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Lean: Beyond the Basics

It’s a Wrap! Logistics and Packaging Impact Your Spend

By Patricia E. Moody CMC ([email protected])

Ship it, box it, mash it, break it –
Ship it, box it, mash it, break it!
There’s money in them thar packages!

Ever wonder how much money packaging and in-transit damage is costing your operation, as well as your suppliers? Well, we have been talking with some special people who stay awake nights and worry – a lot – about what happens between your shipping dock and your customer’s receiver.

And sometimes it gets uglier than a Stephen King bestseller. Package integrity starts with the shipper. Let me show you an example. A leading manufacturer of fasteners — metal and plastic — providing small parts to wide varieties of industries, reported high incidence of lost product. It seems that fasteners were slipping out of ripped cartons. The shipper was awash in reshipment requests, which raised overall product cost and clogged daily production schedules. They needed a solution that would stanch current losses and prevent damage in transit. The shipper asked its freight company to take a closer look, to see if they could find the cause, and the answer that came back was "Packaging!"

Packaging engineers started at point one — the products themselves — evaluated and tested packaging strength and materials, then redesigned packaging for a laboratory performance test. Although the new design looked identical to the old one, in the end, the engineer did reduce the cube of the package to make it more dense, "not so loose and flowing."

Further, engineers changed box material properties for better tear resistance, to protect against damage in transit. Surprisingly, this did not raise the cost of material – in fact, the reduced cube actually reduced the amount of material required.

All this cost big bucks in consulting money, you say? Not necessarily. Did you know that all the leading shippers — including UPS and Fed Express — employ incredible packaging and shipping experts whose only job is to help good customers do better? According to Chad Thompson, former UPS packaging expert, "In certain situations we will partner with customers where they have high frequency — not necessarily for free — but we have agreements in place where we will absorb some or all of the cost, to provide winning solutions. In fact, we do partner with a good percentage of customers."

Product vs Packaging
Most companies don’t give enough thought to shipping — materials, packaging design, as well as handling and logistics. This whole area is considered an afterthought. It’s easier to simply focus on product. Harley-Davidson, however, sits a packaging engineer first thing, right on its bike design teams — they can provide valuable input on suppliers, material options, and real costs as part of the total bike cost roll-up.

Common mistakes that companies make in a misguided attempt to protect product is to overspend on packaging, hoping that over-packing will prevent problems. Not only is this costly — it’s expensive to ship air — but it doesn’t always work. Thompson recommends designing the packaging to fit the product as well as the transportation mode.

For example, companies that do a lot of shipping to and from China, says Thompson, will want to be sure they design packing for highest utilization of containers, because shipping air over long distances is very expensive! "We recently did packaging design for a company producing furniture in China. And coming in from China, the biggest thing is utilization of containers and the amount of specialization of the container — we don’t want to ship air — we want to make it as dense as possible."

What Does Your Money Buy?
So what can customers do to reduce damages as well as packaging costs? Know what your money buys in terms of absolute product protection. That’s where package performance testing comes in. Packaging engineers use standards to develop the most appropriate and cost effective packaging solution. UPS’ Addison, Illinois laboratory, for instance, has all the different types of tests to simulate handling and packaging, shock, vibration, and compression, everything you need to know before the product goes out the door.

The idea is to simulate as accurately as possible normal handling conditions — you don’t want to test for the abnormal. Performance testing will ensure your package will get best protection for least cost. Where to start to control costs? Start with products that need the most help, the ones experiencing higher frequency of damages — frequency is key. If the data show 50 units of one product getting damage, and 25 units of another, one might want to start an improvement project with the 50-units product. But Thompson suggests that companies look at the percentage of damages to the percent of items shipped – zero in on the higher percentage problem areas, and try for small changes in packaging, with small cost increases — if any — first.

Part 2


Patricia E. Moody CMC ([email protected]) is a Boston-based management consultant and author. Her client list includes British Petroleum, Respironics, Waste Management, Hardbikes, Cisco, Motorola, and Power Partners. Her latest book is a business novella called The Big Squeeze, Ten Ways to Cut Your Spend 10% Right Now!


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