There’s a way to design a carton regime that addresses both costs and volume utilization. Smart regime designers save 20% or more of their costs and impress customers with their packaging skills.
Many organizations have a set of corrugated cartons, a regime, used as shippers. These regimes range from a few sizes to many with various dimensions and grades. Just what the dimensions are greatly impacts a variety of costs—material, warehousing, and freight. Importantly, customers’ perceptions are shaped by our packaging when, for example, they open their cartons and discover 70% of the contents are air or dunnage. That risks customers switching to “greener” competitors and criticism on social media.
There’s a way to design a carton regime that addresses both costs and Volume utilization. Smart regime designers save 20% or more of their costs and impress customers with their packaging skills.
THE BIG PICTURE
Corrugated Shippers might be just one component of your packaging arsenal. We’ll focus on corrugated carton regimes, RSCs, Regular Slotted Cartons, made from corrugated fiberboard.
We’ll look at the number and the dimensions of the cartons an organization should have in its regime. We’ll quantify the problem, apply several techniques and illustrate how an organization can design its own high-quality low-cost-regime.
To start let’s frame the high-level problem. Suppose you started with a regime of 10 RSCs and wanted to specify the dimensions of each one. Well, each carton has three dimensions, Length, Height and Width. They can have many values usually confined by carton suppliers to 8th inch increments. Each dimension, varying from, say, a minimum of 5 inches up to, say, a maximum of 30 inches, could take on 200 values ( (30-5) * 8 ). Since each of the 30 dimensions can be selected independent of all the others, there are 30^200 options for the 10-carton regime. Then there’s the 11-carton regime to consider. Wow!
These are astronomically high numbers. It is not possible to evaluate every option. If it took just one-trillionth of a second to evaluate an option (Cray computer-like speed), evaluating all those options would still consume more time than has taken place since the Big Bang. So, any approach that evaluates regime options must pair these numbers down radically. Fortunately, there are ways to do just that.
THE GENERAL APPROACH
Designing a carton regime requires an evaluation procedure, a Tool, that, for a particular regime, calculates its costs. It would look like this
For a set of orders, say a year’s worth, the Tool would calculate the cost of any input “Test” regime. By varying the Test regime, we could pick the one that bore the lowest costs.
Costs driven by your carton regime generally have three components—the corrugated material, warehousing and freight. The material cost is the amount paid to the carton supplier—typically a corrugator in higher Volume situations and a distributer otherwise. Warehousing should include the cost to maintain the carton inventory and the labor to manually package the odd orders not containable by the regime. Freight might include multiple elements such as weight, number of cartons on the orders and Dimensional Weight charges.
All Carton regime design efforts follow this approach. Importantly it is possible (and desirable) to construct a Tool that varies the Test Regime by itself rather than require human intervention to construct new Test regimes each time.
DESIGN SPECIFICS
Techniques you can apply to design your regime include:
Volumetric Need
The purpose of a carton regime is to “contain” orders. Containment is best measured by Volume. It’s not the number of orders, their weight or their value, rather the resource that is consumed by containing customers’ orders is the Volume of the cartons needed to ship those orders. Understanding this Volumetric Need helps apply important physical design specifics.
Optimal Cartons
RSCs are erected from blanks. That blank has a specific area. The material cost portion of a carton, for the Kraft paper used to construct it, is proportional to this area. Moreover, cartons are made on a large expensive corrugating machines that have limited capacity. Cartons use that capacity in proportion to their area. Area drives other carton making costs too—slotting, scoring, printing, folding. So, it’s natural that RSCs costs are proportional to the area of the blacks they are made from.
You can confirm that cost is proportional to area with your own current regime. The area of the unfolded blank of an RSC is 2 * (Height + Width) * (Length + Width). Contemporary costs for simple cartons from a corrugator sold to a reasonably high-volume customer usually range between 6 and 8 cents per square foot. Check out your cost-Area pattern. It should look something like this:
“Optimal” cartons use the least amount of corrugated area per Volume. And because RSC costs are proportional to their area, optimal cartons are the lowest
cost
per Volume too.
This cost to Area proportionality means that we can derive the dimensions of optimal cartons—just maximize Volume / Area, or, equivalently, minimize the Area / Volume. Doing the math results in the discovery that optimal cartons have Length, Height, Width ratios of 2 to 2 to 1. (Clearly the old adage “deeper is cheaper” has its limits.) So, any carton with these ratios is optimal, it has the most Volume for that Area (or cost) and the lowest cost (or Area) per Volume.
As a first step your regime can be designed with optimal 2, 2, 1 cartons. While there may be reasons to deviate from these ratios, doing so will add material cost to your regime.
