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Supply Chain Challenges, 3PL Outsourcing, Reduce logistics costs, Contract Packaging

Streamline Packaging by Integrating with Product Distribution

Alex Stark | August 12, 2020

Specific consumer products all look pretty much the same as they roll off the manufacturing line.

But to satisfy the various ways retailers want to sell products and consumers want to receive them, these products are bundled, wrapped, sealed, tied and packed into dozens of different configurations for final sale.

This is called secondary packaging and it’s very expensive for manufacturers to constantly adapt their production lines to create this multitude of packaging configurations. So, they lean on outside resources to streamline packaging.

streamline packagingThese partners could be pure-play contract packagers who do the work and then feed packaged product back into the manufacturer’s distribution network. Or, increasingly, they could be third party logistics providers (3PLs), like Kane Logistics, who have developed the expertise and infrastructure to manage high-volume final packaging operations and integrate this function more tightly with final distribution.

The advantage of using a 3PL as your packaging partner is bringing together tightly related supply chain functions. Performing final packaging in the distribution center can reduce combined distribution, packaging and transportation costs by 30% and can cut at least 7 days in order-to-delivery cycle time versus shipping products back and forth to outside contract packagers.

Even within the manufacturer’s own corporate structure there are functional disconnects that inflate costs.

Let’s use the example of merchandise displays, which are built in volume and offered to retailers to place at the end of aisles or other high-traffic spots in stores. Often, it’s the marketing department, or their outside design consultants, that dictates the display design and directs the efforts of downstream packaging and logistics colleagues. But something that looks great at the end of an aisle may not be very cost-effective to build and ship.

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A better approach is for the marketing team to share its idea and objectives with its research and design group, which can make suggestions. Then, get the packaging and logistics teams involved to determine how to build and ship the display in the quickest, most cost-effective way – right down to the corrugate type used.

A collaborative approach from the start can streamline packaging and trigger dramatic savings. For example, a contract packager for a large CPG company designed a point-of-purchase display that took a combined 28 hours to assemble. In addition, the shape of the display resulted in inefficient use of trailer space. The 3PL that was building the display suggested changes that maintained the basic look of the display, but cut assembly and labor costs in half and improved trailer utilization by 10%. This simple change saved tens of thousands of dollars in a very short timeframe.

Secondary packaging is much more of a distribution function than a manufacturing function. That’s why it makes so much sense to integrate your packaging and warehouse distribution functions. (Our eBook explores this topic in detail.) Your DC is the final touch point before products ship to consumers or retailers. It’s here that you want to be able to flexibly react to market demands and last-minute retailer requests.

If you want to streamline packaging, here are the primary benefits of integrating final packaging and distribution:

  • Lower inventory carrying costs. Use of an outside contract packager adds 7 days to the distribution cycle, forcing you to add safety stock.
  • Reduced labor costs. A 3PL will be focused on the practical downstream implications of particular packaging designs and configurations and can make suggestions to streamline packaging processes. 3PLs are also expert at managing promotion-related and seasonal volume spikes, deploying a combination of cross-trained associates and temporary workers to economically manage high-volume, short-term projects.
  • Lower freight costs. When products ship out to a contract packager and then back to the DC, that extra run hikes freight costs by at least a third. Also, as mentioned, 3PLs can recommend slight changes to packaging and display design to maximize trailer utilization.

Beyond cost savings, the most powerful benefit of integrating final packaging with your distribution operation is sales growth. Much of final packaging work is in response to retailers’ demands for different packaging configurations – variety packs, 12-packs instead of 24-packs, multi-product promotion kits. Typically, these are fast-moving projects. 3PLs that combine expert packaging and logistics skills are better able to respond quickly to such requests.

If, because of this 3PL support, manufacturers can confidently answer “yes” to these retailer requests, they gain a huge advantage. For example, let’s say you have an idea for a Father’s Day promotion that combines 3 different shaving products in one kit. Target loves the idea and wants 100,000 kits in 4 weeks. In such cases, a nimble, vertically integrated supply chain can help you book that huge order.

Dynamic contract packaging services

Kane Logistics supply chain services include robust contract packaging services for numerous food and beverage manufacturers. We combine this capability with warehousing and transportation services to provide a fully integrated distribution solution. Contact us today to discuss if and how we can help streamline your packaging operations.