Case 8: Supply Chain Optimization
Problem: Many manufacturers are paying too much for transport, storage and logistics services because their products are not optimally packed. Similarly many retailers have these costs passed on via FOB freight, storage and store delivery charges. Consumer product firms often view packaging as a marketing responsibility, with management of costs or quality falling on other departments. We see it as part of the supply chain because the shape, design, strength of the corrugated shipping case impacts handling, storage and transportation costs.
Goals: The benefits are not found by just reducing material (corrugate, sku) specifications. Some projects have resulted in recommendations to increase material strength but this cost has been more than offset by cost reductions in other areas. Actual savings come from the following cost buckets:
- The material itself - unless our study determines that increased material specifications and costs will result in savings in other areas that will offset this change.
- The package dimensions can be selected to optimize the box and shelf carrying capacity which can return significant supply chain and business benefits.
- The cost of handling, as optimized case and pallet configurations result in more goods being moved on each pallet.
- The cost of storage as the optimized case and pallet configurations result in fewer storage locations being used.
- The cost of transportation (plant to warehouse, warehouse to DC and DC or warehouse to customer) as optimized case, pallet and loading configurations result in more product shipping in the same space.
- The cost of the pallets no longer required because the optimized configuration uses less warehouse space.
- Consider the total cost of ownership of this package in addition to its recycling potential.
Results: (Our history indicates we generate an average of 10% annual savings on the combined costs listed above.) There are too many successes to list but below are some specific examples:
- #1 frozen snack company saved $5 million per year.
- #1 frozen dough company saved $3 million per year.
- A major poultry firm saved 16% of the combined costs of corrugate, shipping, handling and warehousing.
- Changed single strain juices package structure and material saving 21 % on freight and doubling shelf life.
- Completed the first phase for a global foods manufacturer saving $1 million from one facility.
- Established composting program for shredded corrugate earning company and EPA Waste Wise partner for outstanding leadership in the recycling industry.
Sustainable Innovations™ - partnerships for a better tomorrow. Contact us for more information.
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