Pack smart, save big

'Australian companies investing in new packaging technologies have the opportunity to drive down their supply chain costs.'
By · 19 Oct 2013
Share this article
By ·
19 Oct 2013
Share this article
comments Comments
The drivers of costs for many companies - freight and storage - are now at the forefront of change by directors of manufacturing enterprises and the landlords of industrial property.

Retailers such as Walmart in the United States and similar Australian companies are taking action to transport fewer containers, but which are fuller, to cut waste and storage requirements.

Walmart has recently redesigned the shipping cases of 200 different products.

This allows it to eliminate the "air" in the box, thereby requiring fewer boxes.

For the industrial landlord, this allows the warehouse to be more efficiently configured to allow for more goods to be stored.

It also means that smaller properties, once deemed unsuitable and uneconomic, are now attractive. This is applicable in parts of Australia where available land for industrial property development is limited.

The move provides companies with not only cost savings from eliminating excess space within shipping containers, but also the sustainability benefits that follow.

According to Jones Lang LaSalle's supply chain and logistics solutions team, understanding the optimal size and shape of boxes for packaging could have multiple positive impacts.

The US-based managing director of global supply chain and logistics solutions at Jones Lang LaSalle, Rich Thompson, said Walmart was an example of the multiple benefits companies could achieve.

"This redesign of their packing cases eliminated 727 ocean containers per year that transported their products between Asia and North America," Mr Thompson said.

"This translates to savings of more than $US2.5 million annually, assuming each freight container costs $US3500 on a conservative estimate."

In a recent statement, Walmart announced that a 5 per cent reduction in packaging would save it and therefore its suppliers $US10 billion a year.

"In turn that 5 per cent reduction in packaging translated to removing 213,000 trucks from the road, eliminating 66.7 million gallons of diesel fuel and generating $US34 billion in savings across the extended supply chain," Mr Thompson said.

Jones Lang LaSalle's Australian director of corporate industrial solutions, Andrew Maher, who is presenting next week on supply chain and logistics solutions at the CSCMP (Council Supply Chain Management Professionals) Conference in Denver, said the cost savings were significant.

"With fuel costs being identified as one of the biggest expenses for transport operators in Australia, load optimisation and less truck movements is good for the bottom line and good for the environment.

"With estimates that transportation typically accounts for 50 per cent of all operating costs, Australian companies investing in new packaging technologies have the opportunity to drive down their supply chain costs.

"Less storage volumes also mean smaller warehouse requirements, which adds to the costs savings on the real estate front," Mr Maher said.

The head of investment management for office and logistics and business parks at GPT Group, David Burgess, said as a developer of logistics facilities GPT was focused on ensuring its portfolio best met the demands for more efficient supply chains and inventory management.

"We know that a big driver of supply chain efficiency is getting more distribution centres in the right locations, which are closer to customers," Mr Burgess said.

"This is why we have secured centres nearby major road and rail transport and that are strategically located close to, or between, key markets."

Mr Thompson said the humble box and packaging design had now been made a science.

"Usually, physical distribution is not taken into consideration when designing consumer packaging. But our view is that packaging design should be determined by both marketing and supply chain experts to achieve results such as load optimisation, reducing packaging costs and damages and achieving greater environmental outcomes.

"Shipping density, meaning the weight per cubic foot, is a critical cost factor."
Share this article
Keep on reading more articles from InvestSMART. See more articles
Join the conversation...
There are comments posted so far. Join the conversation, please login or Sign up.
Related Articles