Companies should seize opportunities to increase packaging efficiencies, improving profitability and sustainability

Since packaging is typically 10-40% of the retail price of products, there is no doubt it adds up to a relevant factor in product cost and waste. Packaging encompasses product design, prototypes and trials, materials, production, labor, shipping, and recycling and/or disposal. The most proactive companies pay close attention to opportunities to increase packaging efficiencies throughout the end-to-end supply chain to improve their profitability and sustainability.

Product Design Collaboration

Product design is at the heart of improving packaging efficiency. Our best clients take a collaborative approach to R&D and packaging design encompassing the end-to-end supply chain. For example, in a healthcare products manufacturer, the packaging engineer worked with R&D, manufacturing technicians, procurement resources, and logistics resources with a specialty in warehousing and transportation. In addition, customers, packaging materials suppliers, equipment specialists, and other resources took part in the collaborative design.

By involving these cross-functional resources, the full life cycle could be incorporated into the product design. In this case, they wanted to ensure the design encompassed the optimal packaging design to meet the customer’s visual, strength, and storage specifications while minimizing the materials, labor, and logistics costs. For example, the objective was to minimize the packaging materials while meeting product specifications. However, the team had to review potentially conflicting factors. For example, doubling the number of units of product per package would make the way the package fit in the box less efficient, the box might not be best designed to optimize the pallet, the pallets might not be optimized to fit on the truck, or the customer might not like the visual design or be able to fit the product in the storage area.

In addition, the product’s performance had to remain intact. Reducing the quantity of materials must not negatively impact the way the product worked for the customer. Compressing the product into the package must not negatively impact the absorbency of the product. Using redesigned materials in the manufacturing process must not impact product quality. This healthcare manufacturer successfully redesigned the product and reduced the total cost by more than 20% inclusive of materials, packaging, warehousing, and transportation costs.

Packaging Efficiencies in Bottling

There are vast opportunities to improve packaging efficiencies in the bottling industry. For example, Niagara has accomplished several key objectives in eliminating waste through packaging and innovation. They designed new packaging that eliminates the need for a cardboard tray in their cases and reduced the amount of plastic in their bottles by 60%. Thus, this packaging requires less materials and uses up less pallet space, allowing the company to reduce carbon emissions and ship more water per order.

Since 2009, Niagara improved its carbon footprint by 59% through innovations in design, lightweighting, and packaging. It has also increased its recycled content usage, which reduced greenhouse gas impact by bottle by 12%. Gaining these results requires a full lifecycle view of supply chain from product design through recycling.

Packaging Efficiencies at Amazon

According to Amazon, it continually works to reinvent and simplify packaging options. The company combines lab testing, machine learning, materials science, and manufacturing partnerships to accomplish this goal. Amazon notes that it avoided more than 2 million tons of packaging materials and reduced per-shipment packaging weight by 41% since 2015. The bottom line is that a significant reduction in packaging will reduce costs and improve sustainability.

Improving packaging efficiency can produce dramatic results. The healthcare products manufacturer, Niagara, and Amazon prove that by focusing on packaging design and innovation, tremendous savings in materials, labor, and freight will flow to the bottom line. In addition, carbon emissions are reduced and sustainability objectives are achieved.

Originally posted in Adhesives & Sealants, March 2024

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The awareness of the importance of international supply chains has grown in recent years, not just among the business fraternity, but more widely in the media, among politicians and ordinary citizens as well. Because of the multiple crises that we have endured such as COVID, Brexit, War in Ukraine and geopolitical tensions with China people now understand much better that it is the correct functioning of these complex supply chains that keeps the show on the road.

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Originally published in Adhesives & Sealants Industry Magazine, December 2022

Companies can focus on win-win-win strategies to impact people, profit, and the planet with supply chain strategies that reduce packaging, modify materials, improve processes, and reduce transportation and logistics costs.

By Lisa Anderson, Founder and President, LMA Consulting Group

With the increase in interest in the three P’s of the triple bottom line (people, planet, and profit), packaging rises to the forefront. It is controllable, and there are several options for how packaging can contribute to the triple bottom line. Starting by expanding your view from your suppliers’ suppliers to your customers’ customers, you’ll find several opportunities for recession proofing your business by partnering with supply chain partners to achieve the ultimate win-win-win.

Almost every raw material and finished good requires packaging. If you can minimize packaging without impacting product quality, you will have a direct impact on the triple bottom line by reducing materials and waste while increasing efficiency, effectiveness, and profitability. You could also redesign packaging to better utilize the packaging design to improve the carbon footprint, profitability, and people’s lives.

