, increased their presence in those kinds of facilities last year. And essentially, it added up to the be the best year on record for the North American industrial and logistics real estate market, according to CBRE, and that boils down to, you know, a really great year for property owners and investors, but for tenants, it's been tough, because rents are rising in many places, and as we've reported before, space is often hard to come by, especially, you know, the specific space you want in the location that you want. CBRE followed up the report with a news briefing earlier this week, and I sat in on that. So, researchers there, you know, took some time to sort of flesh out some of these issues, and they really pointed to the robust fundamentals of the market to emphasize this high demand that we're seeing. And just to give a couple of statistics, North American transaction volume for large facilities increased from about 280 million square feet in 2019 to more than 349 million square feet last year, and direct vacancy rates fell from about five and a quarter percent in 2019 to 4.6% last year. So clearly, demand is rising.
David Maloney, Editorial Director, DC Velocity 20:12
Well, the huge acceleration in e-commerce activity is obviously one of the drivers here. Did the report uncover anything else?
Victoria Kickham, Senior Editor, DC Velocity 20:19
Well, yeah, interesting, they pointed to some of the things that are underlying the growth in e-commerce that we're seeing, and particularly, it's, you know, the changing consumer habits that we've been talking about for the last year, but a couple of things stood out. Rising demand for online grocery shopping, and also new restaurant formats that are focused on home delivery, are really having an effect on the amount and kind of space that's needed, and also home improvement investment. We all know we've been at home more and also, you know, sort of investing more in our homes and in yards and things like that, so that's really affecting, you know, home improvement retailers and furniture retailers, and those kinds of companies and the space that they need to store inventory and get it to us when we need it. So, those were two big ones, and, obviously, these are changes driven by the pandemic, but many people think that it's likely to stick around as consumers get comfortable with these new buying behaviors. Now, we'll mention just a couple of other trends that they pointed to that are driving this growth, and that's continued demand for cold storage space, and rising rent growth in that market. It's obviously a direct result of what we just talked about—e-grocery and home food delivery. Multistory development in urban markets is also something that they're still watching—you know, places like New York City, where you can't find a lot of land, but you can certainly build up vertically. And conversion of office space to industrial is also something that's happening. One of the researchers mentioned that this is gaining popularity as tenants sort of relax their geographic requirements in search of the right industrial space. I will say one last thing about 3PLs: Growing demand for 3PL services is also having an effect. 3PLs are serving a broader range of customers these days because of the need for—greater need for—e-commerce fulfillment in particular, so as they seek to do that, you know, they need to look for more space or other ways to expand to accommodate those customers. So, yeah, there's a lot of factors, and this is something we'll obviously continue to watch.
David Maloney, Editorial Director, DC Velocity 22:27
Yeah, There sure are a lot of factors, changes in supply chain, but, you know, that's what makes it fun for those of us who write about this industry, to always have something new to report on. Thanks Victoria.
Victoria Kickham, Senior Editor, DC Velocity 22:37
David Maloney, Editorial Director, DC Velocity 22:39
We encourage listeners to go to DCVelocity.com for more on these and other supply chain stories, and check out the podcast Notes section for some direct links on the topics that we discussed today. Thanks, Ben and Victoria, for sharing highlights of the news this week.
Ben Ames, Senior News Editor, DC Velocity 22:53
Good to be here, Dave.
Victoria Kickham, Senior Editor, DC Velocity 22:54
Yeah, thank you for having us.
David Maloney, Editorial Director, DC Velocity 22:56
And again, our thanks to Hanko Kiessner of Packsize for being with us. We encourage your comments on this topic and our other stories. You can email us at firstname.lastname@example.org. We also encourage you to rate this podcast if your podcast platform allows for that. We do appreciate your feedback, and it really does help people to find us.
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