Supply Chain Optimizers


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SCO Packaging Optimization

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  • Dear Edmund Rucels, can you send this presentation to my e-mail: and I would like to this ppt to teach class about corrugated box.
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Supply Chain Optimizers

  1. 1. Supply Chain Optimization Through Packaging Ed Rucels Supply Chain Optimizers
  2. 2. Basic Premise <ul><li>The shipping case or bag is the lowest echelon building block in the supply chain </li></ul><ul><li>- impacts handling, storage, freight, damage </li></ul><ul><li>Packaging optimization focus is on holistic supply chain between shippers & receivers </li></ul><ul><li>- opportunity comes from correlating packaging, warehousing, transportation for lowest total cost between members </li></ul>
  3. 3. Supply Chain Issue <ul><li>Shipping case size, strength and shape decision is typically made by: </li></ul><ul><li> Engineering Quality Control </li></ul><ul><li> Manufacturing Corporate Packaging </li></ul><ul><li> Research & Development Marketing </li></ul><ul><li> Corrugate Supplier Plant Management </li></ul><ul><li>The costs show up in Logistics which is usually not involved in this decision </li></ul>
  4. 4. Leverage Point <ul><li>Packaging is typically seen as a marketing or engineering process </li></ul><ul><li>- packaging impact on supply chain <10% </li></ul><ul><li>- warehousing impact ~25% </li></ul><ul><li>- freight impact ~60% </li></ul><ul><li>Yet typical client has focused on driving down packaging while logistics increased </li></ul><ul><li>… saving nickels by spending quarters </li></ul>
  5. 5. Process History <ul><li>Started at Johns-Manville Canada by Don Allison & Harry Clark in mid ’80’s </li></ul><ul><li>After Manville Canada closed, Allison & Clark refused move to Denver to focus exclusively on packaging optimization </li></ul><ul><li>~500 completed projects over 25+ years </li></ul><ul><li>Users include Kimberly-Clark, Heinz, Nestle, George Weston, Office Depot </li></ul>
  6. 6. Packaging Observations <ul><li>In 1999 Bob Delaney’s State of Logistics Report identified packaging optimization as the last major logistics opportunity </li></ul><ul><li>- operational costs have been squeezed so long there is not much big improvement left </li></ul><ul><li>Most firms are not integrated on packaging decisions…leaving money on the table </li></ul>
  7. 7. Box Efficiency <ul><li>Most economical box has ratio of </li></ul><ul><li>L2 - W1 - D2 </li></ul><ul><li>Example: 10 x 5 x 10 = 500 cu in </li></ul><ul><li>25 x 5 x 4 = 500 cu in </li></ul><ul><li>Box #2 uses 20% more corrugated </li></ul><ul><li>There are 10+ different ways to construct a box….each impacts total cost differently </li></ul>
  8. 8. Impact of Storage Time <ul><li>0 Days = Full Strength </li></ul><ul><li>1-4 Days = 70% </li></ul><ul><li>Up to 11 Days = 65% </li></ul><ul><li>Up to 31 Days = 60% </li></ul><ul><li>Up to 101 Days = 55% </li></ul><ul><li>Up to 1000 Days = 50% </li></ul><ul><li>… .in normal ambient temperature space </li></ul>
  9. 9. Optimization Opportunities <ul><li>Traditional manufactured product </li></ul><ul><ul><li>Multiple units of the same product in a box </li></ul></ul><ul><li>Pick-pack operations: e-commerce </li></ul><ul><ul><li>Many ship 1 million+ combinations of weight & cube each year </li></ul></ul><ul><li>Retail ready: attempts to reduce store labour & packaging waste disposal at stores </li></ul><ul><ul><li>Current focus for both Loblaws & Walmart </li></ul></ul>
  10. 10. Supply Chain Optimizers
  11. 11. Supply Chain Optimizers
  12. 12. Pallet Differences <ul><li>Original </li></ul><ul><li>Count: 50 cases </li></ul><ul><li>Overhang: 1.3” </li></ul><ul><li>Stacking strength </li></ul><ul><ul><li>1.1 pallets high </li></ul></ul><ul><li>Truck loading </li></ul><ul><ul><li>100/floor spot with machine loading..110 with hand stacking </li></ul></ul><ul><li>Optimized </li></ul><ul><li>60 cases </li></ul><ul><li>.7” & .5” </li></ul><ul><ul><li>2.1 pallets high </li></ul></ul><ul><ul><li>120/floor spot with machine loading </li></ul></ul>
