From automotive to high-tech and the buzzing retail, CEOs are increasingly viewing supply chain as something more than the cost incurred to deliver products to customers. Data and digitization has catapulted supply chain efficiency, but there is one physical component of supply chain that CEOs and supply chain managers must pay close attention to. It is Package Optimization.
Package optimization is a process that retailers adopt to make product packaging more friendly and economical to the entire supply chain. It helps in picking the right kind, size and the quantity of packing material to give incremental cost savings throughout the supply chain. Packaging has always been one of the critical factors for brand perception and image. Apple, Starbucks, and Cadbury’s are all perceived as premium brands for the attention they give to product packaging.
In eCommerce, the primary purpose of packaging is to protect the product until it is delivered to the customer. In addition to protecting the product, good packaging also helps in creating a great first impression with the customer.
According to an infographic by The Paper Worker, “Businesses have reported a 30% increase in consumer interest when those businesses show a strong attention to packaging”.
That said, package optimization is not your everyday brown bag grocery pack. In a supply chain, it has a lasting impact that begins from the first link of the supply chain - the supplier - until the last link - the customer. It can bring several benefits to the whole supply chain process, and they include:
Package optimization can help a retailer achieve the dual benefits of cost savings and brand recognition. Good packaging is a serious brand differentiator that helps a product package stand apart from a sea of homogeneous products racked together in a shop rack.
A straight-forward benefit that package optimization can bring to your supply chain is amplified cost savings. The stress is on ‘amplified’ cost savings because even a tiny reduction in package sizes can translate into massive savings throughout the supply chain.
For instance, consider the packaging design of a pizza box. A quarter of an inch reduction in the primary packaging would translate into more boxes being bundled into a single consignment made up of several truckloads.
Being able to accommodate more boxes in secondary packaging would mean fewer trucks, less transit miles, less fuel, less packaging materials and so on. In other words, reduction by a quarter of an inch in primary package size results in amplified cost savings across the supply chain.
We hate air - IKEA India’s CEO Peter Betzel
This simple mantra helps the Swedish furniture retailer save approximately $1.36 million every year. IKEA was able to save costs of this quantum by figuring out how to rethink product designs from a delivery point of view.
The proactive thinking of product design for deliveries is also what has made the brand stand out from its competition. For instance, an IKEA Ektorp sofa can be separated into several components which reduces the packaging size by 50%. Customers can assemble the components back into shape at their living spaces, thus creating a win-win situation for both the retailer and the customer.
Even a single damaged SKU can result in extra costs being incurred for replacement, additional logistics transport, packaging and administration. Package optimization helps retailers pick the right packing material that is sturdy enough to protect the product while in transit. Proactive planning will help in selecting the right packing material that can withstand damage threats from multiple fronts including warehouse handling, storage, climatic conditions, bulk transport and so on.
Package optimization can be done at two levels to reduce damages:
The first layer of customer-facing packing. It is designed keeping in mind the user experience and ease of opening.
The protective packaging that is used while transporting the SKUs in bulk from manufacturers/supplier to retailers or stores. This form of packaging is usually sturdy enough to withstand the rough handling that occurs during forklift truck handling, fluctuating climatic conditions, conveyor belt transportation, etc.
While selecting a packaging material, it has to meet the requirements of both primary and secondary packing environments. Such a well-chosen material will help in reducing the damages that might happen anytime throughout the supply chain.
Plastic, styrofoam and cardboard boxes are proven to be harmful to the environment. In fact, the plastic used in packaging is touted to be the biggest cause of environmental degradation. Unfortunately, these materials are also the most flexible, reliable and sturdy ones that best fit the needs of primary and secondary packaging.
While their regular usage cannot be eliminated completely, it is possible to reduce their extensive usage by redesigning product packaging. As explained in the pizza box example, reducing the size of the packaging, limiting the use of harmful substances to a bare minimum and using more of eco-friendly products in packaging can help make the supply chain less harmful to the environment.
Packaging optimization decides how the packages that you dispatch to your customers are designed for delivery. It is as important as the product that your customers are buying. Studies have established that customers consider the quality of packaging to evaluate future buying decisions with a brand. If done right, package optimization can help a retailer save a large chunk of costs incurred on logistics, packing materials and other components of the supply chain. It is indeed a catalyst for supply chain performance that every retailer must seriously consider.
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