A Scientific Approach to Packaging Optimization

Transcription

1 1 Packaging Optimization 406 A Scientific Approach to Packaging Optimization Jack Ampuja Supply Chain Optimizers

2 Corrugate Background 2 Corrugate is infinitely recyclable Cellulose fibers shorten during recycling process making paper softer and less strong Good for facial tissue not good for packaging N. American standard is 35% recycled content Provides best combo of performance and cost China uses 100% recycled content Lack virgin softwood pulp Use double, triple wall boxes to increase strength

3 Why Packaging is an Issue 3 Most organizations do not view packaging as part of the supply chain Cost reduction & sustainability impact is grossly underestimated because impact of on logistics is not understood Many departments are involved in decisions Marketing, Purchasing, Logistics, Manufacturing, QC, Engineering.. all focus on different goals All supply chain members share results good or bad

4 Packaging Approaches 4 Typical Use box already in-house Rely on marketing Use internal engineering Rely on contract manufacturer Use customer specification Rely on packaging supplier Avoid complexity: limit # of boxes Scientific Use packaging software Rely on packaging science Understand freight analytics Use advanced mathematics Employ lots of boxes

5 Optimization Opportunities Abound 5 Traditional manufactured product Multiple units of the same product in a box Imported product especially from Asia Little application of packaging science Pick-pack operations in e-commerce Many ship 1 million+ combinations of weight & cube each year

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8 Pallet Differences 8 Original Count: 50 cases Overhang: 1.3 Stacking strength 1.1 pallets high Truck loading 100/floor spot with machine loading..110 with hand stacking Optimized 60 cases.7 & pallets high 120/floor spot with machine loading

9 Optimization Results 9 16% reduction in freight & warehouse cost Better stacking strength: less damage Less overhang on pallet No hand stacking needed on full truck loads Can be positioned as a customer benefit as their logistics costs will decline too Major green improvement

10 R G Barry 10 $125 M footwear supplier with no profit In danger of missing loan repayment Sourcing from Mexico & China Used packaging optimization to increase ocean container payload Reduced costs $2.8 M Gained business increase of $10 M from Walmart and $5 M from Target

11 Process 11 Very modest adjustments to shipping cases Eliminated excess void Moved away from shallow boxes Balanced complexity versus efficiency Reconfigured retail packs Changed pallets to column stacking Suggested standard pack revisions Increased Walmart box from 12 to 18 pairs per master box

12 OPERATIONAL RESULTS Item Cost/Benefit - Reduced corrugate spend 15% (COGS savings) $ 200, Reduced inbound freight spend 20% (600 fewer containers /COGS savings) -Reduced warehouse storage requirements 25% (storage & handling / SG&A savings) -Reduced miscellaneous expenses (damage, pallets, shrink, labels, etc.) $ 1,580,000 $ 1,000,000 $ 100,000 + SCO fees ($ ) + Miscellaneous Internal project costs (temp labor, travel & IT) ($ 50,000 ) Total Savings $ 2,800,000 The knowledge transfer of is difficult to quantify...

13 11% Gain in Payload Present Future Cartons/load 1009 Cartons/load

14 Marketed Solution to Key Customers 14 Presented to Wal-Mart 15% reduction in corrugate 20% reduction in freight 25% reduction in distribution cost Recaptured national distribution $10 million Presented to Target 15% reduction in corrugate Awarded men s volume $5 million 20% reduction in freight 25% reduction in distribution cost

15 Key Learning Points Executive sponsor is critical to accelerating success. 15 Recognize organization s true core competencies. Overcome We can do this internally skeptics. Strong & flexible supply chain partnerships facilitate savings. Speed to Value is an attitude! Data integrity is critical (quality of the item master file). Post-implementation support is a must..issues never end

16 Impact of 16 ecommerce Thousands of new shippers No science applied to packaging Many daily shipments of one box per destination Lots of residential deliveries Has changed cost profile of couriers which traditionally managed by weight Typical ecommerce shipper achieves 60% cube utilization This means they ship 40% filler & air Many boxes are much worse

17 Consideration 17 Typical box supplier or packaging engineer cannot resolve package vs freight cost issues Try to protect one item [lamp shade] in box or many units of same product [light bulbs] Can be accomplished with software They do not understand freight details or costs Commercial packaging software cannot do pickpack operations because of many different items shipping together

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24 Major Hi-tech Company shipping 24 hot air 3 cables weighing 1 lb shipped via UPS Ground Dim weight: 15 lbs (16 x 14 x 11 ) Product: 54 cu in Package: 2,464 cu in Cube utilized: 3%

25 Major Retailer poor packaging 4 chair mats shipped via FedEx Ground Each package dimensions are: 50 x14 x14 = 9,800 cu. in Actual Wt. = 17 lbs. each Billed Wt. = 60 lbs. each All four chair mats could have been shipped in one box of 50 x14 x14 Actual Wt. = 68 lbs. for all four chair mats billed for 240 lbs Cube utilization: 25% 25

26 National Ecommerce Retailer 26 Specialty retailer: 145 stores + on-line sales Increased boxes from 16 to 22 only 9 are original sizes.13 new boxes Full Year Impact: Reduction in carton material 22.4% Reduction in filler 60.3% Reduction in packing labor 12.5% Reduction in freight $ 19.8% Total cost reduction 23.2%

27 Dim Weight Impacting LTL 27 Brad Jacobs CEO of XPO: We don t want inefficient freight light density product, susceptible to damage, doesn t fit pallet, tough to handle - but if you tender to XPO we will charge accordingly We will install pallet dimensioners into all cross-dock operations to verify shipment density All major LTL carriers use pallet dimensioners Cost: $65,000 paid back within 90 days

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32 Impact of Packaging & Loading 32 Product cube = 5.42 cu ft Density of lbs / cu ft freight class: 55 Pallet cube = cu ft Density of lbs / cu ft freight class: 70 Freight cost of class 70 = 30% higher than 55.inefficient pallet loading has increased freight cost 30%

33 Box Efficiency 33 Most economical box has ratio of L2 - W1 - D2 Example: 10 x 5 x 10 = 500 cu in 25 x 5 x 4 = 500 cu in Box#2 uses 20% more corrugated There are more than 10 different ways to construct a box.each impacts cost differently

34 Engineer s Dilemma 34 Easiest box to make is a square Provides good strength to contents But square box is not a good solution for logistics Logistics world = rectangular..does he optimize engineering or logistics? Reality: in a 12 count box of rectangular units there are 324 possible combinations of case pack arrangements & pallet patterns

35 Packaging Lessons 35 Transport cost must be #1 consideration Much higher than warehousing or packaging Don t leave box decision to supplier especially in Asia just lack expertise Always avoid square & cube boxes They use more material than rectangles and are not good fit for logistics Use column stacking in warehouse Provides much better strength than interlock pallet pattern

36 Packaging Lessons Cont 36 E-commerce is not really a packaging issue more freight & math problem Packaging decisions require logistics input before box is created Sustainability needs a corporate champion to gain traction Packaging optimization is all green Improves sustainability & profitability

37 Scientific Approach 37 Excellent opportunity for efficiency & green improvement Real $ & environmental benefit is in freight Typical reduction opportunity from total cost of boxes, filler, packing labor, outbound freight: - 10% for manufacturers/inbound - 15% for pick-pack companies Process is over-looked by most firms

38 Closing Thought 38 The greatest obstacle to discovery is not ignorance.it is the illusion of knowledge. - Daniel J. Boorstin: author, historian, Librarian of Congress