Volumetric Balancing
A next step in the design of a regime might be to apply the “Volumetric spectrum” test. A regime will consist of a specific number of cartons—6, 7, 8, so on. Each carton will have to be inventoried and managed as an item to be stocked, reordered, received, and put-away periodically. So, each carton will have to “bear its weight” in the regime—make its contribution. It will do so by being selected to contain a balanced portion of the Volume spectrum, the array of Volumes of all customers’ orders, our key resource. Accordingly, a given carton should not cover a very small nor a very large part of that Volume spectrum.
The following illustrates the point in an 8-carton regime:
Cartonization Specifics
In higher Volume organizations individual Items of an order are assigned to specific cartons before being released to a warehouse for fulfillment. This process typically occurs in a WMS or other order processing system. The Tool used to evaluate any carton regime will have to mimic the assignment algorithm embedded in your order processing system.
Knowing how the assignment process works will help design the best regime. Actually, there is a subtle feedback process between Item assignment and carton design; investigating one leads to improvements in the other.
For example, many assignment processes employ a Volume “buffer” often set to 15%. It’s applied by limiting the Volume of Items assigned to a carton be less than 85% of that carton’s actual Volume. This approach is a crude way of accounting for items not nesting perfectly in a carton. (This buffer is not applicable to one-Item orders, a situation you might check-up on in your own assignment procedure.)
If you have buffers, you could apply “Granulated Buffering”. This approach exploits the fact that more granular orders, ones with many small items, need less buffering than orders with few large items; think sand versus rocks. Here’s an illustration of the potential relationships
This approach has a double benefit. It assigns smaller buffers to “sandy” orders and it reduces the costly repacking needed at packing stations when “rocky” orders won’t fit their assigned too-smaller cartons.
In the other direction, knowing the assignment algorithm leads to better regimes. For example, a common approach assigns items to a carton if they are Volumetrically compatible and have their longest dimension less than the length of the carton. In this case your carton design options can concentrate on just Volume and Length, two elements rather than three.
MOUNTAIN CLIMBING IN THE DARK
Designing a carton regime is like climbing a mountain range blindfolded. We test a regime by evaluating it with the Tool—taking a step in the mountain range. We will have saved more if costs decrease—if we have climbed higher up the hill we’re on in the mountain range. Because we cannot tell which step to take until after we take it, we are blindfolded. Our step, our Test regime, is a “stab in the dark.”
This makes the design process challenging and interesting. To climb the mountain, we must make good steps—construct cost reducing Test regimes. Effective approaches make smart steps in the mountain range. They automate the Test regime construction process for speed, they gauge the “lay of the land” to tell which way is up. They avoid going down valleys and strive to go up steep slopes. They recognize if you are on a global peak or if there’s higher ground somewhere else in the range. And they do all this quickly with available computer resources.
Having a smart automated process will design cost-effective regimes quickly, save costs and help retain customers.
It’s almost Halloween, and if your town is anything like mine, your neighbors’ yards are already littered with ghosts, witches and tombstones.
Clearly some of us enjoy giving other people a scare. Just as clearly, some of us enjoy getting a scare.
I’m not one of them. I hate haunted houses. I avoid scary movies like the plague. And I once jumped on top of several eight-year-old members of the Girl Scout troop that I was leading in order to escape a haunted hayride’s zombie.
However, that doesn’t mean I’m not capable of (wo)manning up and facing my fears, especially it’s for a good cause, which is why ALAN’s executive director, Kathy Fulton and I recently put our heads together to create this short list of some of the scariest perceptions that people have about disasters and disaster relief.
Scary Perception Number One: “A Disaster Will Never Happen To Me.”
When people live in certain areas (i.e. far away from a hurricane-prone coast or earthquake fault lines) it’s easy for them to assume that they’re protected from many types of catastrophes – and to become dangerously casual about making disaster preparations or heeding safety warnings.
Frankly, this attitude scares the heck out of us, because if the last few years have taught us anything, it’s that disasters can take a wide variety of forms and strike at almost any time. And the people who fail to plan – or to take shelter/evacuate as requested – are much more likely to find themselves in harm’s way.
Scary Perception Number Two: “It’s Okay. The Government’s Got It Covered.”
There are so many things wrong with this second perception that it’s not even funny. For one thing, not every disaster survivor qualifies for FEMA government assistance. For another, some survivors aren’t eligible for as much government assistance as others. Plus it can take some time for FEMA to process all of the requests for assistance that it receives and to conduct all of the necessary inspections that need to be made before it can provide funds. And even then, these funds are limited.
It’s a similar story for disaster survivors who are fortunate enough to have homeowners’ or renters’ insurance.
