Global Logistics and Supply Chain Strategies - March 2008 - (Page 48)

shipping services through franchise operations nationwide. Products like highly sensitive electronics need foam stabilizers, she says, “but often less foam is better, if you use the right foam product.” In other products, air-filled plastic pillows can sometimes be used to replace foam peanuts, “which can stay in the environment for a thousand years,” she says. “These choices are product-specific. What works for one product may not work for another.” Another way to save on packaging expense is to rationalize carton inventories. This is needed at many companies, says Matthews, because a common mistake is to use too may different sized boxes. “When companies rationalize and consolidate the number of corrugated SKUs in their system, they are able to leverage their spend more efficiently,” he says. Xpedx uses a proprietary software tool, called Global PKG, to help companies with this task. “We can load all of a company’s corrugated into Global PKG and ask the software to determine the common box sizes within a 1-inch variance in each dimension,” he says. “We recently used this tool with a company that makes tools for a major retailer and we took 93 box sizes down to 30, just by using that program.” Global PKG also helps companies manage all their packaging items across their global facilities and monitors total spending on packaging, Matthews says. In addition it enables collaborative package design. “One of the key features of global PKG is that it is internet based, he says. “For companies that are manufacturing in Asia, for example, U.S. package engineers can collaborate with Asian engineers 24/7. This ensures that the package that comes into the U.S. meets all the specs and testing protocols that have been determined for domestic use and eliminates concerns about getting damaged or over-packaged products.” The flip side of having too many box sizes is having too few—a problem that Ampuja says is common in pick-and-pack operations. “In the pick-and-pack arena we see companies that have maybe 50,000 different products in a warehouse and millions of order combinations, but they typically have only five to seven different sized boxes. The result is that customers get a box the size of a breadbox with maybe one item and lots of plastic, shredding and peanuts.” Most pick-and-pack operations have cube utilization rates of under 65 percent on outgoing boxes, he says. “We just did an analysis of an e-commerce operation of a big retail company. It had less than 40 percent cube utilization on outbound boxes, so it was shipping more than 60 percent air. It’s impossible to make a value proposition out of that.” The right number of boxes is “that magic number where efficiency and complexity cross,” says Ampuja. Supply Chain Optimizers uses its own optimization application to help companies determine the right number and size of boxes to use in any operation, he says. A built-in algorithm also can tell a picker which box to pull for any order, based on the dimensions of each item. Waste Not Regardless of how many boxes are used and how much material is eliminated, at some point shipping cartons become waste. Often that point is the warehouse dock. In fulfillment operations, inbound goods typically are unpacked for individual picking. Additionally, some customers require products to be repackaged before being shipped and may have restrictions on allowing packaging material to be reused. “Some of our customers require us to package everything into a new cardboard box before shipping out,” says Mike Honious, vice president of engineering at OH Logistics, a 3PL based in Nashville, Tenn. “If something is going direct to their customer, they really want consistency of presentation.” Last year OH Logistics started a national recycling program in partnership with the Traylor Group, a recycling company, to ensure that the corrugated waste at its facilities does not end up in a landfill. “Over the last year, we implemented this program at four of our campuses and already we have recycled 830 tons of waste,” says Honious. After an analysis from the Traylor Group, OH installed machines to bale used cardboard. “Before we would have put this is a trash compactor, but now it goes to the baler,” Honious says. Traylor picks up the baled material for recycling and OH even earns a return based on its recycled volume. OH Logistics recently expanded its relationships with Traylor and announced that it would add 10 to 12 more sites to the national recycling program this year. The company said it expects to recycle between 25 and 30 tons of corrugated materials each month just in the newest Memphis location. Noting that approximately one third of all new business inquiries request information about sustainability initiatives, the company said it expects this recycling program will help it convert more prospects to customers. While everyone wants to reduce unnecessary corrugated material, cardboard is hard to beat from a sustainability standpoint. “Paper and paper board are probably the best sustainability story out there because of their high and growing recycling rates,” says Kelly. “There is a good recycling infrastructure to keep these materials out of the waste stream and turn them back into more useable paperboard products.” While it is true that corrugated comes from trees, which some would regard as environmentally unfriendly, Kelly notes that many paper manufacturers grow their own trees and manage them as a renewable resource. “The important thing is that it can be recycled, which some plastics cannot,” he says. Innovations in recycling continue to be developed. Craters & Freighters is testing equipment at its New Jersey location that perforates corrugated scrap in such a way that it can be used as inner pack material, says Gibson. One problem on the horizon may be that China has recognized the value of old corrugated cartons (OCC). “OCC shipments from North America to China have increased due to the manufacturing growth and the lack of natural resources in China,” says Smorch. For a while, China was drawing so much OCC and paying so much for it that it was economically better to sell old boxes overseas than to put them back into domestic mills, which caused the price of paperboard to shoot up,” says Kelly. This could again become an issue, he says. Turnkey Solutions Even companies that have their own inhouse packaging group sometimes outsource special projects to contract packagers. Others are looking for a full outsourcing partner. To help meet customer demand for a turnkey solution, OH Logistics recently partnered with the Alliance division of Rock-Tenn, the largest in-store display and promotional pack- 48 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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