A Chain Reaction: Using Packaging Processes to Advance Supply Chain Performance. Tom Blanck, CSCP Chainalytics 10/22/2012

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1 A Chain Reaction: Using Packaging Processes to Advance Supply Chain Performance Tom Blanck, CSCP Chainalytics Tom Blanck, CSCP, CPP leads the Packaging Optimization Practice at Chainalytics as Principal where he manages the delivery of supply chain packaging optimization and complex package engineering gservices as well as packaging value improvement programs. Working with leading organizations, Tom has enabled packaging improvement across multiple industries, including CPG, Manufacturing, Medical, and Technology. In addition, Blanck is a certified instructor for Dale Carnegie Training. 1

2 Agenda Packaging for the Supply Chain Supply Chain Reaction Impact of Packaging Processes Case Study Examples Summary Who is Chainalytics? Years Supply Chain Design Quarters Packaging Optimization Months Weeks Planning Horizon Sales, Inventory & Operations Planning Logistics Operations Transportation Service Supply Chain When should we buy or make product to make the best use of our capacity? What is the best flowpath? How much and where should inventory be positioned in the supply chain? At what service level can we profitably satisfy demand? Should our warehousing operations be insourced or outsourced? How should we transport product through the supply chain? Can we reduce our transport and logistics costs by improving cube utilization? How well do our current operations mitigate repair and warranty costs? How can we increase visibility to stakeholders? 4 2

3 Packaging Optimization Practice Packaging Engineering Expertise Seasoned Team of Packaging Professionals (CPP, CSCP) Objective and Independent Analysis Do Not Sell Materials or Equipment Unbiased Advice and Consulting Focused on Client Business Results, Productivity, and ROI Packaging Engineering Expertise Objective & Independent Analysis Sustainability with Savings Leverage Packaging Design to Reduce Logistics Costs AND Reduce Environmental Impact Sustainability- Minded 5 Agenda Packaging for the Supply Chain Supply Chain Reaction Impact of Packaging Processes Case Study Examples Summary 3

4 Packaging Engineering and Design Traditional View Focus on Primary Package Packaging Materials Holistic View More Emphasis on Complete Package Including Secondary and Tertiary Packaging Complete Lifecycle of Materials (including Disposal) Systems Approach Supply Chain Perspective Impact on Logistics Costs 7 Packaging Engineering and Design 8 4

5 Why is this important now? Ongoing Supply Chain Challenges Materials (Petroleum Based Materials) Transportation (Diesel Fuel) AllModes of Transport (Ocean Container, Truck, Air Freight, Rail, Small Parcel) Warehousing and Storage Costs and Maintenance Increasing Labor Rates Are Undermining Supply Chain Performance Provide No Benefit to Customer or User Erode Profit Margins Detrimental to Environment Continue to Escalate and Work Against Manufacturers, Resellers 9 Increasing Delivery Costs $ Billion 1, U.S. Transportation Costs ( ) Source: CSCMP s 22 st Annual State of Logistics Report 10 5

6 Rising Diesel Fuel Costs Long Haul Dry Van Line Haul and All-In Rates Fuel Shock v Source: Chainalytics FMIC Research Rate Trough Profitability During Product Lifecycle $ Opportunity to Optimize Packaging Early Stage Peak Mature t 12 6

7 Agenda Packaging for the Supply Chain Supply Chain Reaction Impact of Packaging Processes Case Study Examples Summary The Opportunity Look for Ways to Leverage Packaging Design New Product Development Existing Products, Packaging and Systems Create Opportunities Using Tactical Changes Reduce Materials Reduce Packaging Volume Decrease Damage 14 7

8 10/22/2012 Packaging Tactics Reduce Material Examples Right-weighting Packaging Reduced Expenses Less Material in Waste Materials Stream Shared Load Packaging Fewer Disposal Challenges Strategies Minimize Internal Packaging Proper Amounts of Cushioning Reduced Weight Cube Utilization 15 Packaging Tactics Reduce Volume Examples Eliminate Headspace and Decreased Freight Costs Voids Decreased Small Parcel Minimize Case Dimensions Pallet Unit Load Optimization Primary Packaging Size Ship Costs Increased Throughput Storage, Warehouse Savings Handling, Handling Labor Savings 16 8

9 Savings AND Sustainability Most Supply Chain Improvements are Sustainably Significant Packaging Design Drives Supply Chain Cost Savings Why now? Eroding Margins, Escalating Raw Material and Transportation Costs Competitive Advantage Organizations seeking Sustainability Your customers may be asking for it! 17 Packaging s Impact on the Supply Chain Supplier Manufacturing Storage Warehouse Distribution Center Retail Store Customer Resources Forklifts Forklifts Packaging Storage Disposal Pallets Disposal Damage Transportation Wrapping Transportation Transportation Resources Conserved Resources Reduced Packaging Material Less Storage and Handling Less Fuel and Reduced Emissions Minimized Waste 18 9

10 Packaging s Impact on the Supply Chain 19 Packaging s Impact on the Supply Chain Packaging design affects each supply chain function Understand drivers for each area Include relevant stakeholders: operations, warehousing, procurement, transportation, marketing Leverage better packaging design to influence performance Business and financial gains Sustainability improvements Trigger a CHAIN REACTION throughout the supply chain Amplify benefits to your organization Amplify benefits to customers 20 10