That’s why the humanitarian response organizations that provide food, hydration, shelter and other supplies immediately after a disaster hits (and the non-profit organizations that help survivors fill in the short-term and long-term gaps that government assistance and insurance reimbursement don’t cover) are so essential. It’s also why the people who support them are an answer to prayer.
Scary Perception Three: “We’re Too Far Away To Be Of Help.”
One of the laments that we often hear from potential transportation, warehousing and material handling equipment donors is, “We’d have loved to help you with relief efforts for X community’s disaster. But we didn’t have any locations in the area.”
The sad thing is, we probably could have used their help – and so could many of the humanitarian organizations that we support.
When push comes to shove, these organizations can’t afford to split hairs about where their donated relief supplies come from, especially if those supplies extend or enable their relief efforts. They might even NEED those donations to come from another part of the country because many of their closer potential product donors may have already been tapped out.
In light of this, never underestimate the value of a long-distance contributed logistics offer. Relief supplies are often located much farther away from a disaster site than you might imagine. And the help that you’re offering might be just the ticket.
Scary Perception Four: “It’s Been A Few Months (Or Years). So Survivors Of That Particular Disaster Don’t Need Our Help Anymore.”
If individuals and communities recovered from disasters as quickly as their particular disasters stopped making headlines, life would be much easier for everyone. However as any disaster survivor can tell you, that’s rarely the case.
Disaster recovery is a super-long process that’s usually measured in months or years rather than days or weeks. And many of its costliest and most work-intensive stages like clean-up and rebuilding don’t start until long after the news and camera crews have left.
So don’t ever think that there’s no way you can help a community just because the disaster that affected it happened quite a while ago. Chances are, that’s when your compassion and assistance will be needed the most.
Scary Perception Five: “Helping With Disaster Relief Won’t Pay The Bills. As A Result, There’s Nothing To Be Gained From Our Business Making A Financial Or In-Kind Donation.”
While it may not initially seem like you have anything financial to gain from helping a community in need, nothing could be further from the truth, especially if that community is home to some of your employees, customers, suppliers or business operations.
The people who live in these communities can (and do) remember who showed up for them when times were tough – and so do many other members of the purchasing public. In fact, according to recent article in the MIT/Sloane Management Review, multiple studies have shown that corporate donations ultimately attract customers. And according to another recent article in the Harvard Business Review, consumers tend to favor companies that donate a larger share of their profits.
Is this why so many of our country’s most successful organizations are also some of the most philanthropic? Possibly. However, if that’s the case, it’s okay by us, because when generous businesses do what they can to help a community get back on its feet more quickly, everybody wins.
Fear Not
There’s far more I could add to this story. But time and Halloween-candy buying obligations don’t allow me to discuss them all. Besides, I want to end this story on a caring rather than a scaring note.
So I’ll leave you with this: Even though disasters seem to happen with frightening regularity, I’ve actually become a far braver person since joining the ALAN family several years ago. It’s taught me that when horrible things like hurricanes, tornadoes and pandemics happen, a lot of wonderful people show up to help – and reminded me that when things are at their most harrowing, there are always extraordinary people like you ready to come to the rescue.
Just don’t ask me to go on a spooky hayride anytime soon.
"Spot solutions are needed to help a company get through a sudden shock, but the only way to ensure agility and resilience going forward is by addressing systemic issues in a way that is intentional and focused on the long term and brings together clear priorities, well-designed repeatable processes, robust governance, and a skilled team." - Harvard Business Review
An article published by McKinsey & Co. in August observed, “over the past year, many companies have made structural changes to their supply networks by implementing dual or multiple sourcing strategies for critical materials and moving from global to regional networks.”
This structural change pivots on the difference between low cost and best cost. The shift extends through Tier 1 Suppliers through lower tiers. The intent of a low-cost supply chain strategy is to present a low price to customers. A best-cost strategy adds factors beyond cost to the equation, like risk, lead time, and responsiveness.
The McKinsey article continues, “Ninety-seven percent of respondents [to the survey] say they have applied some combination of inventory increases, dual sourcing, and regionalization to boost resilience.”
We offshored, losing sight of the associated risk, for decades. Time to learn what near-shore, re-shore, regionalization, and localization mean.
As global supply chains become increasingly complicated, there are now more digital connections and business collaborations in the global shipping industry than ever before. Holding freight data in opaque, disconnected silos and relying on outdated methods of communication is not just inefficient - it’s unsustainable.
The global supply chain is no longer a linear process. Whereas before it was simply about moving freight from point A to B, now there is now a multitude of options for transporting that freight, each with its own unique set of capabilities and constraints.
