Many articles on the topic of supply chain cost reduction have been written, most of which are understandably focused on issues such as inventory levels, network design, process efficiencies and supplier management/relationships.
What do you do though, when you’ve explored and perhaps executed all the obvious options and still need to find additional savings?
There are a number of less well-explored possibilities to consider, one of which is the way in which your company packages its materials and products for transportation. Of course packaging is a necessary supply chain expense, but that doesn’t mean you can’t find cheaper options.
Better still, it’s often possible to tackle packaging strategy from a dual perspective, seeking a solution which is not only less costly, but also more aligned with sustainable practices, and therefore beneficial to your company’s corporate responsibility credentials.
Investment on Returns
Make no mistake; any initiative to save money on packaging is likely to require some investment up front. This is something which has traditionally discouraged companies from utilising returnable packaging.
After all, pallets and packages which look nice and useful can all too easily fall prey to pilferage—who wants to buy returnable materials which might never return?
The landscape is changing though.
Thanks to tracking technology, it’s much easier today to keep tabs on packaging assets as they move through a closed supply chain.
Furthermore, as the Internet of Things takes hold, reusable packaging can become a useful source of visibility as well as a lever for supply chain cost reductions. In fact the advantages can potentially include:
- Lower overall packaging expenditure (due to reuse of packaging materials and platforms)
- Potential to use onboard sensor technology to monitor product location and quality
- Support for sustainability (reduced waste generation)
- Possibilities to raise brand profile and awareness (for example, plastic pallets can be manufactured in company colours and can incorporate a brand logo)
- Support for customer interaction (think secondary packaging used for merchandising, with built in beacons to interact with consumers’ mobile apps)
General Considerations for Cost Savings on Packaging
Whether your company considers reusable, recyclable, or disposable packaging, there are a number of perspectives from which you might approach cost savings. It’s not just about the purchase price of the packaging itself. You also need to think about the indirect ways in which packaging can support supply chain cost reductions. For example, if product damages are an issue, spending a little more on protective packaging improvements might pay for itself (and then some) in reduced product write-offs.
However, any decision to change primary or secondary packaging should first be subject to intensive investigation.
You need to avoid introducing costs which might nullify the identified savings or render them negligible.
Imagine for example, that you take the decision to switch to a heavier, more protective packaging material. While this might reduce damages, the possibility of extra labour costs, processing expenses, or health and safety issues connected with the new material, should be considered and calculated.
Sometimes Less is More
Depending on your company’s industry and the types of products to be shipped, you might try to reduce supply chain costs by reducing packaging, rather than looking to reusable solutions. Sometimes it can be a matter of thinking smart about how products are packaged.
For example, you might be able to switch from filling space in cartons with loose-fill packaging materials (like polystyrene chips), to using foam spacer blocks. This could reduce the overall quantity of packing material used and may even provide better protection for the packaged products.
Some eCommerce companies have made supply chain cost reductions by shipping products in simple, envelope style packages, instead of fancy cardboard and plastic casings which look good on a retailer’s shelf, but offer few advantages when customers shop for products online.
These online retailers have decided to focus on simplicity and pragmatism, rather than aesthetic appeal. Branding is still present, but packaging costs are minimal, with the emphasis on just enough protection to get the goods to the customer’s door.
Think Inside and Outside of the Box
While it may not be the most obvious place to look for supply chain cost reductions, packaging expenses can mount up to an awful lot of working capital. With some creative thinking and perhaps some investment, your company might be able to make some packaging changes, save some money, and improve supply chain visibility and sustainability into the bargain.
Of course a lot depends on your supply chain characteristics. After a thorough investigation, you might find your packaging is already optimal. But there’s no harm in exploring the possibilities—and once you start looking, you might just see a way to reduce costs by boxing clever.
