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Packaging optimization is an area of the supply chain that has long received too little attention. But its benefits are becoming more and more known, not only to consumers fed up with extra garbage, b...

Packaging optimization is an area of the supply chain that has long received too little attention. But its benefits are becoming more and more known, not only to consumers fed up with extra garbage, but to the transportation industry too.

Jack Ampuja, president of Supply Chain Optimizers and a lecturer at Niagara University, said the process of packaging optimization actually started in Toronto back in 1985, originally focusing in on consumer product goods firms.

“Initial attempts to take out packaging costs drove freight savings of several millions of dollars a year, and that’s the connection to trucking,” said Ampuja at the recent Profitability Workshop, hosted jointly by Motortruck Fleet Executive and Dan Goodwill and Associates.

Packaging optimization has experienced a recent migration to inbound private label and retail ready packaging, he noted.

“The basic premise is that the shipping case or bag is the lowest echelon building block in the supply chain, with impacts on handling, storage, freight, and damage, all of which have financial and environmental components,” said Ampuja.

There’s long been a misdirected focus on packaging in many firms, as it’s a task usually seen as a marketing or engineering process, and therefore assigned to the marketing department by consumer goods products companies, or to the engineering department by industrial firms.

Optimization, he said, considers a more holistic supply chain, and is an opportunity that comes from understanding the total packaging, warehousing, and transportation effect on cost and sustainability.

“The major dollars are in the logistics budget. Yet the typical firm is focused on packaging without considering the total system impact,” noted Ampuja.

But optimization of packaging can impact the overall supply chain more than 10%, warehousing 20%, and freight about 60%.

“Yet most clients are focused on driving down packaging without knowing the full impact…saving nickels by spending quarters and hurting sustainability,” said Ampuja.

Density is the number one cost factor in LTL and small package transport. Essentially, it’s more costly to ship 100 lbs of feathers versus 100 lbs of steel, noted Ampuja.

So small package carriers now use dimensional weight on domestic ground shipments, and he said the US LTL industry is moving in that direction too.

“All LTL shipments to and from the US have to comply with NMFC (National Motor Freight Traffic Association) regulations which have 150 pages of packaging rules that impact freight cost,” said Ampuja.

Today, with many clients wanting to document the impact on sustainability, and having to report to shareholders and consumers, efforts towards optimizing packaging as a supply chain management tool fall in line with the goal of increasing performance while reducing costs.

“But do not invite your carriers in and pound them for 20%…you’ve got to look at other ways to optimize,” he said.

In 2006, Wal-Mart announced an initiative, under CEO and logistician Lee Scott, which aimed at increasing efficiency with an added environmental benefit.

The company’s top suppliers were asked to reduce packaging by 5%. Some 60,000 other suppliers started on the initiative in February 2007, at a projected savings in of $10 billion in 2008: $3.5 billion to Wal-Mart and $6.5 billion to suppliers, noted Ampuja, who said the “real opportunity” is closer to $20 billion.

Even something seemingly as innocuous as packaging that sits in storage can be a sustainability and cost issue.

At zero days in storage, Ampuja pointed out, in normal ambient temperature space, corrugated packaging retains its full strength. At one to four days’ storage, it’s already down to about 70% strength, and loses half its strength at 1,000 days.

“If a product sits for a year, shouldn’t it have a different box from one that sits for a week?” he said.

The impact of humidity is perhaps more obvious, but no less serious. At 45% relative humidity, a box’s strength is about 110%, and at 100% humidity it is down to 50%, Ampuja pointed out.

“The frozen potato industry beefs up its boxes to meet higher humidity and switches over throughout the year,” he said.

Building an economical and efficient box, he said, is best determined by a ratio of Length 2 -Width 1 -Depth 2.

“There are more than 10 different ways to construct a box….each impacts the cost differently,” he said.

Ampuja said that packaging optimization continues to be an excellent opportunity for supply chain efficiency and sustainability improvement.

“The real financial and environmental benefit is in freight, with a typical cost reduction opportunity of 10% for manufacturers and inbound, and 15% for pick-pack companies. Adapting to change is the biggest obstacle,” he said.

Features editor Julia Kuzeljevich has been writing about transportation issues for more than a decade. Her meticulously researched articles have garnered transportation writing and Canadian Business Press Awards.

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