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February 26, 2013

That was easy (on the planet)

Customer complaints led Staples to adopt a new lean packaging system. As a result, the retailer expects to trim its carbon footprint by 30,200 tons a year.

By Peter Bradley

In the middle of last year, office supply giant Staples quietly launched what would turn out to be a dramatic overhaul of its packaging operations. At a few select e-commerce fulfillment centers, it began installing a new packaging technology that promised to sharply reduce its use of corrugated and dunnage. In marked contrast to past practice, those DCs would no longer stock an array of standard-sized boxes. Instead, workers would create custom delivery boxes on demand, each tailored to an individual order's unique dimensions.

What led the office supply giant to make the shift was "the voice of the customer," says Don Ralph, the company's senior vice president of supply chain and logistics. With its e-commerce business exploding—Staples is now the world's second-largest Internet retailer, after Amazon—the retailer 12 years ago adopted what Ralph calls a "strong perfect order culture." Customer surveys in the years that followed showed the company had made significant strides against metrics like fill rate, missing products, and damage, he says. But there was one issue that kept bubbling to the top: packaging. "Customers frequently say, 'Why are you shipping such a big box for such a small item?"

Adds Rod Gallaway, vice president of logistics strategy, global design, and engineering: "The number one feedback item [from customers] was the number of boxes and the size of them. We set out to find a solution that would address that as well as be friendly to the earth."

The new technology adopted by Staples, which it calls "smart-size" packaging, was developed by Packsize International, a Salt Lake City-based packaging solutions company. The system uses specialized equipment that cuts and creases box materials into the exact size needed for a particular item or order. The technology replaces the use of standard-sized corrugated boxes.

Staples is currently in the process of rolling out the technology across its 35 e-commerce fulfillment centers. (These are separate from the DCs that serve the company's retail stores.) The number of machines in each DC depends on the facility's size and its packaging volume—some will have one, others as many as eight. The first installation took place in June 2012. Ralph expects the rollout will be completed across the network by the end of this year.

This might seem like a bold move for a company like Staples, which takes a hard look at capital investments before moving forward. But the decision to go with the Packsize solution was a slam-dunk, according to Ralph. That's largely because it requires no capital expenditure upfront. Instead, Packsize installs the machines at its own cost, profiting from the sale of its proprietary corrugated stock.

Gallaway, who oversees the installation of the Packsize equipment in the DCs, reports that the installation process has not disrupted existing operations, and the cutover to the technology has gone smoothly. "It really takes only a few days to learn how to operate the machine," he says. "We're seeing it take less than a month to get up to the productivity we had when we were manually making boxes. It's a very small learning curve." Once the changeover is complete, he says, productivity has actually improved over previous levels.

That productivity bump came as an unexpected benefit, according to Gallaway. "We didn't initially have productivity as a goal," he says. "But we are seeing more consistent productivity from building to building because it is the same repeatable process." Prior to the installation, about half the packages were built manually, half with carton erectors. "Now, it's all Packsize and we get consistent productivity," he says.

Producing custom-sized boxes for each order, rather than keeping an array of standard boxes in inventory, provides a number of benefits for Staples. For starters, there's been a dramatic drop in the volume of packing materials used. The retailer went into the project expecting to see a 60-percent reduction in the use of air pillows and a 20-percent reduction in the use of corrugated. Ralph reports that the actual results indicate Staples has met or exceeded those projections. The company estimates that the initiative reduces its annual carbon footprint by 30,200 tons, or what it says is the equivalent of about 120,000 trees.

It has also helped the company reduce transportation costs slightly, although Gallaway describes those savings as a secondary benefit. "We primarily wanted to reduce box sizes and dunnage. We knew the rest would follow."

The reduction in packaging waste also brings the Framingham, Mass.-based company closer to another important goal—making its operations more sustainable. "Sustainability is an important part of our DNA," says Ralph. One of the pillars of Staples' environmental sustainability strategy, adopted in 2010, calls specifically for reducing operational waste.

The packaging initiative has also met its initial imperative. The customers, whose voice drove Staples toward the change, have responded. "We piloted this for a year before we made the decision to deploy," Ralph says. "We clearly saw customer satisfaction metrics rise significantly. We have seen those rise as we continue to put the technology in place."

Ralph reports that Staples is also working with its suppliers to reduce the amount of packaging they use on inbound shipments. Staples' goal is to trim suppliers' packaging by as much as 40 percent over the next three to five years. "We are engaged in that conversation," he says. He adds that the company believes that if it made sense to reduce packaging for its delivery business, then it made sense to do the same thing across its supply chain.

"If we reduce packaging, we save money from an inbound and an outbound perspective," he says. "It is good for the company. It is good for the customer. And it is good for the planet."

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