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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According to a McKinsey survey about COVID-19’s impact on operations and the future supply chain, supply chain leaders believe it will be transformed. For example, close to 75% experienced issues in the production, distribution and supplier footprint that will require changes in the future, and a whopping 93% of respondents plan to increase resilience across the supply chain. The pre-coronavirus full focus on efficiency is moving over in favor of resilience. Clients and colleagues are seeing the critical importance of creating resiliency and customer responsiveness in their supply chain.

Even before COVID-19, executives were interested in increasing customer responsiveness. Amazon has been transforming both B2B and B2C businesses. As customers get used to rapid deliveries, the ability to change orders at the last minute and easy returns, it becomes the new expectation. However, prior to the pandemic, the ingrained philosophy to reduce costs and increase efficiencies remained dominant, and so customer responsiveness and resiliency was seen as more of a “nice-to-have” so long as there wasn’t a hit to the financials.

The pandemic has proven that resiliency has become a “must”. The ability to respond and be agile has gained in importance. For example, during the pandemic, clients ran out of inventory or critical materials/ components due to disruptions in the supply chain. Having a backup supplier in the same geographic region as the core supplier was of no help! Even if the backup supplier was in another region of the world, lead times were too long to address changing customer requirements. If your backup source of supply was close to your manufacturing operations and consumer demand, you were most likely still out of luck unless you had consistently ordered supply from your secondary backup supplier so you’d gain priority. The need for resiliency has become clear.

Do we have to choose between efficiency and resiliency? Not necessarily. Clients that have pivoted to rethink how to achieve efficiency and resiliency simultaneously will thrive post COVID-19. In essence, they need to find the appropriate balance between an internal and external focus, a reduction of costs and an increase in agility, an increase in labor efficiency by locating production to lower cost countries and an increase in customer responsiveness by locating production closer to customers and a focus on the monthly profit and loss statement and creating flexibility with working capital reserves.

How should we achieve the “AND” of efficiency and resiliency? Start by understanding your customers’ customers, and the associated changing buying behaviors and evolving customer needs. The quicker you pick up on these changes, the quicker they can be incorporated into your strategic decisions, your supply chain network and your new products and services offerings. Proactively collaborate with customers and suppliers so that you can rapidly realign demand and supply to improve the customer experience, increase profitability and cash flow. Certainly, to bring these goals to fruition, you’ll need to pay close attention to upgrading your talent and technology.

The most successful executives will focus on creating both efficiency and resiliency. If you think of the definition of efficiency as organization plus speed, and you think of the definition of resiliency as the speed to recover, you’ll find speed in common. Latch on to that commonality and find innovate ways to achieve the win-win of  efficiency and resiliency.

As originally published in Brushware Magazine on November 2020

Click here to see the original PDF.

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Lisa Anderson, founder and president at LMA Consulting Group Inc. based in Claremont, Calif. was the opening keynote speaker on day 3 at the SAP Vision 33 Virtual Conference.

Published in SAP Vision 33 on Oct. 2020

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I’ve incorporated three planning method options into a presentation on inventory management best practices. I’ve been receiving more and more requests for this topic as executives experience the impact poor inventory management can have on an organization – it can stunt growth, weaken profits, tie up cash unnecessarily and negatively impact operational efficiency.

I run across conflicts frequently among these options. Unfortunately, the method is often dictated. Resources are not valued. And results struggle. On the other hand, my best clients view these as complementary options to be used at the “right” time in the “right” situation for the “right” products.

Briefly reviewing these methods:

1. Lean: In lean circles, planning is seen as a Kanban process. In essence, the demand is pulled through the system by the customer. For example, when a customer consumes 5 pieces, the manufacturer produces 5 pieces. This type of process works effectively when demand is even.
2. MPS/ MRP: Master production schedules and material requirements planning are system tools and related processes that derive production requirements and purchase plans from a compilation of demand (sales orders, forecasts, independent demand), inventory levels, expected production plans and receipts etc. This process looks at lead times and calculates what should be produced, regardless of the environment (make-to-order, make-to-stock, configure-to-order etc.). This type of planning can work effectively with uneven demand.
3. TOC: The theory of constraints focuses on subordinating all resources to the bottleneck or most overtaxed resource. The focus is often-times on throughput. Since throughput will be limited by the bottleneck, it makes sense to focus there.

I cannot tell you how many disagreements I’ve seen over the years on the optimal planning method. In some companies, executives have become purists to one method or another, and it created havoc – unhappy customers, high costs etc. Instead, I’ve found it is well-worth it to evaluate what combination of methods makes the most sense for each particular company, product line, machine, team etc. My most successful clients use a combination approach.

