The Bottom Line

Efficiency: One of Packaging and Transportation’s Biggest Hurdles

Posted by Jim Kurtz on Jul 10, 2019 9:00:00 AM

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In any aspect of business, achieving a sense of efficiency—balancing effort, time, and money to achieve the best outcome—is hard work. This is a particularly unique challenge for packaging and transportation. From excess headspace to improperly scheduled routes, to simply being unaware of emerging shipping and packaging solutions, it’s easy for a business to unknowingly lose thousands of dollars and valuable resource hours per year.

When rising e-commerce shipments translate to a hike in transportation costs, manufacturers are challenged more than ever to find the most efficient packaging and transportation solutions. For many companies, there are several opportunities to that are not readily apparent, but can quickly make a long-term difference.

The Domino Effect of Packaging Oversights

At a glimpse, packaging seems foolproof, but there are many factors that are often overlooked and can result in thousands of wasted dollars or more.

For example, these days with e-commerce customers shipping light but bulky boxes (such as paper towels) to their front door, many transportation companies have begun charging shippers by square footage, not weight.

With this in mind, let’s consider an inch of extra head-space in a box. If a company is shipping an item that needs padding, a box that is too big will require extra packaging materials, costing extra money. And even though an inch of extra heads-pace doesn’t seem like much,  that’s an inch for every unit being packed into a shipping vehicle - it’s be easy to see how much space is being wasted. If this space were being utilized properly, it could mean fewer shipments, less packing material, improved efficiency, and cheaper transportation costs - i.e. several opportunities for cost savings.

There's also a good chance that the grade of paper is too heavy for what is being shipped, so too much or too high a tension grade of packaging is used for the kind of handling that it will encounter in transportation.

Unfortunately, many factory floor workers who have the most visibility to these issues might neglect bringing them to management’s attention, trusting that if there was a problem, management would say something. Even when management does catch wind of these errors and oversights, some are so risk-avoidant that they will keep doing what they’re doing—because it’s what has worked for them so far. Indeed few manufacturing managers can forget that, above all else, an interruption in production is the most expensive problem of all.  We would argue that it is possible to bridge that journey, without interruptions, with the help of a qualified expert and a long-term strategy with several contractually built-in contingency plans.

Making Transportation and Packaging Changes Takes a Determined Finance Team

As professional negotiators since 1992, we've seen a broad range of cost savings opportunities in packaging and transportation, but a dynamic shift doesn't just happen overnight. It will take a skilled finance team to sift through each piece of data, each product, and each transportation method to determine the cheapest and most efficient way to get products to their destinations. Figuring out a company’s total cost of shipping versus how much they could be saving is not at all simple. Understanding unit price is easy, but it doesn’t reveal the actual cost of ownership.

Management Must Be Receptive and Open to Change

Especially during a time where finding new employees is more difficult than ever, management is typically hesitant to try out new processes. Putting things on hold just to experiment with something that might work is not a great incentive for a business-owner who just wants to keep the plates spinning.

But if management works with the right team, in our experience, a solution will be found without losing activity.

The Bottom Line: Most organizations know where their packaging and transportation inefficiencies lie, but aren’t motivated enough to do something about it.

In order for management to be open to change, they must truly understand the cost of wasted time, energy, and of course, money. We also understand though, that people are more willing to change for the better if they can get a grasp on what they are losing.

Rather than just purchasing less inventory or shipping less often, consider working with a specialist to examine all angles of potential savings.  We've found that there's a good deal of opportunity out there, it's just a matter of knowing what options to pursue, and how to start.

For more on the packaging industry, read our white paper, A New Era of Pulp & Paper Volatility: Controlling Packaging Costs or contact us today to speak with a representative to discuss potential strategies.

Topics: Manufacturing, Strategic Sourcing, Packaging, transport