When assessing sterile medical applications, you could research the clinical requirements for the barrier. Good packaging design, material selection, and composition can minimize the requirements for the barrier. In a non-sterile application, you might evaluate the use of recycled content and biomaterials.

Pertinent Examples

As it relates to packaging design, material selection and composition, an adult incontinence manufacturer wanted to redesign the materials to perform better yet use less materials in the product for a win-win-win for the customer, manufacturer, and supplier. The R&D, Package Engineering, Purchasing, and Supply Chain teams collaborated closely with the supplier to develop new materials that would achieve the objectives. After several iterations, trials, and revisions, the team accomplished the triple bottom line. Less materials were used in the product, less packaging was required, less waste occurred on the lines with close alignment between operations, equipment suppliers, and key suppliers, and the product performance and customer satisfaction improved.

From a logistics perspective, the resulting packaging was designed optimally to maximize the product in the box, on the pallet, in the warehouse, and most importantly, in a truck so that they could gain up to 20% additional product on the truck for the same price. It also optimized warehousing and storage requirements so that they could shut down an overflow storage facility, not only reducing the movements but also reducing damage and wasted packaging materials.

In another example related to this manufacturer, the team was able to minimize the waste associated with the construction and elastomeric adhesives as well as the fastening tapes by focusing on the manufacturing process. Operations put attention on centerlining the process, asset care, and people development, and these “basics” delivered consistent results over time. Since materials were a preponderance of product cost, these saving went straight to the bottom line, but, more importantly, the people felt engaged, and the customers could count on receiving quality products that met their specifications on-time so that they could serve their patients.

In a life sciences manufacturer of proteins, a cross-functional team focused attention on forecasting sales by package sizes so that they could better align their operations resources to priority tasks to have the right products in the right package in the right place at the right time. Since they had several custom products in custom sizes, it wasn’t a simple task to standardize what was achievable while gaining a directionally correct view by package sizes so that they could set their bottling schedule to align with customer demand. However, after creating a demand plan to support sales growth objectives and translating that plan into bottling requirements by size, they were able to reduce waste, minimize non-essential inventory, and support aggressive growth targets with high on-time-in-full percentages and reduced lead times, creating loyal customers.

Winning Strategies

In each of these examples, the manufacturer communicated and coordinated across the end-to-end supply chain to achieve success. Within each supply chain partner, a cross-functional team participated to ensure the packaging and product was designed, redesigned, and adjusted with the supplier, manufacturer, customer, and even the end customer in mind. The most successful companies are focusing on win-win-win strategies to impact people, profit, and the planet with an eye across the supply chain to reduce packaging, modify materials and composition, improve processes, and reduce transportation and logistics costs while improving overall performance to the customer.

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Improved supplier data will give your supply chain the competitive advantage to drive customer loyalty.

Netstock recently collaborated with leading supply chain transformation expert, Lisa Anderson, Founder & President of LMA Consulting, to discuss how businesses can improve supply chain processes and reduce supplier risk to ensure they meet demand.

According to Zippia.com, only 6% of companies report having complete supply chain visibility. With access to improved supplier data, you’ll better understand your supplier network and utilize these insights to ensure you make the best decisions to optimize your planning. Investing in a supply chain planning solution that monitors and measures suppliers’ reliability will increase supplier visibility across your supply chain. 

Use these five steps to manage and identify supplier risk across your supply chain.

Step one: Classify your suppliers. 

To prioritize your efforts, you should know the following information about your suppliers: 

1. Which suppliers deliver on time and in full
2. How many items each supplier provides
3. The average lead time per item
4. What stock items come from which locations

External disruptions also impact suppliers. By increasing the frequency of communication with your suppliers, you’ll know if they are experiencing any challenges in sourcing materials or potential delays in delivering your products. This information will help your business quickly adapt to any increased lead times so you can find an alternative solution.  

Step two: Use a dashboard to help disseminate the data. 

Work with improved real-time supplier data across your supply chain. During these volatile times, having a Sales & Operations Planning solution in place can help manage the data and provide visibility to make the best choices to help your business minimize supplier risk.

Click here for the full story.

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Partners are always prioritized over transactional suppliers during times of allocation and disruption.

Supply chain disruptions were up 88% in 2021, according to Resilinc, a leading supply chain risk monitoring and mapping solution. Lifesciences and healthcare were two of the industries most impacted by these record-breaking supply shortages. Companies across the board are experiencing vast raw material shortages and extended lead times, creating a never-ending cycle of disruptions.

Do you have suppliers or partners? Successful companies are stepping up their collaboration with partners.