11 Agenda Packaging for the Supply Chain Supply Chain Reaction Impact of Packaging Processes Case Study Examples Summary Multiple Packaging Processes Packaging Review Identify opportunities within your existing system Execute packaging changes during a product s lifecycle Packaging Development New product development Design optimized i situations packaging prior to a product launch 11

12 Multiple Packaging Processes Packaging Review 1. Assessment - Current State 2. Identify Opportunities 3. Develop Business Case a) Determine Estimated Financial Benefits b) Weigh against Costs and Tradeoffs 4. Communicate to Stakeholders 5. Execute Change Keys to Success Executive or Senior- Level Sponsorship Use Operations or Logistics Perspective Many Companies Start with Secondary or Tertiary Packaging Remember: There are no free moves! Multiple Packaging Processes Packaging Development 1. Integrate with Product Development a) Create Guidelines and Standards 2. Understand Customer Requirements 3. Include Packaging and Logistics Stakeholders a) Product Protection and Distribution Hazards b) Shipping and Handling Efficiencies 4. Verification a) Packaging Prototyping, Testing and Validation 5. Product Launch Keys to Success Understanding Internal and External Customer Requirements Recognizing and Addressing Potential Pitfalls DIM Penalties Unique Storage Requirements Multiple Store Formats Elevating Packaging Development Process to All Stakeholders 12

13 Elevate Packaging Development Process President Vice President VP President VP $$ Director Director Director Director Manager Product Development Sales & Marketing Manufacturing Logistics Procurement Operations Plant A Plant B WH TRANS MRO Strategic Sourcing $ $$$$$ $$ 25 Packaging Development Stakeholders Product Development Production & Delivery Customer Requirements 26 13

14 Agenda Packaging for the Supply Chain Supply Chain Reaction Impact of Packaging Processes Case Study Examples Summary Case Study: Consumer Electronics Global Consumer Electronics Manufacturer Asia Manufacturing Short Product Lifecycle Shipped via Air Freight 80 Cartons per Pallet 140 Cartons per Pallet ORIGINAL DESIGN NEW DESIGN 28 14

15 Case Study: Consumer Electronics Supplier Manufacturing Storage Warehouse Distribution Center Retail Store Customer $5,000 Materials Savings $1,100,000 Freight Savings $1,105,000 Costs Saved 142 Tons CO 2 Eliminated 29 Case Study: Refrigerated Food Product North American Refrigerated Food Producer Packaging Damage in Supply Chain Display Improvements 90 Cases per Pallet 144 Cases per Pallet ORIGINAL DESIGN NEW DESIGN 30 15

16 Case Study: Refrigerated Food Product Supplier Manufacturing Storage Warehouse Distribution Center Retail Store Customer $125,000 Materials Savings $20,000 Pallet Savings $5,000 Labor Savings $85,000 Warehouse Savings $235,000 Costs Saved 164 Tons Fiber Reduced 31 Case Study: Direct Household Delivery Health Products and Appliances Distributor Products Shipped via Small Parcel Excessive DIM Weight Rates 305 Units per Container 372 Units per Container ORIGINAL DESIGN NEW DESIGN 32 16

17 Case Study: Direct Household Delivery Supplier Manufacturing Storage Warehouse Distribution Center Retail Store Customer $X Materials Savings 18% Freight Savings 45% Parcel Savings $7,500 Costs Saved per Container 33 Case Study: Communications Product Communications Hardware Manufacturer Global Manufacturing and Distribution System Wide Packaging Optimization 34 17

18 Case Study: Communications Product Internal Packaging Development Competency Discovery & Concept Solution Implementation Analysis Development Verification & Monitoring 1 Identify Product Implement Packaging Define Uses Distribution Testing Pallet Configuration Stakeholder Needs & Distribution Environment Primary Package Package Testing Secondary Package Case Study: Communications Product Packout Process Improvement: Box Selection Fixture Place small packs into the fixture, then select the case indicated by the color coded lines which references a specific case ID. Fixture 18

19 Case Study: Communications Product Supplier Manufacturing Storage Warehouse Distribution Center Reseller Customer $820,000 Material Savings 1,859,000 ft 3 Storage Volume Reduced $1,100,000 Freight Savings $1,920,000 Costs Saved 336 Tons Material Reduced 196 Tons CO 2 Eliminated 37 Agenda Packaging for the Supply Chain Supply Chain Reaction Impact of Packaging Processes Case Study Examples Summary 19

20 Is It Right For You? Is there a business case for change? Packaging Assessment Identify Opportunities Quantify Potential Benefits Business Case Formulation Understand Savings Potential Estimate Costs and Time for Change Determine Stakeholders What is needed to accomplish these changes? Physical Resources (People) Expertise and Knowledge 39 Summary What should you look for in your system? Pallet Overhang or Underhang Headspace or Voids in Cartons, Cases, Totes Underutilized Trailers or Containers Floor Space, Racking Challenges in Warehouse Direct Ship, Small Parcel (DIM Charges or Penalties) Do you have Packaging Processes? Packaging Improvement Packaging Development 40 20

21 Summary Savings AND Sustainability Most Supply Chain Cost Improvements are Sustainability Significant Supply Chain Costs > Packaging Material Costs Leverage Package Design for Chain Reactions Packaging Process Include supply chain stakeholders The time is now! If you re not thinking about this stuff, you may be missing valuable opportunities. If you can t get to this yourself, get help! 41 Questions? Thank you! Tom Blanck, CSCP, CPP tom.blanck@chainalytics.com (612)

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