“The steps to extracting the value stored in your packaging supply chain are simple: design the right box, size the right box, source the right box and pack the right box.”
Supply chain efficiency and optimisation has never been so much about the packaging as it is right now. Decisions taken around transit packaging – the outer cartons around product used for shipping – have always been a bit of an after-thought in the grand scheme of the supply chain. That said many retailers did go hard at creating packaging standards a number of years ago now. Experience tells us that there is huge disparity between retailers and where they sit on the maturity curve of fully optimised transit packaging. What’s clear, is that retailers are increasingly realising the importance of packaging optimisation on reducing logistics costs and are now prioritising efficient packaging design as a means of leveraging the supply chain.
Why now and what makes these times different?
Three core factors are driving the current focus:
1. Huge growth in international retailing – brands are now truly international, often shipping from source country to any number of differing country markets. They all have their own customs regimens, labelling requirements and idiosyncrasies. This more fragmented supply chain means reduced critical mass, making increased logistics costs inevitable.
2. Rising domestic logistics costs – never has the cost of international shipping been so disproportionate to the final mile cost of logistics. Warehousing space and labour cost are at a premium and, here in the UK, we have the huge added pressure of Brexit and uncertainty over swathes of logistics operators from the EU currently engaged in the industry. Final mile costs are also rising in North America.
3. The rise of the robots – robotics is coming and it’s coming fast. In the 90s, the buzz was automation and that created a flurry of packing optimisation. Many retailers created standards that needed to be adopted on a zero-tolerance basis for the high-cost automation to function. Robotics will be different. Robotics implies that standardisation will be a requirement – but not to the extent that it is with automation – and robotics will allow for optimisation in equal measure. Put simply, automation implies ‘it must fit in this box’, whereas robotics says ‘optimise the box, and so long as its standard is known, it can be handled’.
Addressing the issue head-on
In 2017, Allport Cargo Services launched a new global packaging optimisation joint venture with industry leading US and China packaging engineers, PacD. The joint venture is solely concerned with the optimisation of transit packaging from factory to distribution or fulfilment centre, as well as ongoing compliance programmes enabled by Allport Cargo Services’ in-house technology.
On-going compliance is the ultimate enabler to releasing the benefits of packaging optimisation and it’s the key area of investment for PacD. What we see across many retail supply chains is that packaging guidelines are rarely followed without controls and unless you manage compliance proactively, suppliers will rarely ‘just do’ what they are instructed. Packaging specifications should exactly describe the right carton and how to pack it; there must be easy to follow logistical instructions on how the product fits when packed into the carton, including (for example) folding guides for garments.
There’s good reason to renew focus on this area. The direct benefits from optimising packaging – primarily cost savings of 8-12% and 10-14% reduction in pallet and rack utilisation – are worth noting. There are also many secondary benefits, including: improved performance and quality control; consistency and compliance; improved carton data to aid supply chain planning; reduction in paper and corrugate material; as well as reduced CO2 footprint of freight and corrugate and better control of packaging specification.
Our experience is that it’s more cost effective to control packaging at origin and fix the issue at source, rather than further down the supply chain. The solution we provide, in conjunction with PacD, holds the hand of the supplier throughout the manufacturing process so that the right specification of carton is ordered, with the right loading guide before product is packed and shipped. Merely recording and reporting non-conformity at destination is not enough. That’s why Allport Cargo Services finds it more effective to hold the packaging expertise in Asia.
The new joint venture has three key pillars that form the core value proposition: situation analysis, design and compliance:
Situation Analysis – firstly we undertake supply chain benefits analysis to look at the lost opportunity cost of the retailer’s current transit packaging approach. This helps us to identify opportunities for making savings in the supply chain by shipping less fresh air in transportation and optimising packaging across storage and handling media.
Design – once a study has been approved, our team of packaging engineers in Shenzhen, South China form a ‘Packaging control tower’ for the project to develop clear packaging specifications across products and categories. The team also act as a help desk for suppliers on packaging. Carton design can almost always be optimised to reduce the amount of card, without disrupting the integrity of the product and the PacD packaging engineers have huge experience of this. There are also key cost savings in the elimination or reduction of break packs; the cartons within cartons, usually seen with smaller products, which can be moved to ‘paltainers’. As best practice, we integrate packaging engineering activities at origin to optimise the order for pallet and container utilisation.
Compliance – it’s therefore important to design transit packaging that’s optimised to the supply chain and build new standards for compliance for vendors and factories. PacD manages compliance against standards with global visibility from our ‘Packaging Portal’ and with local hands-on technical support for vendors. The complexity is in the scale and scope of assortment and supply chain, so technology is critical and our bespoke ‘in-house’ Adjuno software platform ‘Packaging Portal’ helps retailers manage their compliance and ensure the correct packaging is used. We can also integrate this into the LIMA platform to form a critical control point in the physical supply chain. The compliance program is crucial. It’s all too easy to drive a large theoretical number on packaging savings. The real challenge is in getting suppliers to comply every single time.
One way of enabling this is through the mindset of: ‘It’s not about the box’. It’s common for these types of programmes to be run by packaging manufacturers themselves, which creates a conflict as they’re ultimately concerned about selling more corrugate. The priority of Allport Cargo Services has always been about efficiency of the supply chain, and so PacD act’s as an enabler by only dictating the specification of the packaging, without disrupting existing business processes and relationships. Clients can then make their own choices about packaging suppliers, which means they’re more willing to adopt these practices and the savings can be realised.