During COVID, clients and colleagues realized there was far too much risk in their supply chain. For the most part, they realized the stark difference in requesting help from in-demand suppliers vs. collaborating jointly with supply chain partners. Given the robust demand for raw materials to successfully support key customer needs, suppliers have no choice but to prioritize. There is little doubt they are prioritizing strategic and profitable customers, as well as those with long-term agreements. In essence, they will fulfill customers that treat them as partners before those who see them as vendors. With the level of supply chain disruptions occurring, whether you have partners or suppliers is directly impacting revenue growth objectives.

Pertinent Examples

Although heightened during the pandemic, partners are always prioritized over transactional suppliers during times of allocation and disruption. For example, a mid-market adult incontinence manufacturer partnered with critical material suppliers. Since they considered adhesives a critical raw material, they collaborated jointly on developing and upgrading materials, finding cost reduction opportunities without negatively impacting product performance, and on maximizing operational performance (reducing scrap and increasing efficiencies without creating additional quality defects).

The manufacturer was fair and upfront in communications and treated the adhesives supplier as a partner. When adhesives went on allocation, even though the manufacturer was a small fish in the pond, the large adhesives supplier prioritized their partner, thereby enabling the eventual successful sale of the company since the manufacturer was able to grow the business during turbulent times.

Another area of significant risk that has been exposed during the pandemic is the lack of backup sources of supply. For example, a client in Europe thought they had a backup source of supply to their China supplier because they had a secondary source in India; however, when COVID hit, neither supplier could deliver the requested materials. Another client had identified a backup source, but they did not utilize that source on an ongoing basis. Thus, when COVID created disruption in the supply chain, the backup source prioritized current clients.

On the other hand, a healthcare products manufacturer proved that even an expensive backup source of supply would prove extremely desirable as supply chain disruptions increase. In this situation, the CEO, vice president of operations, and director of procurement had to constantly defend why they were paying 20% more for the same nonwoven material as they could purchase from their primary supplier. The board of directors was not happy since this move reduced the bottom line.

The leaders stayed the course and kept purchasing 20% of their raw material needs from the backup supplier, however, in order to ensure continuity of supply and to innovate with a regional supplier. Eventually, a supply chain disruption arose, and the primary supplier located in Brazil couldn’t deliver materials on time because of delays in the ports. As planned, the backup supplier increased volume to support their partner. Additionally, the joint innovations resulted in further margin improvement.

Partnering for Success

Resilient and successful organizations are reevaluating suppliers, carefully selecting which suppliers to upgrade to partners, and staying on top of key partner relationships. Relationships will not be maintained by default.

Instead, the most successful companies are focusing on becoming a customer of choice. They are proactively communicating changes to forecasts, supplying resources to support key initiatives, jointly innovating for win-win solutions, and providing suggestions and recommendations for success. For example, a customer decided to coordinate loads with multiple suppliers so that their suppliers would gain priority access to trucks while sharing in cost savings.

Are you thinking like a partner, or are you negotiating with suppliers? Partners will speed by the competition and thrive post pandemic.

Lisa Anderson

As originally published in ASI Adhesives & Sealants Industry on March 11, 2022

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Manufacturing and Supply Chain Expert, Lisa Anderson, MBA, CSCP, CLTD, president of LMA Consulting Group Inc., tells companies to recognize workforce talents and take time to partner with the right suppliers. LMA Consulting Group works with manufacturers and distributors on strategy and end-to-end supply chain transformation to maximize the customer experience and enable profitable, scalable, dramatic business growth.

“Stabilizing the supply chain has been critical these last few months for manufacturers and distributors. This has been necessary to minimize volatility and keep goods flowing, in turn, fulfilling customer expectations. Customers understand that these are different times, but they will be patient only so long. That is why it is critical to get the supply chain stabilized,” Anderson explains.

In past communications, Anderson has suggested understanding demand by connecting with both the customer and the customers’ customers. She has also discussed realigning demand with supply through the SIOP process (Sales, Inventory and Operations Planning). Yet, the most critical component in solving problems, disruptions or even expansion of the supply chain is a company’s talent. “I often ask our clients who in the organization, which disciplines and levels, is involved in the SIOP process and collaboration with customers and suppliers. If the answer is simply Supply Chain or Operations, they are missing out on solutions that their talent can bring to the table, and even more concerning is the potential loss of talent due to the lack of involvement in meaningful activities. I also ask about the depth of talent and cross-functional capabilities within a discipline. This is telling, especially when complex solutions are required to satisfy key customer requirements or resolve a situation within the supply chain. And, one of my final questions lies in the determining the kinds of relationships the company has with suppliers. Employees and suppliers can create new solutions or products and be champions of an organization,” she continues.

