Transcription
1Packaging Optimization406A Scientific Approachto PackagingOptimizationJack AmpujaSupply Chain OptimizersJack Ampuja, Supply Chain Optimizers
Corrugate BackgroundCorrugate is infinitely recyclable Cellulose fibers shorten during recycling processmaking paper softer and less strong Good for facial tissue not good for packagingN. American standard is 35% recycled content Provides best combo of performance and costChina uses 100% recycled content Lackvirgin softwood pulp Use double, triple wall boxes to increase strengthJack Ampuja, Supply Chain Optimizers2
Why Packaging is an Issue 3Most organizations do not view packaging as part ofthe supply chain Costreduction & sustainability impact is grossly underestimated because impact of on logistics is not understood Many departments are involved in decisions Marketing,Purchasing, Logistics, Manufacturing, QC,Engineering . all focus on different goals All supply chain members share results – good or badJack Ampuja, Supply Chain Optimizers
4Packaging Approaches TypicalUse box already in-house ScientificUse packaging software Rely on marketing Rely on packaging science Use internal engineering Understand freight analytics Rely on contract manufacturer Use advanced mathematics Use customer specification Employ lots of boxes Rely on packaging supplier Avoid complexity: limit # of boxesJack Ampuja, Supply Chain Optimizers
Optimization Opportunities Abound Traditional manufactured product Multiple Imported product – especially from Asia Little units of the same product in a boxapplication of packaging sciencePick-pack operations in e-commerce Manyship 1 million combinations of weight & cubeeach yearJack Ampuja, Supply Chain Optimizers5
6Jack Ampuja, Supply Chain Optimizers
7Jack Ampuja, Supply Chain Optimizers
Pallet DifferencesOriginal OptimizedCount: 50 cases Overhang: 1.3” Stacking strength 81.1 pallets high 60 cases .7” & .5” 2.1 pallets high 120/floor spot withmachine loadingTruck loading 100/floor spot with machineloading.110 with handstackingJack Ampuja, Supply Chain Optimizers
Optimization Results 16% reduction in freight & warehouse cost Better stacking strength: less damage Less overhang on pallet No hand stacking needed on full truck loads Can be positioned as a customer benefit as theirlogistics costs will decline too Major ‘green’ improvementJack Ampuja, Supply Chain Optimizers9
R G Barry 125 M footwear supplier with no profit Indanger of missing loan repayment Sourcing 10from Mexico & ChinaUsed packaging optimization to increase oceancontainer payload Reduced costs 2.8 MGained business increase of 10 M from Walmartand 5 M from TargetJack Ampuja, Supply Chain Optimizers
Process 11Very modest adjustments to shipping cases Eliminated excess voidMoved away from shallow boxes Balancedcomplexity versus efficiency Reconfigured retail packs Changed pallets to column stacking Suggested standard pack revisions IncreasedWalmart box from 12 to 18 pairs per master boxJack Ampuja, Supply Chain Optimizers
OPERATIONALRESULTSItem12Cost/Benefit- Reduced corrugate spend 15%(COGS savings) 200,000-Reduced inbound freight spend 20%(600 fewer containers /COGS savings) 1,580,000-Reduced warehouse storage requirements 25%(storage & handling / SG&A savings) 1,000,000-Reduced miscellaneous expenses(damage, pallets, shrink, labels, etc.) SCO fees( ) Miscellaneous Internal project costs(temp labor, travel & IT)( 50,000 )100,000Total Savings 2,800,000The “knowledge” transfer of is difficult to quantify.Jack Ampuja, Supply Chain Optimizers
1311% Gain in PayloadPresent912 Cartons/loadFuture1009 Cartons/loadJack Ampuja, Supply Chain Optimizers
Marketed Solutionto Key Customers14Presented to Wal-Mart 15% reduction in corrugateRecaptured national distribution 10 million 20% reduction in freight 25% reduction in distribution costPresented to Target 15% reduction in corrugate 20% reduction in freight 25% reduction in distribution costJack Ampuja, Supply Chain OptimizersAwarded men’s volume 5 million
15Key LearningPoints Executive sponsor is critical to accelerating success. Recognize organization’s true core competencies. Overcome “ We can do this internally” skeptics. Strong & flexible supply chain partnerships facilitate savings. “Speed to Value” is an attitude! Data integrity is critical (quality of the item master file). Post-implementation support is a must .issues never endJack Ampuja, Supply Chain Optimizers
Impact ofeCommerce Thousands of new shippersNo science applied to packaging Many daily shipments of one box per destination Lots of residential deliveries Has changed cost profile of couriers whichtraditionally managed by weightTypical eCommerce shipper achieves 60% cubeutilizationThis means they ship 40% filler & air Many boxes are much worse Jack Ampuja, Supply Chain Optimizers16