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As businesses look to find ways to grow profitably and build efficiencies into the process upfront, maintaining low operational costs remains paramount.  It also provides pricing flexibility as you are able to reduce your breakeven point for covering costs. A few strategies to consider include:

1. Reduce waste – sounds obvious but often requires significant focus. Focus demands priority. Dictating priority doesn’t last long; instead, it must be a priority backed with support when “the going gets rough”.  Reducing waste reduces raw material cost – if raw materials are a significant portion of your business cost, consider prioritizing. If they aren’t, ignore this item!

2. Improve operational efficiency – find a way to resolve roadblocks, analyze root causes and improve your throughput. Improving operational efficiency frees up capacity for growth. You might be able to free up crews/people that can be re-focused on other, value-added activities that will increase profitability and support business growth.

3. Minimize machine breakdowns – it is obvious that minimizing machine breakdowns will improve operational efficiency. In addition, it typically also reduces waste because lining out the machine when starting back up uses extra materials. A healthy focus on preventative maintenance combined with operator training programs typically does the trick.

4. Reduce inventory levels – although the main benefit of lower inventory levels is increased cash flow, it also can reduce operational cost. For example, if there is less inventory on hand, it is typically quicker and requires less people to cycle count, pull inventory, etc. It also can reduce costs significantly if your company is at the breakeven point in terms of warehouse space.

5. Continuous improvement – don’t forget to ask your employees for ideas! In my experience, employees are able to generate significant ideas to save operational cost when asked. Be genuinely interested and you’ll be amazed with the results.

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Sustainability is gaining traction in today’s cutting edge discussions. Whenever a topic pops up in multiple places suddenly, I take notice. I’ve read multiple articles in trade publications and magazines, attended a keynote at an international trade conference devoted to the subject and even read how my alma mater has developed a leading program in sustainability (of course!). So, what’s all the fuss?

Several years ago, when the subject first started coming up in conversations, I wondered how this topic made business financial sense. Then, after a bit more research, I discovered I’d been working sustainability aggressively for many years and just didn’t realize it – in essence, it is common sense!

I thought the University of North Carolina Business magazine defined it best – “Sustainability is about doing what’s best for everyone involved – from shareholders to customers to employees and the community – in a way that respects the environment while ensuring financial returns for the company.” Thus, who wouldn’t want to be sustainable? Given this premise, I thought we’d discuss a few ideas of sustainable strategies a company could consider: 1) Optimize packaging. 2) Reduce waste. 3) Optimize freight.

1. Optimize packaging. When I was in my role as VP of Operations for a mid-sized manufacturer, we were relentless on sustainability – known to us as packaging optimization. Since we were in the midst of two major initiatives, redesigning our product for a new product launch and redesigning our product as a part of a cost reduction project while maintaining product performance, it made sense to include packaging in the process.There were countless opportunities in packaging. A few examples include: 1) Compressing the product so that it fit into smaller plastic packages (or more items fit into the package) which then fit into smaller boxes (or more of them fit into the box). 2) Partnering with suppliers to develop new materials or tweak materials so that we could have a thinner material which still met product performance expectations and manufacturing expectations. 3) Taking a cross-functional view of packaging with logistics to optimize the number of boxes on a truckload, minimizing potential damage and optimizing storage and warehousing efficiencies. And the list goes on…. Each of these initiatives helped to improve the bottom line.
2. Reduce waste. Sounds simple and is the mantra of not only lean, the Toyota Production System and just good common sense but also sustainability. Each dollar of waste reduction = sustainability.Since there have been mountains of data written on lean, my preference is to “keep it simple” – look for ways to reduce waste in your organization (ranging from reducing scrap on the manufacturing floor to reducing the number of steps required to process an order to reducing inventory levels), and then put plans in place to address the opportunities. It is as simple as that. In my experience, common sense was the 80/20 of reducing waste. Of course, you’ll run into technical issues etc, but there are always ways to resolve if the appropriate people are involved.
3. Optimize freight. Certainly anything you can do to optimize transportation costs will achieve the desired end result. Therefore, consider some of the following – Can you optimize your routes? Implement milk runs? Utilize pooling? Implement transportation optimization software to improve transportation efficiencies? Combine rail and over-the-road? Consider redesigning your transportation strategies (sourcing study)? Again, there are many options. Improving your transportation processes will likely reduce costs, gas, etc – and, many times, you can do it with improved customer service!

These are just a few sustainable ideas. They are largely common sense and do not require significant capital/ cash. As you can see, there are countless strategies which will drive the triple bottom line – people, planet and profit. Why not start with one that fits with your company and then tackle them one at a time? It is likely to not only drive results but also create an engaging teamwork environment.

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