Dynamics of Packaging Sourcing. Maryann Jashinske Package Engineering Solutions LLC

Transcription

1 Dynamics of Packaging Sourcing Maryann Jashinske Package Engineering Solutions LLC

2 Agenda Introduction Recommended Steps in Bid Process Packaging s Role in Bid Process Preliminary Strategies Data Gathering Selecting items to bid Developing details Select vendors to quote Evaluate responses Re-evaluate strategies Negotiation and selection Award business Summary Questions

3 Recommended Steps in Bid Process 1. Conduct preliminary evaluation of purchasing strategies 2. Gather your purchasing data 3. Select items for the RFQ 4. Provide details for selected items 5. Identify vendors to quote 6. Review responses 7. Re-evaluate strategies 8. Negotiate 9. Award business

4 Intro When the purchasing department calls. Ideal situation: all specs up to date and in place all packages consolidated, right-sized, properly specified purchasing can proceed with current info Typical Situation: Specs not up to date; packages not right-sized Timing constraint Resource constraint

5 Packaging s Role Help select the best option(s) for your business Work as a team Provide input up front and during negotiations Confirm need for special requirements Understand the alternatives Optimize the packaging where possible Confirm apples to apples comparisons Evaluate the whole packaging process Outline the cost differences and trade-offs Don t forget the intangibles Stay involved

6 Step 1: Preliminary Strategies Direct vs indirect purchase Manufacturers typically lowest component cost Higher min runs Full lead time May not inventory Distributors Reduced minimum run (tie-in) Reduced lead time Manufacturer Distributor Reduced working capital may offset higher part cost May provide value add Minimum run Lead time Component Cost

7 Step 1: Preliminary Strategies Secondary operations: Inventory, Kitting, Assembly, Decorating Vertical integration; In-house Capability The longer you can delay differentiation o the more flexible your production schedule o the fewer items you need to inventory Production line down time may increase with this strategy Direct Manufacturer capabilities (value add) Third party (value add) Additional handling, freight and lead time May inventory or pack and ship to order

8 Step 1: Preliminary Strategies Domestic sourcing vs import Lead times Back-up plan if quality or shipping issue Single sourcing or not Risk vs reward

9 Step 2: Data gathering What do we buy? How many? How often? Where does it ship to? Are there any special requirements? Are there intangibles desired?

10 Intangibles Customer service Quick turn-around Technical expertise Design capability New/different technology Systems integration Develop a measuring tool for intangibles if possible

11 Step 3: Selecting items for RFQ Use 80/20 rule to select high volume items Add some low volume items for comparison Identify any special requirements Can we consolidate? Time constraint Help narrow down the list ideally no more than 20 items points you in a direction or two

12 Step 4: Gather details for bid Develop/review specifications Quality requirements vs desires Regulatory requirements Does the item currently work with your equipment? Is the item over- or under-specified? Include special requirements lead time/inventory/shipment needs Specify packing/shipping requirements Freight costs who will pay? Set material indices - Purchasing which ones? Select a date for comparison index Provide Pictures

13 General cost factors to consider Up front planning: Minimum run sizes ganging runs Ordering practices (can your company ID the opportunities?) Inventory control Inventory costs working capital Lead times Forecast changes Inbound freight costs Delivery; reliability

14 General cost factors to consider During production: Equipment Downtime Equipment changeover time Labor needed to run QC time incoming and outgoing Scrap factors Inbound packaging needs labor vs part price Contract packagers

15 General cost factors to consider After production: Shipping environment Special Handling requirements Shipping damage Returns/complaints related to packaging Leaks (clean-up cost) Customer disposal concerns

16 General cost factors Can these items be assigned a dollar value? Consider using a rating system

17 Packaging Cost Factors

18 Package Component Cost Factors - General Special colors or textures Special materials; recycled content Component weight Non-standard performance testing Tight dimensional tolerances (ID) Packaging equipment needs Exterior or interior treatment Number of shapes/sizes Custom vs stock availability of tooling Cavitation of tooling capital vs part price Equipment utilized for production of parts/capacity Decorating at manufacturer Packing requirements (tray vs box) Freight

19 Packaging Cost Factors by Type Bottles Window stripes Non-standard finish Caps Lining materials Unscrewed vs stripped threads Film/pouches Layout/scrap factor # of colors Print quality gravure vs flexo Special fitments or laminations; barrier needs

20 Packaging Cost Factors by Type Blisters/thermoforms/vacuum packs Layout scrap factor Special design requirements (perfing, sealing) Folding Carton/Corrugated Special board (ECT vs Mullen, Kemi vs mottled white, SBS vs clay) Recycled content Print quality needed, # of colors Package design -regular RSC vs diecut Special manufacturer s joint

21 Packaging Cost Factors by Type Industrial Packaging Reconditioned vs new Special fitments and gaskets Special linings Decoration Packing Freight

22 Tertiary Package Component Cost Factors Pallets Non-standard designs Material Scrap factors based on lumber sizes Reconditioned vs new Moisture content Treatment requirements Leasing options/returnables Customer requirements Stretchwrap/strapping/blocking and bracing materials/tape Yield (prestretch, gear settings) How much is needed to secure load? Regulatory requirements Customer requirements

23 Decorating Cost Factors Direct print to component at supplier in-line Inventory all items Decorate at package supplier - secondary operation double handling Decorate at third party Multiple handling and freight Lead times Decorate off-line, in-house Decorate on-line Delays differentiation, minimizes inventory Consider equipment downtime Recommend separating on bid

24 Step 5: Select vendors to quote

25 Step 5: Select vendors to quote It s not all about price objective is to get all three Right, Quick and Cheap Get technical and non-technical input Survey various departments Identify types of suppliers/mfg processes Niche vendors (fast lead times, low min runs) Additional capabilities (decorating, assembly, technical, design, innovation) Include distributors Stock items vs custom items Choose a variety of suppliers for cost comparison Include current supplier

26 Step 6: Evaluate responses Provide adequate time for responses Make apples to apples comparisons Answer questions Re-advise all vendors of new/additional info Some suppliers will quote only some items Compare high vs low volume costs Check capacity, ability to handle surges Ask for more info, if needed Evaluate alternative offerings Include intangible ratings and general cost factors

27 Step 7: Re-evaluate strategies What is best for your company, for the majority of items? What works for you? May vary by item Single sourcing vs multi-sourcing Outline the cost differences for special items; confirm need internal negotiation Alternate offerings Assign value to intangibles if possible Adjust bid if necessary Look at the Total Cost Opportunity Does it change the original strategies?

28 Step 8: Negotiate Internal and external negotiations Exclusivity/ownership of tools Rebate/prebate opportunities Long term contract Volume Credit incentives Capital Expense Inventory Return of defective or used packaging prepurchase of pallets or boxes Partnering opportunities with major suppliers Other

29 Step 9: Award Business What is the implementation cost/timing to change suppliers? Are the right resources available? Who owns the tooling? can it be moved? will it work on other equipment? Is there a capital expenditure to move? What is the impact on the current business if not awarded to current supplier? What about the other 80% of items? How do you maximize profit vs risk; cost vs value?

30 Summary Provide input up front and during negotiations Confirm need for special requirements Make apples to apples comparisons Review, revise, ask again Understand the alternatives Involve other departments for input Outline the cost differences and trade-offs for business Don t forget the intangibles Select the best option for your business

31 Questions?

32 Contact Info Packaging and Supply Chain Optimization Maryann Jashinske, CPP Consulting Engineer Cell Office