Business Magazine

Packaging Challenges Eating into Your Supply Chain Budget?

Posted on the 23 January 2014 by Ryderexchange

Knowing how different packaging operations impact networks can help.

Whether you’re managing a confectionery, snacking or other type of food manufacturing supply chain, packaging is one of the most overlooked opportunities for improvement.
Most companies do a great job of weeding waste out of other links in the supply chain.

Port iStock 000004910014Large1 300x199 Packaging challenges eating into your supply chain budget?

When it comes to packaging, however, most aren’t as strategic as they could be. In fact, packaging often slips through the cracks completely when supply chain decisions are being made.

The good news? This oversight serves up an exciting opportunity to boost both efficiency and customer service. If you haven’t optimized packaging operations yet, now is a great time to start. But first, make sure you understand the three types of packaging operations and how they fit into a larger supply chain strategy.

Know your packaging operations…

Packaging operations come in three flavors. Each impacts the supply chain differently.

  1. Contract manufacturing: when manufacturers don’t have the equipment to produce/package products in-house, they subcontract the entire process to a third party – from procuring ingredients to packaging products into retail-ready formats. Within the context of food manufacturing, this might mean using the contract manufacturer’s production lines to make candy and then package it using fill bagging, shrink-wrapping and robotic picking & packing capabilities. The use of contract manufacturing is typically driven by the need for capabilities that aren’t available in-house.
  2. Primary packaging: the manufacturer outsources initial packaging to a third party that takes a “work in process” product and converts it to retail-ready output. For example, the contract packager might provide additional packaging capacity to accommodate new product launches or seasonal surges. The use of a primary packager is typically driven by a need for additional capacity, not capabilities.
  3. Secondary packaging: the manufacturer sends a retail-ready product to a contract packager to reconfigure it in another retail-ready package. An example might be re-packaging a toothbrush and toothpaste together. The use of a contract packager for secondary packaging is typically driven by retailers looking to merchandise products differently to gain a competitive edge.

Could you be under-leveraging your packaging operation?

If you’re like other companies in the food manufacturing or consumer packaged goods space, chances are the answer is yes. And if you are under-leveraging packaging, simply taking these three steps could make a big difference in your supply chain:

  1. Push the packaging process as close to your customers as you can.
    For example, instead of packaging in one location and shipping to another, considering packaging goods in multiple locations, closer to retailers/consumers.
  • Make sure the supply chain team is part of packaging decisions.
    Too often, packaging decisions are segregated from supply chain decisions. Instead those decisions are made by marketing, manufacturing or R&D teams that may not be working with the most complete or accurate information. Including supply chain experts in the process enables more informed decision-making because it factors supply chain impacts into the decision and results in a better idea of total landed costs.
  • Tap into postponement and sustainability opportunities.
    More companies today are working with less inventory and tuning their supply chains to better respond to consumer demand. Postponing packaging until just before products go to retailers helps eliminate waste, reduce inventory and associated carrying costs and respond better to customer demand. The result is often lower costs and less environmental impact.Want to learn how you can design a supply chain that can flexibly accommodate new product launches, seasonal demand and overflow capacity? Watch the Talking Logistics episode on “The Important Role of Packaging in Supply Chain Network Design and Optimization” here.

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