So, what do shippers really want from their logistics service providers? Two things: accurate information at their fingertips and the ability to conduct business and transact - without having to pick up a phone or wait for email replies. Digital customer-facing freight execution platforms are the answer, collecting the most relevant and up-to-date data from carriers on one side, and providing shippers with a simplified and accelerated process on the other.
Digital freight execution platforms also provide shippers with a unified view of their shipping options, giving them the data they need at a glance to make an informed decision for any particular shipment.
Plus, as we continue to navigate uncertain waters, shippers are increasingly seeking solutions to increase resilience. After all, if there’s anything the last few years have taught us, it’s to expect the unexpected. The organizations that were able to pivot fastest came out on top. The availability of accurate data and solutions to action that data are key building blocks to resiliency in the face of new and unexpected challenges. Supply chain optimization, especially today, hinges on accessible, up-to-the-minute data, shared and acted on to keep freight moving as successfully as possible.
Digital Freight Execution Puts Power in Shippers’ Hands
Increasingly, freight forwarders and logistics providers are giving their shipper customers access to online freight execution platforms for just this purpose.
Largely unheard of just a few short years ago, online freight execution tools for shippers have quickly emerged to become a must-have for established forwarders to compete with startup digital forwarders. Logistics providers can no longer afford to go without offering this critical customer tool which enables shippers to access crucial freight data online, including timely visibility of their freight on the move. Their shipper customers have come to expect it, and it’s what’s needed to compete in today’s market.
Traditional methods of communication between shippers and freight forwarders can be slow and inefficient. Email and phone tag are not conducive to fast decision-making, and sales representatives may not always have the most accurate information about fleets, equipment, and routes. Digital freight execution platforms enable shippers and carriers to communicate in real-time, facilitating fast decision-making while eliminating the potential for miscommunication.
As digital conveniences proliferate our day-to-day lives (think of ordering food online, tracking your latest purchase, viewing your favorite shows on-demand, and so much more), it only makes sense that we should expect similar experiences in our work lives. That means that the traditional way of working in the freight industry, fraught with manual processes, phone calls, and emails, simply doesn’t cut it in today’s digital-first world.
What’s more, with timely freight data, shippers are better equipped to quickly address exceptions by changing transportation plans. Supply chain disconnections are costly. Responding to exceptions is critical to a smooth-running supply chain where shipments arrive at their final destination as planned.
“An organization's ability to learn, and translate that learning into action rapidly, is the ultimate competitive advantage,” Jack Welch
One of the outstanding things about a digital freight platform is the ability to integrate various functional modules to enable shipment data to be used and shared. These may include tracking and visibility, warehouse inventory, ocean shipments, freight rates, and even finance information, enabling a shipper to pay invoices online. Customer-facing online portals are an important and effective way to facilitate a shippers’ access to key shipment information, improving visibility and productivity on all fronts.
Partnering for Sustainable Success
Partner programs are another important aspect of connected digital freight platforms. This openness to integrate with a broad range of shipping industry businesses, such as technology or service providers, offers shippers the ability to access their partners through their forwarders’ customer-facing freight execution portal. This enables the shipper to have a comprehensive and complete flow of key freight data based on their unique needs and partners.
For example, if a shipper is using a real-time transportation visibility (RTTV) system provider, they can work with their forwarder to integrate the RTTV solution with the forwarder’s digital platform. This is only possible when the forwarder has a partner program enabling integrations.
All parties involved with a shipment can boost productivity and enhance value for the customer when they’re digitally integrated with freight transaction operational areas and partner providers. Technology companies who try to wall off access to the data they manage for their customers and their functionality have it backwards: they might create an appearance of their own business interests being protected in the short term, but long term, they’re either going to hurt their customers, or, more likely, their own product development roadmap.
Recent supply chain challenges have pushed BCO shippers and their logistics partners to take a much closer look at cargo flows. Accessible, convenient, and transparent freight data is now the expectation and necessary to control costs and keep cargo in view for optimal supply chain management.
Digital freight execution is the wave of the future, and it's already making a big impact in the shipping industry. Streamlining data flows by building out connectivity helps to bring greater logistics harmony that allows shippers to optimize their overall freight ecosystem.
America’s posture in world trade, and the underlying supply chains, are more than robust. According to the U.S. Census Bureau and the U.S. Bureau of Economic Analysis, the United States balance of trade in goods and services deficit dropped to $70.6 billion in July. Exports hit the highest level in real dollars since tracking began over 70 years ago. During the recovery from Covid,, with reshoring and shifting market demands, are holding imports flat..
This success is happening despite the global disruption caused by Ukraine. Expect our labor shortages to continue. Expect wage pressure to continue. Expect inflationary pressures across the supply chain to continue.