How Packaging Engineers Discover Supply Chain Cost Savings
Packaging engineers play a critical role throughout the supply chain and are instrumental in helping their organizations discover significant savings opportunities. The right packaging decision has the potential to save millions of dollars.
In one example, a new box design helped packaging manufacturer Silpack reduce air freight costs by $300,000 per one million boxes shipped. In another example, a global footwear producer was able to reduce transport spend by $1.2 million by standardizing material usage and reducing box complexity. How do packaging engineers discover savings hidden in the supply chain? In short, by taking a critical look at how product and packaging interact.
From manufacturing facilities overseas to warehouses, distribution centers and store shelves in Europe and North America, packaging undergoes a lot of stress as it moves through the supply chain. If the packaging materials aren’t properly specified, or if the design doesn’t take into consideration the actual environments through which packaging moves or the actual hazards it's exposed to, the likelihood of product damage is many times higher than it would be if the packaging were optimized for distribution.
Packaging engineers are interested in how packaging performs in the “real world,” specifically how it stands up to the hazards of distribution, including rough handling, warehouse stacking, loose-load vibrations and environmental exposure (e.g., hot or cold temperatures, high or low humidity). But not all distribution chains are the same, so packaging engineers must understand the exact route their boxes take from origin to destination and all the touchpoints in between. By looking across the entire supply chain, packaging engineers are able to identify optimizations and improvements that eliminate waste, lower costs and drive revenue.
Understanding the distribution environment and specifying packaging requirements accordingly allows engineers (in tandem with designers) to reduce damage caused by under packaging while avoiding excess material and shipping costs due to over packaging. Packaging is optimally specified and designed to withstand the actual hazards it is exposed to.
Testing and Analysis
Now that the packaging engineer understands the actual distribution environment, he or she replicates the supply chain inside a laboratory setting to identify areas of improvement in design and evaluate comparative packaging materials. Lab testing allows engineers to subject packaging to closely simulated damage-producing motions, forces and conditions of real-world environments and hazards.
Material analysis is equally important, and the findings can help packaging engineers uncover savings opportunities on par with the savings to be had by reducing product damage in transit. For example, if a packaging engineer opts for double- or single-wall corrugate over a heavier and more expensive triple-wall board corrugate, the material savings alone could be millions of dollars for global brands with large packaging operations.
Material reduction also plays a key role in container yield savings, another major opportunity uncovered by the keen packaging engineer. For example, if an existing carton with XYZ dimensions fills up 35 containers, switching to single-wall corrugate may shrink the dimensions such that only 20 containers are needed to deliver the same amount of product. Considering that a container costs around $3,500 to fill, the packaging engineer has just uncovered $50,000 in savings just in container yields.
Total Cost Optimization
One of the reasons packaging engineers are so effective at discovering savings hidden throughout the supply chain is because they consider the difference between box price and box cost. The “total cost of ownership” of packaging is more than the unit price; it’s all the direct and indirect costs resulting from the packaging itself. For example, packaging that is over specified may incur additional freight costs as a result of excess weight and dimensions. Packaging engineers consider all the ways packaging interacts with the supply chain and look for opportunities at each stage of the journey to eliminate waste, prevent damage, increase reuse and a number of other ways to save money. Some of the factors that contribute to the real box cost—and some of the factors packaging engineers consider in order to achieve total cost optimization—include:
- Excess freight
- DC inefficiencies
- Product damage/shrink
- Package reuse/recycling
- Brand damage
- Time to market
Need a Packaging Engineer to Take a Look at Your Supply Chain?
If you want to discover savings hidden in your supply chain, the packaging engineers at BillerudKorsnäs can help. When we evaluate an opportunity to work with a new company, we look at their entire supply chain to identify where improvements can be made. Our focus on designing packaging solutions and processes with the entire supply chain in mind is what sets us apart, and what has helped us drive significant operational savings for the companies we work with.