With high levels of ambiguity and volatility, the leader’s role is more important than ever. Anderson suggests three ways to immediately leverage talent to stabilize the supply chain. “Talent is key to stabilizing the supply chain. 1) Get your salespeople and your customers involved in the forecasting process. Sales tends to be on the outskirts of demand and supply. They need to be as involved and accountable in the demand planning and fulfillment phase as they are in generating orders. 2). To stabilize internal operations, fill gaps and keep teams focused on the customer while maximizing efficiency, formal and informal leaders must monitor progress, adjust plans and stay on top of morale, training and developmental needs. 3) Do not assume the past will repeat. Deep dive into critical supplier relationships and future viability. Make sure you have the right supplier partners, not simply the least costly vendors, and track progress frequently. And, make sure you do not have all of your eggs in one supplier basket” she concluded.

Anderson recently released a short video, What’s Happening in Manufacturing & Supply Chain: Consider Your Top Talent. Anderson has also released, Future-Proofing Manufacturing & the Supply Chain Post COVID-19, an eBook that provides practical go-forward insights, advice and experiential value.

Published in Today’s Medical Developments on September 18, 2020

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May 22, 2019

Supplier management has been a theme this week. I taught a CSCP (certified supply chain professional) class session about supplier relationship management and SRM software last night. An attendee had a great example of the impact of poor quality because her company was sending an entire container load of product back to Asia with defective parts which was bound to have negative impacts on the customer. After all, they were already delayed, and now they were spending another month on the water to just start over again. That led us to discussions on backup suppliers. 

Next, I spent quite a bit of time on webinars and calls today talking about the critical importance of supplier lead time, reliability, safety stock, lot size and how these factors impact our ability to maximize service, profit and cash flow. And then I presented to APICS Ventura on “The Resilient Supply Chain” this evening, and we had intriguing discussions on the trends of vertical integration, supplier consolidation, allocation of key materials (and how consumer products are gaining priority access with the leftovers being allocated to industrial companies), the impact of tariffs on sourcing, and several more topics. 

The bottom line of each of these discussions is that proactive management of suppliers is of ever-increasing importance in today’s Amazon impacted business environment. If you don’t have what you need, when you need it, where you need it, in good quality, and within cost guidelines, you are likely to lose vs. your competition. And this includes last minute changes! Do you consider your supplier your partner or someone to negotiate with and gain an advantage over?

What Should We Consider and/or What Impacts Could Arise?

It is NOT all about cost. Of course, the hot topic on executives’ minds is how to achieve scalable growth, and so profit and cost are important topics, yet smart executives realize it is quite easy to sacrifice the future by saving pennies in the present. Similar to the mistakes made several years ago when it didn’t matter whether it made cost-sense or not (ie. Boards were demanding outsourcing regardless of the financials), many Boards are demanding supplier concessions without looking at the extended supply chain impacts. Instead, stick up for looking at total cost and taking the value viewpoint! Of course, this means you’ll be focused on costs but it won’t be your sole focus.

We talked about several scenarios where you had to invest extra cost upfront to achieve longer-term success. For example, we talked about keeping a more expensive backup supplier and giving them 20% of the volume. Boards and private equity backers weren’t too happy with the extra cost yet this risk mitigation technique saved the day on more than one occasion. When the material went on allocation, the main supplier struggled or the ports/ transportation infrastructure broke down, those who planned for the inevitable bump in the road had uninterrupted supply from the backup supplier and satisfied customers while the competition fell further behind. Are you thinking about your suppliers like a cost or a partner?  You’ll find more information on these types of topics on our resilient supply chain series.

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Since we did research on “The Squeeze” for a speech on the the squeeze in aerosapce (meaning, how does the supplier in the middle between the Tier 1 suppliers who supply final assembly parts for an airplane and the powerhouse mills survive, or preferably thrive), we have been thinking a lot about the supplier relationship.  Coincidently, we also heard a lot on this topic at the Association for Supply Chain Management (ASCM/ APICS) international conference as it is a hot topic across all industries.  There was an almost identical discussion occurring with retail and the consumer goods industry.  Last but not least, all of our clients are seeing the relevance of this topic. 

What is the “right” answer?  Of course, it depends!

