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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Prior to Uber, a medallion (a transferable permit that allows a taxi driver to operate) cost $1 million dollars in New York city. It was a powerful permit with substantial value. After Uber started up, the low point for a medallion was around $25,000. That is a 40-fold reduction in perceived value! Alternatively, Uber brought customer service up several notches, added customer value and growth exploded. Customer service mattered.

On the other hand, although Uber exists in Japan, it is not well known. Taxis continue to rule the road. Why? This is because taxis are clean, efficient, and provide value. Uber wasn’t filling a gap in perceived customer service deficiency.

Fast-forward several years, and the current value of a medallion is around $137,000. It is up 4-fold yet remains less than 20% of its peak value. Could this be related to service? Absolutely! I used to take Uber or Lyft home from Ontario airport. However, the last 3+ times, it took forever to get a driver, it cost a lot, and it was a frustrating experience with poor customer experience. Taxis are starting to look more reliable and faster. I decided I’d rather drive and pay for parking for more reliable and quicker service for close to the same price. If this spreads, the value equation will continue to change.

How does this boil down? Customer service matters and can drive millions to the bottom line.

Customer Service Rules

The best clients prioritize customer service and customer success. A superior customer experience will create customer loyalty. As the world becomes more volatile, customer loyalty will matter more than ever before. How can you distinguish yourself from the competition? Both simple and advanced strategies can be incredibly effective.

• OTIF (on-time-in-full): Although OTIF seems like a no-brainer (after all, who doesn’t expect products on time), we’ve seen many client examples of significant business growth and success stemming simply from “doing what you said you would do”. Starting with the simple strategies can go a long way.
• Quick deliveries: Amazon has proved that quick delivery has value. When my Mom (who has never ordered directly from Amazon since she calls me to place orders) thinks next day delivery is ‘late’, you know quick delivery has become the standard.
• Reliability: Beyond OTIF and delivery performance, ensuring your products and services are reliable is important. This includes receiving the expected quality in product and service and communicating issues upfront.
• Going the extra mile: There are countless examples of employees going the extra mile. For example, when my car broke down, my mechanic picked me up and took care of my car. When I asked for something a restaurant didn’t have, they made it anyway. And I could keep going with endless examples.
• Customer collaborative programs: We worked with customers to develop processes to figure out what their customers’ needed, where their customers’ needed it, and when the customers’ needed it (collaborative ordering, vendor managed inventory). In essence, our customer took over the ordering process and made sure their customer’s distribution centers/ branches had the right products at the right place at the right time to provide excellent service while minimizing inventory and product costs (production, transportation, distribution, etc.) for the customer and supplier. A win-win.
• New products: Bringing products to market before customers realize they need those products can be risky yet transformational. Just think about the examples. When Toyota wanted to introduce vans in the U.S. market, they drove vans across the country to see what customers might need that they wouldn’t realize or mention in a customer survey. Who knew they needed that cup holder or USB port before they had it? Similarly, who knew they needed an iPhone or even an iPod when walking around with a Sony walkman?
• New services: Figure out what would provide value and what your customers need even if they haven’t requested it or thought about it. Pay attention. Who knew they needed an Uber before Uber existed? Anyone who was picked up in a dirty taxi with an unfriendly driver could figure it out.

Companies that follow these simple and advanced strategies add value for their customers. They will grow faster and more substantially than their competition, and they will add more profit to their bottom line. In fact, they will add more profit to their customers’ bottom line as well.

Please contact us with your stories, issues, and ideas on customer service. And, please keep us in the loop of your situation and how we can help your organization prepare to thrive and mitigate your highest risks. SIOP (Sales Inventory Operations Planning) is one of the strategies and toolsets to help you achieve customer service objectives. If you cannot get ahead of changing conditions and needs, you won’t be able to provide a superior customer experience. Learn more about this strategy in our book, SIOP: Creating Predictable Revenue and EBITDA Growth.

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Originally posted in ASI – Adhesives & Sealants Industry – June, 2023

Innovation allows companies to achieve higher levels of growth, profitability, employee engagement, and success.

According to the Global Innovation Index (GII), Switzerland ranks first in the world with the US edging out Sweden for the second position. China continues to ascend and is in the eleventh position, and the only middle-income economy within the top 30. India also rated number one in the lower-middle income category. It is apparent that innovation, growth, and success seem to go hand in hand. This insight rings true in the business world as well. The most innovative clients have the highest levels of growth, profitability, employee engagement and success.

