Global Logistics and Supply Chain Strategies - March 2008 - (Page 46)

Procter & Gamble and Unilever have reformulated their laundry detergent to be more concentrated so that bottle sizes can be reduced by almost half. The concentrated versions will fully replace existing products by the end of this year. This change has both sustainability and business benefits. With a smaller bottle, retailers can fit more bottles on shelves, meaning fewer out-ofstocks and less employee time spent replenishing product. Retailers and manufacturers save on transportation costs because more of the smaller bottles can fit on a truck. And manufacturers, which will bear the brunt of the considerable upfront costs, will save on petroleum-based plastic packaging, the price of which has been soaring due to high oil prices. Overlooked No More Those involved in packaging say that many such opportunities exist and they welcome the spotlight that sustainability is shining on what often has been an overlooked area of the supply chain. “Since the advent of the Wal-Mart sustainability scorecard and the visibility that it has given to smart package design, we have had numerous requests from existing customers as well as opportunities to talk to new companies that we had tried to see in the past, with no luck,” says Mark Matthews, vice president of marketing for packaging at xpedx, Loveland, Ohio. Xpedx, an International Paper company, provides logistics and distribution services as well as packaging design and optimization solutions. In its packaging engagements, Matthews says, the company typically uses a formal survey process to identify opportunities in a client’s operation for more sustainable and more efficient packaging. “We look at the entire operation because it is important to make sure that anything we do in terms of package design also works in the production environment,” Matthews says. “We also look for opportunities to automate functions that might in the past have been manual.” Tom Blanck, packaging solutions manager for Adalis Corp., a global packaging and supply chain solutions company based in Vancouver, Wash., says his company also has worked with Wal-Mart suppliers to help them determine how their current package designs score and how those numbers can be improved. “Often times, we can redesign a package so that it is more envi- ronmentally sensitive and also achieve cost savings,” he says. Blanck says the perception that sustainability will increase costs is wrong. “Our view is 180 degrees from that,” he says. “We believe that companies can find sustainability improvements by simply packaging better to get more products onto a pallet and more pallets into a truck trailer or container.” With that, he says, “you decrease your shipping costs, which also decreases fuel consumption and emissions, and you get more throughput in the warehouse. Tactical, simple changes to a package can ripple through the whole system.” Blanck cites an example in which an Adalis customer—a consumer packaged goods company with offshore manufacturing—was able to decrease the size of its container from 40” x 18” x 18” to 39.5” x 18” x 16. “That small change enabled this customer to increase the number of units per ocean container by 18 percent,” he says. companies generally “grossly over-package” products in order to avoid damage, says Matthews. That problem is exacerbated when domestic companies manufacture overseas, he says. “Many times an offshore manufacturer is charged back for any damaged product received in the U.S., yet the U.S. manufacturer pays for packaging material,” he explains. “You can see the incentive—the offshore company naturally will over-package so as to avoid damage. Meanwhile, the U.S. company will experience higher unit costs because the product is over-packaged.” The extra cost is not just related to materials, but also to the additional labor required, he says. “We can help companies reduce labor costs as well as material costs.” Blanck agrees that over-packaging is a common mistake. “People tend to use too much cushioning or put more strength in a package than is necessary,” he says. “This works against efficiency because it results “We believe that companies can find sustainability improvements by simply packaging better. — Tom Blanck of Adalis Corp. More importantly, most of their product was distributed via small-parcel carrier and the original carton was subject to oversized rates. The smaller box saved them 45 percent in domestic delivery costs. “A small dimensional change can make a significant impact on logistics and freight costs,” Blanck says. “And the reality is, that is where the big dollars are.” A lot of companies focus on decreasing package material costs, he says, but they would get a much bigger impact by looking at how packaging affects the cost of freight and distribution. “In most companies we find that these costs are five to 10 times the cost of materials,” he says. “Packaging optimization is not about getting a cheaper box, it is about optimizing weights and dimensions and getting the proper packaging for maximum cube utilization and throughput.” Such opportunities abound because in cube utilization being less than it could be,” he says. Zero claims are a red flag that there is a problem with over-packaging, Blanck says. “Companies need to find the balance between the right amount of packaging and an acceptable amount of damage,” he says. “Finding that equilibrium is a big part of what Adalis’s consulting services focus on.” Of course, too much damage also is a red flag and a sign that packaging is insufficient. These situations often result when a purchasing or packaging group is told to cut expenses, says Jack Ampuja, president of Supply Chain Optimizers (SCO), Buffalo, N.Y., a supply chain and packaging consulting and solutions provider. “To meet the cost-cutting requirement, they downgrade the packaging material, but anything they save and more is lost in damages to the product during warehousing and transportation,” he says. 46 MARCH 2008

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Global Logistics and Supply Chain Strategies - March 2008 Editorial GL & SCS Exclusive FastForward Up Front The Green in Green Think Inside the Box Have a Second Look Can't Happen Here Opinion: Stay in the Black as Your Workforce Fades to Gray Opinion: Four Critical Steps to Managing Change in the Supply Chain Industry Voices

Global Logistics and Supply Chain Strategies - March 2008

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