Optimizing your packaging supply chain means balancing the cost of transportation against inventory holding costs while simultaneously ensuring 100% availability. Smaller, more frequent deliveries reduce inventory, but increase transportation costs. Maximizing shipment size drives down unit transport costs but needs a higher average level of inventory. (It may also increase the risk of stopping production due to a shortage of packaging material.)

Packaging Supply Costs - Going Below Minimum

If you graph these costs against quantities you'll get a U-shaped curve. In other words, there's a minimum achievable total cost of packaging supplies per unit of sale. The only way to go lower than that minimum is by taking a step back and looking at what you're really trying to achieve. Here are five things to examine:

1. What does the product really need?

Consider the product's fragility and vulnerability to environmental factors. Markets like automotive focus primarily on these transportation aspects while retail packaging puts more emphasis on presentation and communication.

2. Is there potential to increase shipping density?

For many products, the quantity transported per shipment is dictated by volume rather than weight so look at the density of each product unit. Automotive castings shipped in CORRcrate packaging might be too heavy to utilize the whole volume of a trailer while kids toys, packaged with display in mind, will quickly occupy all the available space.

3. Review packaging design

Many packaging designs, especially in the consumer realm, incorporate a lot of air either in or between the individual units. Switching from cylindrical shapes to cubes is a simple example of how it may be possible to get more units on a pallet. For another example, consider how stronger packaging material could open up new design options.

4. Explore alternative materials

Sometimes the search for cheaper material results in more being needed, and possibly also increased shipment losses. The cost of a higher quality, more technically advanced material could easily be offset by lower consumption and better protection.

5. Reevaluate inventory and distribution options

Increasing the distance between packaging material inventory and point of use raises transport costs, encouraging larger shipments and more inventory. Conversely, becoming too local might also increase the total level of inventory. Review all options to find the optimal approach.

Tackling any one of these points will likely reveal new cost saving opportunities, especially if done with a partner who understands the role of packaging in supply chain management. A better approach though, especially for anyone serious about achieving true optimization, is to tackle all five.

As the scope of your review grows, so too does the need for a team approach. Generating ideas and options for optimizing your entire packaging supply chain needs people from backgrounds and disciplines different from your own. You need people who are willing to challenge your existing ways of working and able to offer alternative methods and approaches to supply chain packaging.

Any number of consultants are ready and willing to help with such an exercise, usually for a fee. The alternative is to find a partner with proven expertise in packaging materials, transportation and distribution. It doesn't really need saying, but we'll spell it out anyway. We want to be that partner.