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Markets in Transition: Is The Best Load Approach the Best Way Forward for Unit Load Design?
The Big Idea behind systems-based design is the elimination of excess packaging. Will the corrugate industry mount a fight or get on board with this unit load revolution?
By Rick LeBlanc
Date Posted: 11/1/2010
A year ago in the Pallet Enterprise, Dr. Mark White, the former director of the Center for Unit Load Design at Virginia Tech, trumpeted the concept of systems-based design as an effort to reduce packaging waste and remove cost from the supply chain.
At the core of the issue is packaging reduction, primarily removing the costs of corrugate in each unit load. The concept is that companies might improve the quality of the pallet used while reducing overall unit load cost by primarily cutting back on unnecessary corrugate packaging. Although pallet costs would go up marginally, the overall cost to the unit load would significantly drop thanks to major reductions in corrugate packaging.
White has advocated this idea for a number of years because he had come up with data showing that the main packaging cost driver in unit loads is the corrugate not the pallet. He believes that shippers could save lots of money if they designed unit loads as systems instead of individual components as is the primary method utilized today.
Changing how companies have done things for decades is never easy. And it is certainly difficult if you are talking about getting packaging departments, marketers, logistics managers, corporate bean counters, distribution center managers, and purchasing departments to work toward common goals. They may all have varying metrics that work against each other to achieve systems-based design.
White's Big Idea is reminiscent of the move that Wal-Mart made years ago when it transitioned to reusable plastic containers (RPCs) for perishable products. Wal-Mart and plastic container poolers tried to push for a massive change in produce logistics. Only a few retailers jumped on the RPC bandwagon. RPCs forced the corrugate industry to innovate and respond. Although there was a strong resistance to RPCs, there was really significant change taking place in tray pack, tabbed corrugate cartons. This change though was incremental rather than a radical conversion to plastic containers.
Looking at systems-based design, the situation is a bit different because corrugate would not be fighting against an alternative product as much as the concept of waste reduction and sustainability â€“ two major buzzwords for Fortune 500 companies right now.
The basic premise of systems-based design begs a number of questions:
Dr. Diana Twede of Michigan State University certainly seems to be in favor of White's approach.
"Packaging has a significant impact on the cost and productivity of logistical systems,"wrote Twede in The Logistics Handbook. "However, because purchasing and disposal costs are borne by firms on opposite ends of the distribution channel, and because the productivity effects permeate a logistical system, packaging-related costs are often overlooked and underestimated. Few firms manage packaging with a systematic approach."
Many companies have picked the low hanging cost savings off the supply chain tree. Now, they are going to have to look for solutions that span various departments to cut costs beyond the basic price of materials. Companies have to consider a wide variety of costs impacted by the unit load including: packaging, product damage/shrink rates, production efficiency, fuel and transport, and unsaleables.
"The systematic approach is what I've always preached,"agreed Al McKinlay, a veteran packaging consultant whose career has spanned more than 40 years. "Sometimes," he said, "you have to spend more on packaging to save (even) more on transport."
Not necessarily, McKinlay indicated. Transportation is typically the largest component of logistics costs. Sometimes, McKinlay noted, it is appropriate to spend more on packaging if it can reduce freight. He cited the example of more expensive but compact protective packaging for appliances that takes less space on the trailer, allowing the shipment of extra units per load at an overall per unit savings.
If a systematic approach recommends reduced corrugate content, will the corrugated packaging industry push back?
McKinlay doesn't think this is likely. "If the buyer has reliable test data that proves his case, I don't think any corrugated box company would oppose reducing the grade of box used," he said.
Moreover, packaging reduction is part of a massive movement impacting the consumer goods industry, sparked by both environmental and cost cutting concerns. For example, Proctor & Gamble recently unveiled a new sustainability vision that calls for a 20% reduction in packaging. Other major food manufacturers are doing similar things by trying to reduce packaging waste. Wal-Mart has touted its Sustainability Scorecard for suppliers, which among other things, calls for packaging reduction and the use of green alternatives.
Generally, the trend has been to reduce corrugate in packaging. Overall, the amount of corrugated on average per case has decreased 20% in the last 15 years. Systems-based design would not buck the trend. It would simply amplify it.
For the last two years, I have attended PACK EXPO, the leading packaging show in the country. Packaging reduction has been the key spoke in the major theme of sustainable packaging. Everyone is talking about it. The problem is that they are not talking about it across departments and realizing maximum savings.
The simple answer is, "Probably yes," according to McKinlay. Packaging change is ongoing and not a catastrophic event. While many shippers do not have in-house packaging engineers, they rely on the testing facilities of their packaging suppliers. Small changes may just require two weeks of testing, while more significant modifications may require test shipments. Such a testing process might last 2-to-6 months to validate the new change.
What if systematic design suggests a lighter box, but once the unit load reaches the distribution center, the order selector piles heavier boxes on top of it?
Impact of packaging changes won't be a problem as long as the systemic approach evaluates all major contingencies in the supply chain, according to McKinlay. In this scenario, boxes should be designed to hold up when smaller boxes are stacked on top, with at least a 12 lb. density per cubic foot.
Given the comments above with respect to the frequency of packaging change and the massive trend toward packaging reduction, there is no reason to believe that packaging purchasers would resist packaging reduction. This is especially true if it helps them achieve better overall logistics efficiencies. But the probability is that any change can take years to institute. And it may require the visionaries to penetrate layers of bureaucracy to achieve the stated goals.
Convincing people to cut costs in corrugate packaging seems to be the easy part of the puzzle. Getting product manufacturers to pay more for a stronger pallet is the much tougher sell.