It’s a big task putting your packaging out to tender, it takes a lot of preparation to identify current suppliers, products, specs and pricing.
Cost savings on packaging are typically reviewed in isolation – suppliers bid on “like for like” products based on current usage. This can amount to small scale savings on individual items, potentially delivering a good saving across the total packaging spend however, there are greater savings to be had.
By switching the focus from price reduction to improvements in the existing packs, you could make larger, longer term savings including reduced damages and transport costs, improved palletisation, or maybe speeding up throughput by taking less time to pack.
If you are looking to reduce your spend on packaging, these six tips will help you achieve longer term cost savings.
Review your packaging storage costs
If you are purchasing packaging direct from a manufacturer in large MOQs or storing multiple packaging SKUs onsite then you could have a warehouse full of packaging. You might be buying it at a great price but, how much are you paying to store it? How much is it impacting your cash flow?
If you are using a particularly bulky packaging solution that requires a lot of storage space, is there a better solution that takes up less room in the warehouse?
Consider less bulky packaging alternatives or investigate a packaging supplier that can deliver stock “just in time” (JIT) or “drip feed” as a replenishment to the minimum stocks held on site. The packaging may cost slightly more but compared with the costs of warehouse storage, your savings could be significant.
Get a handle on transportation improvements
Reworked packaging can contribute to improvements in cubage, pallet yield and payload, reducing your transport costs and carbon footprint.
A slight reduction in outer pack size or thinking about the orientation of the pack, will help maximise the surface area used on your pallet. You could accommodate more products in a layer or increase the number of layers without impacting pallet height. It could also lead to less void fill being used in the pack – reducing the amount of packaging material you use.
Analyse damages and returns
It is vital that you understand the total cost of damages and returns. These include the cost of writing off the original product (if damaged), the cost of the replacement, double transportation costs to redeliver (triple if you offer a returns service), labour charges to pick and pack the order again and administration costs to process the RMA.
By identifying the true cost of returns, you can come up with a solution that delivers improved protection based on commercial results. It may cost 10% more to protect the goods, but it could be reducing your total damage and returns costs by 80%.
Scrutinise the amount of time spent on administration
CIPS (Chartered Institute of Procurement and Supply) calculate the average cost of placing each purchase order at £50. This takes into account the management of orders, invoices, utility and labour costs. If you are dealing with various packaging suppliers and raising weekly or monthly purchase orders with each of them, it is definitely worth investigating how much this costs.
Savings could be made by consolidating your supplier base or switching to a single supplier who can deliver all of your packaging requirements. By raising a single standard PO each month and switching to monthly consolidated invoicing you are reducing delivery vehicles into the warehouse and the handling of both paperwork and goods is reduced.
Tracking orders, managing forecasting, reporting and identifying packaging waste also becomes easier – all of your data is potentially generated from a single source.
Audit how long it takes to pack products
The longer it takes to pack products, the slower you are getting goods out the door. And if you hit a spike in production then, potentially, you could be drafting in more packers to help.
By simplifying the packing process, you could speed up your operational throughput.
Investigate a quicker way to pack goods, perhaps by using alternative pack designs such as boxes with a crash-lock base or a composite pack that negates the need for separate infill. Semi or fully-automated packaging systems will also save you time and will potentially use less material – generating less packaging waste.
Reflect on your customer experience
Customer experience has become the star in the retail world and it shouldn’t be any different with B2B.
Does your packaging convey the value of the goods and ensure that the order arrives in full working order? How easy is it to unpack the product and recycle the packaging? Many businesses pay for refuse disposal so they don’t appreciate bins full of packaging.
Success for any business is about customer retention and repeat orders – it is vital that products are dependable and stand out.
If you’re interested in investigating improvements in your existing packaging, contact Macfarlane Packaging today.