  13. 13. Initial Project Results <ul><li>11 box sizes </li></ul><ul><li>2% reduction in packaging </li></ul><ul><li>10% savings in warehousing & freight cost </li></ul><ul><li>200,000 lb reduction in corrugate </li></ul><ul><li>Savings can be doubled with minimal revisions to retail packages </li></ul><ul><ul><li>280,000 lb reduction in corrugate </li></ul></ul><ul><li>Major opportunity for green campaign </li></ul>
  14. 14. Retailer Support <ul><li>Many major retailers endorse packaging optimization to their private label suppliers </li></ul><ul><li>- benefit flows through supply chain to both supplier and retailer </li></ul><ul><li>- opportunity to make private label more profitable for both partners </li></ul><ul><li>- supports retailer effort to expand private label business </li></ul>
  15. 15. Wal*Mart Initiative <ul><li>Announced in ‘06 by CEO Lee Scott </li></ul><ul><li>Efficiency & environmental benefit </li></ul><ul><li>All suppliers must reduce packaging by 5% </li></ul><ul><li>- private label scorecard started in Nov ‘06 </li></ul><ul><li>- 60,000 other suppliers started in Feb ‘07 </li></ul><ul><li>Projected savings in 2008: $3.5 B to Wal-Mart & $7 B to suppliers </li></ul>
  16. 16. Wal*Mart Examples <ul><li>Liquid detergent supplier asked to reduce bottle by concentrating product </li></ul><ul><li>- Wal-Mart offered merchandising support </li></ul><ul><li>- All small & mighty 1 st year sales </li></ul><ul><li>= $35million </li></ul><ul><li>Improving 200 toy products eliminated 727 ocean containers/year from Asia </li></ul>
  17. 17. New Product Application <ul><li>Marketing had choice of four presentation alternatives for sample kit </li></ul><ul><li>Pre-commitment packaging optimization identified the following: </li></ul><ul><li>- two middle alternatives had same cost </li></ul><ul><li>- high/low had $.75/unit difference </li></ul><ul><li>With 1.5 million units shipping, cost swing was $1+ million </li></ul>
  18. 18. Trucking Utilization <ul><li>Headlights rated as class 250 </li></ul><ul><li>LTL carrier agreed with analysis and provided additional input </li></ul><ul><li>New boxes, revised pallet patterns & loading specifications improved efficiency </li></ul><ul><li>Headlights now classify at 125 </li></ul><ul><li>50% reduction in freight costs </li></ul>
  19. 19. E-Commerce Observations <ul><li>Most small package shippers utilize </li></ul><ul><li>too few carton sizes: <10 is common </li></ul><ul><li>- savings in purchasing are not enough to offset loss in distribution efficiency </li></ul><ul><li>Typical small package shipper gets <60% cube utilization of outbound cases </li></ul><ul><li> therefore >40% = filler & air </li></ul>
  20. 20. Small Package Shipper <ul><li>Specialty retailer: 145 stores + on-line division  </li></ul><ul><li>Increased boxes from 16 to 22 - only 9 are original sizes   </li></ul><ul><li>Full Year Impact:    </li></ul><ul><li>Reduction in carton material             22.4% </li></ul><ul><li>Reduction in filler                             60.3% </li></ul><ul><li>Reduction in packing labor               12.5% </li></ul><ul><li>Reduction in freight $                        19.8%  </li></ul><ul><li>Total cost reduction                          23.2%  </li></ul>
  21. 21. Packaging Optimization Summary <ul><li>Synchronizes relationship of shipping containers, warehousing & transportation to achieve lowest total supply chain cost </li></ul><ul><li>Deceptively simple but amazingly effective </li></ul><ul><li>In full alignment with principles of lean management </li></ul><ul><li>An opportunity for significant operational cost improvement </li></ul>
  22. 22. Contact Info <ul><li>Edmund Rucels </li></ul><ul><li>Supply Chain Optimizers LLC </li></ul><ul><li>Email: [email_address] </li></ul><ul><li>Phone: 416-557-1610 </li></ul><ul><li>Website: </li></ul>