New Product Development

One of the most visible forms of innovation is developing new products and submitting patents. No manufacturer can thrive long term without a keen eye to research and development, designing new products, and upgrading existing products. The World Intellectual Property Organization (WIPO) reported that the demand for patents hit record levels in 2022. It is no accident that India’s patent applications shot up by 25% as they emerge in the manufacturing realm. China filed the most international patent applications, followed by the US and Japan.

New products can drive success. For example, at a lighting manufacturer, the CEO put a heavy emphasis on designing new products to enter new markets and maintain their top position in their industry. He was one of the only executives investing in people at the height of the Great Recession. Excellent talent was available, and so he hired when the competition cut and invested resources into research and development. Fast-forward a few years and they had developed new products, got architects to spec their products into plans, and they were growing steadily in the new market.

Supply Chain Innovation

Innovation does not come just in the form of new products. You can reconfigure, repackage, develop new services, and find ways to meet unmet needs. These forms of innovation can be far more important as few people develop the new sticky pad. Even the iPhone was an iteration of the iPod which was simply a better “Sony Walkman”. Supply chain innovation can be a critical ingredient to success in the next decade. During the pandemic, executives learned that supply chain should be integral to their strategy to drive profitable growth. Start with your ideal customer and find the best way to grow and innovate with them.

For example, in a piping insulation manufacturing company, providing high quality products and rapid service was cornerstone to growing the business. They had built a distribution network to position product closer to their customers to provide short lead times and quick turnaround service; however, since they didn’t store all items at these distribution centers, they also experienced increased freight costs to supplement customer orders and ship direct from the manufacturing facility when needed. Service suffered because the right product was not in the right place at the right time, and storage costs increased with this model and due to the bulky nature of the product. Thus, a focus was put on innovating the supply chain model to find a new solution to provide short lead times and high service levels while minimizing costs and inventory.

The executives invested in supply chain consultants, supported innovation with trials/ pilots of new replenishment strategies, rolled out advanced ERP and planning system functionality, reviewed and upgraded processes, and designed inventory analytics to support improved service at lower costs and inventory levels. Not only did service levels dramatically improve from the high 30%s to the 90%s for On-time-in-full (OTIF), but costs and inventory levels were reduced. As improved and predictive information became available with business analysis and reporting, they also were able to make key pricing, product rationalization, and service policy decisions sooner and created a resilient supply chain.

Operational excellence is no longer enough. Innovation has become cornerstone to success. There will be more opportunity than ever before during the next decade, but only for those companies continually innovating and improving with changing circumstances. Those that innovate will be ready to take advantage of market opportunities and will pivot with evolving conditions. Will you innovate and grow or decline and die?

Lisa is founder and president of LMA Consulting Group, Inc., a consulting firm that specializes in manufacturing strategy and end-to-end supply chain transformation that maximizes the customer experience and enables profitable, scalable, dramatic business growth. She recently released SIOP (Sales Inventory Operations Planning): Creating Predictable Revenue and EBITDA Growth as an e-book that can be found at https://www.lma-consultinggroup.com/siop-book/.

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September 22, 2016

Last week, Kash Gokli (the head of Harvey Mudd’s manufacturing program) and I facilitated our Harvey Mudd executive roundtable discussion with executives of Southern California on just this topic.  According to best practices, your new product sales should become 30% of total sales within 2-3 years.  This seems like a tall order!

Let’s assume you achieve these goals.  Just from the numbers standpoint, it will not work if you wait too long!  You need to be developing products BEFORE your current products are in maturity and start their downward trend. And, certainly, it is rare for anyone to have only success along the way in product development; thus, it is prudent to start early and expect failures along the road to success.

One tip to implement this week:
So, I bet you are wondering what could possibly be done this week.  I wondered that too until thinking a bit further.  There is actually quite a lot that could be accomplished in a week. Get a cross-functional team together to discuss your products and services.  Think about where they are in the cycle.  Are any getting close to maturity?  How are they performing?  Do you know the market needs?  By understanding these answers, you’ll know where to start.

If you are already in a product development cycle, take a step back to think about whether you think achieving 30% of total sales within 3 years is feasible.  What can you do to strengthen your possibility of achieving this objective?  Who should you involve?  Do you feel confident that your customers are on board?  Put a team together to ensure success.

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