To manage “the squeeze”, one of the keys is to create partnerships with your key suppliers.  The rest can be vendors since they are not core or significant to your success.  However, your key suppliers must be partners and collaborators.  For example, one of the best ways to handle the middle position in the aerospace world is to bring your customers and their demand together when your suppliers and their capabilities.  Here are a few ideas that all depend on being a partner:

• Collaborate with suppliers on new ideas / design concepts to reduce materials and waste for you AND up your supply chain.
• Become a partner of your customer and gain access to demand information as it becomes available and help translate that into a benefit for your customer, you and your supplier.
• Leverage pricing and volume across the supply chain for a win-win-win.

Although these ideas relate to aerospace, the same concept applies with every client.  When I was VP of Operations and Supply Chain for an absorbent products manufacturer, we used these same concepts to find win-win-win solutions in your supply chain.  We partnered with key vendors to redesign materials (that performed better at a lower cost), redesign packaging, reduce waste in our manufacturing process which required teaks and collaboration with both material and equipment suppliers and more.  By following a partnership route instead of the “vendor” negotiation/ beat up on price route, we turned our situation around from bad to good. 

We found private equity backers who wanted profitable growth; however, soon after, the market changed and oil and gas prices were continually rising which significantly impacted our material costs (and were unavoidable) yet our private equity investors still expected the same profit improvements as before.  Our business was also heavy in transportation cost since the product was bulky which was also an issue with rising oil and gas prices.  Thus we collaborated with customers, material suppliers and freight suppliers for win-win-win solutions.  It “worked” and we were able to offset the price increases while growing the business in a profitable and scalable way.

These types of situations are common in today’s business environment.  Do you view your suppliers as vendors or partners?  And who are you hiring to manage these relationships?  Transaction-oriented purchasing folks or strategic relationship procurement resources?

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In today’s Amazonian environment, it is quite clear that the customer’s experience is #1.  It doesn’t matter what issues you have; if you cannot make sure that your product or service is delivered on-time with value-add service at a reasonable price, you will lose the business.  

In talking with a group of aerospace CEOs who are being squeezed between the Tier 1/2 suppliers (those who supply Boeing and Airbus with plane ready parts) and their suppliers who are metals suppliers (mills/ metals service centers) and outside processors, it is a tough position to hold!  However, just as Mirna Elnar, CEO of Acrua Spas said in our supply chain resiliency video series, there is always a solution when you think innovation.  

In this example, many of the suggested solutions from executives and procurement resources alike were to find opportunities to redesign/ improve the product and process to achieve a “win” for the Tier 1/2 suppliers (improved manufacturability with better efficiencies and/or less scrap, less materials while maintaining specs/ performance, having the “right” inventory in the “right” place at the “right” time etc.) while also achieving a “win” for the CEO (better margins/ better cash flow) and ideally a “win” for their suppliers (more predictable demand, etc.).  A win-win-win is achievable if you look hard enough.

This relates to a situation I found myself in while VP of Operations & Supply Chain for a mid-market manufacturer.  We found private equity backers and were able to make it through in terms of cash flow by the “skin of our teeth”.  We even were able to convince suppliers to take a haircut.  So far, so good.  Then, oil and gas prices rise which impacts 70% of our material cost which impacts 70% of overall cost.  NOT good.  Also, we find that our product lines are all mixed up in terms of which ones cost less to produce vs. the sales price for various customer segments because we had recently merged 3 companies into one.  Also NOT good.  

Our customers were a bit angry about service issues that arose when we cut over to a new system and merged the 3 businesses into one.  Also NOT good.  And the largest segment of the business hadn’t updated products in years because they planned to sell and so was in desperate need of an upgrade to grow sales.  A fact but also NOT good.  Lastly, our product is light but fluffy (which makes it larger in size) which carries a high transportation cost.  NOT good either.  But we had good suppliers and an innovative and committed team.  GOOD!  So, how can we turn this into a “win-win-win”?

We decide to kick off a redesign project to find a way to straighten out the product tiers, improve performance of the product, reduce the cost of the product and reduce the freight cost associated with the product to boot.  A bit of a tall order?  Yes but a challenge as well!  

We were successful in achieving ALL of these objectives by turning supplier negotiation on its head.  Instead of demanding price concessions, we partnered, provided upfront information on our objectives (including cost reduction objectives), collaborated on the design of new / improved materials, redesigned products and packaging, collaborated with customers to make sure we aligned with their needs and priorities, collaborated with equipment suppliers to put it all together and turned supplier negotiation into customer collaboration, achieving a win for our customers, our business (and therefore our private equity backers) as well as our suppliers.  There are too many people to thank but a quick shout out to Bill Weber, Keith White and Rick Finlayson seems appropriate.    

Are you stuck in thinking about cost concessions or are you looking for the “win-win-win”?

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