Consideration Typical box supplier or packaging engineercannot resolve package vs freight cost issues Tryto protect one item [lamp shade] in box or manyunits of same product [light bulbs] Can Theybe accomplished with softwaredo not understand freight details or costs Commercialpackaging software cannot do pickpack operations because of many different itemsshipping togetherJack Ampuja, Supply Chain Optimizers17
18Jack Ampuja, Supply Chain Optimizers
19Jack Ampuja, Supply Chain Optimizers
20Jack Ampuja, Supply Chain Optimizers
21Jack Ampuja, Supply Chain Optimizers
22Jack Ampuja, Supply Chain Optimizers
23Jack Ampuja, Supply Chain Optimizers
Major Hi-tech Company – shipping 243 cables weighing 1 lbhot airshipped via UPS GroundDim weight: 15 lbs(16” x 14” x 11”)Product: 54 cu inPackage: 2,464 cu inCube utilized: 3%Jack Ampuja, Supply Chain Optimizers
MajorRetailer –poorpackaging25 4 chair mats shipped via FedExGround Each package dimensions are:50”x14”x14” 9,800 cu. in Actual Wt. 17 lbs. each Billed Wt. 60 lbs. each All four chair mats could havebeen shipped in one box of50”x14”x14” Actual Wt. 68 lbs. for all fourchair mats billed for 240 lbs Cube utilization: 25%Jack Ampuja, Supply Chain Optimizers
National Ecommerce Retailer Specialty retailer: 145 stores on-line salesIncreased boxes from 16 to 22 only9 are original sizes .13 new boxesFull Year Impact: Reduction in carton materialReduction in fillerReduction in packing laborReduction in freight Total cost reduction 22.4%60.3%12.5%19.8%23.2%Jack Ampuja, Supply Chain Optimizers26
Dim Weight Impacting LTL Brad Jacobs CEO of XPO: Wedon’t want inefficient freight – light densityproduct, susceptible to damage, doesn’t fit pallet,tough to handle - but if you tender to XPO we willcharge accordingly Wewill install pallet dimensioners into all cross-dockoperations to verify shipment density Allmajor LTL carriers use pallet dimensioners Cost: 65,000 paid back within 90 daysJack Ampuja, Supply Chain Optimizers27
28Jack Ampuja, Supply Chain Optimizers
29Jack Ampuja, Supply Chain Optimizers
30Jack Ampuja, Supply Chain Optimizers
31Jack Ampuja, Supply Chain Optimizers
Impact of Packaging & Loading Product cube 5.42 cu ft Density Pallet cube 11.62 cu ft Density of 44.83 lbs / cu ft freight class: 55of 20.93 lbs / cu ftfreight class: 70Freight cost of class 70 30% higher than 55 .inefficient pallet loading has increased freight cost 30%Jack Ampuja, Supply Chain Optimizers32
Box Efficiency Most economical box has ratio ofL2 - W1 - D2 Example:10” x 5” x 10” 500 cu in25” x 5” x 4” 500 cu in Box#2 uses 20% more corrugated There are more than 10 different ways toconstruct a box .each impacts cost differentlyJack Ampuja, Supply Chain Optimizers33
Engineer’s Dilemma Easiest box to make is a square Provides Butgood strength to contentssquare box is not a good solution for logistics Logisticsworld rectangular .does he optimize engineering or logistics? Reality: in a 12 count box of rectangular unitsthere are 324 possible combinations of casepack arrangements & pallet patternsJack Ampuja, Supply Chain Optimizers34
Packaging Lessons Transport cost must be #1 consideration Muchhigher than warehousing or packagingDon’t leave box decision to supplier especially inAsia just lack expertise Always avoid square & cube boxes Theyuse more material than rectangles and are notgood fit for logistics Use column stacking in warehouse Providespatternmuch better strength than interlock palletJack Ampuja, Supply Chain Optimizers35
Packaging Lessons Cont E-commerce is not really a packaging issue more freight & math problem Packaging decisions require logistics inputbefore box is created Sustainability needs a corporate champion togain traction Packaging optimization is all green Improvessustainability & profitabilityJack Ampuja, Supply Chain Optimizers36
Scientific Approach Excellent opportunity for efficiency & greenimprovement Real & environmental benefit is in freight Typical reduction opportunity from total cost ofboxes, filler, packing labor, outbound freight:- 10% for manufacturers/inbound- 15% for pick-pack companies Process is over-looked by most firmsJack Ampuja, Supply Chain Optimizers37
Closing Thought“The greatest obstacle to discovery is notignorance .it is the illusion of knowledge.”- Daniel J. Boorstin:author, historian, Librarian of CongressJack Ampuja, Supply Chain Optimizers38
Jack Ampuja, Supply Chain Optimizers Why Packaging is an Issue Most organizations do not view packaging as part of the supply chain Cost reduction & sustainability impact is grossly under- e
