The Role of Packaging in Supply Chain Management

Defining the role that packaging plays in your supply chain typically takes a low priority, but that is a mistake. It plays a critical role in optimizing your supply chain. Packaging is the foundation for your supply chain. 

Managing your supply chain starts with having the right packaging for your goods. Packaging plays a critical role in managing costs, reducing risks and improving customer satisfaction, yet it is often low on the list when it comes to management. Packaging can either drive the costs of shipping up or it can help to reduce the costs of shipping, it can either provide protection for your products or increase risks, yet it is not given the consideration that it should be given.  There are several ways that packaging can improve your supply chain management and help to save on costs.

The Problem with the WRONG Packaging 

There are some key problems that many business owners must deal with when their packaging is not well-thought out. A good example is using heavy weight packaging for lightweight products that are not “fragile” enough to warrant the heavier packaging or using interior packaging when exterior packaging is enough. These are two critical yet common mistakes that not only drive up costs of shipping, but they also drive an increase in waste. Of course, these are not the only two mistakes that are being made, there are a litany of mistakes.

A Case Study

Bob’s Books a small business in Arkansas USA, grew exponentially as did the costs.  While business was booming, the bottom line was not showing the type of increase that was expected. After a careful examination of costs, it was determined that the packaging was really causing some damage to the budget. Of course, this is not an unusual scenario, many businesses are throwing money away on the wrong packaging. In Bob’s Books case the following was true:

 

• Heavy weight packaging was being used driving up the costs of shipping. Every ounce counts when it comes to shipping. The books are already heavy enough, adding heavy weight packaging can add unnecessary poundage to each order. The results can be thousands if not hundreds of thousands of added shipping costs each year. 

• Bob’s Books was leaving a lot of money on the table by shipping in containers that were too large for the products. “Air” can cost you. Using packaging that is too large for your products is a quick way to give money away. Larger packaging is naturally more expensive and more importantly costs more to ship. Ikea is a good example of a company that understands this concept, they have a “no air” policy when it comes to their packaging. Ikea and other businesses have perfected their packaging policy by utilizing packaging that leaves no room for air. Not only does this approach cut down on costs but it also actually provides greater protection for the products when they are being shipped. 

 

• Bob’s Books was using both interior packaging and exterior packaging, double the packaging for items that are clearly not fragile is a waste of money, time and drives up shipping costs. It was unnecessary and is largely unnecessary for most products except the most fragile. If your exterior packaging is the right size, the right weight and designed for your product needs, there should be nothing else needed inside the exterior package.

Bob’s Books was able to make some adjustments to their packaging, cut costs on shipping and even share that cost savings with customers to realize the improvement in revenue they had hoped for. While Bob’s Books is one company that learned how important the right packaging can be the hard way, it does not mean that your business must wait to get your costs under control. 

The Waste 

The added costs of using incorrect packaging is obvious when it comes to shipping but there are even more costs to consider. The waste that unnecessary packaging creates can be tremendous and that cost is also relevant. The more waste that is generated the more cost it is to dispose of the waste down the supply chain. Unnecessary packaging is:

• Bad for the environment. There is an intangible cost that adds up and that cost can be measured in the amount of packaging that winds up in the landfill. Public perception is key to the success of any business, environmental issues are a huge factor to consumers. Waste packaging is not a good look for any business. 

• Optimizing your supply chain starts with a “less is more approach”. Less storage space taken up by packaging, less waste, less space left in your packaging all play an important role in optimization. Streamlining your operation should include having the right packaging on board. 

What Can you Do?

Wrangling in costs is a priority for any business that has a supply chain to manage, of course, the next question is “what can you do to optimize your packaging solutions?” There are a few things to consider when you are choosing the perfect packaging that will reduce risk and keep costs down:

• Consider the size and shape of your products. This is where you start, a standard carton may not be the best solution for your product size. Diameter, shape, weight and more should be considered when you are searching for the perfect packaging solution. 

• Choosing packaging that suits the mode of transportation. Whether it is by freightliner, truck or plane there is a packaging option that is going to be best suited for the mode that your supply chain depends on. It is vital that you make the right choice or you risk overpaying for shipping. 

• How fragile are your products, really? Reducing risk of breakage is important but 9 times out of 10 businesses will choose unnecessary packaging with the idea that they are protecting their goods. Less can be more. Unless you are truly transporting goods that are very fragile, you are likely wasting money. 

• Don’t be afraid of testing! Sometimes it takes a few tries to find the ideal packaging solution, don’t be afraid to NOT commit to a long term solution until you have tried a few different options. 

• Storage capabilities and capabilities along the supply chain should also be accounted for. How much space is there available to manage packaging? Keep in mind, your space does not have to be adjusted to manage packaging materials, the packaging materials should be adjusted to fit all of your supply chain needs. 

• Get creative in how you package and ship your products. If products can be shipped in different containers that make more sense for your supply chain than, that is something that you should consider. 

• Get help! One of the best ways to ensure you have the best packaging for your activity is to get someone on board that specializes in helping companies manage their packaging choices. It is an easier way to make sure that you are getting all the benefits that you can from your packaging. Consider consulting with an expert that can point out where your savings on shipping is hiding. 

You Can Be Doing Better

Whether you are hyper aware of the importance that packaging plays in your supply chain or you are simply wondering if you can do better, the right support will make a difference.  An evaluation of costs, packaging options and need will help you to cut costs, improve and optimize your supply chain. There is always room for improvement. 

 

19.12.2018

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