A big-picture approach to reducing packaging costs and boosting sustainability

Your packaging material suppliers can be useful resources to lean on when optimizing your material spend and achieving your sustainability targets. But a holistic perspective on your packaging needs and supply chain network can yield more significant benefits.

Packaging material suppliers are often a useful extension of materials knowledge and expertise for your team. In some instances, they’ll even negotiate annual packaging material cost savings and include the target — often defined as a percentage of spend — in the vendor contract. But from a material supplier’s point of view, there are only so many things they can control. You’ll find that limits the improvements they can find for you.

If using your materials suppliers is your only way to save money, reduce your footprint and improve value, you're probably missing out on potential gains. Here are a few areas to reconsider.

Find real improvement along your supply chain network

If your focus is only on materials, you’re missing out on the big picture. Supply chain and transportation costs can be between five to 10 times higher than what you’ll spend on materials. Inbound logistics, warehousing, material handling, outbound transportation, damage and return costs and labor costs — all impact the cost of goods sold and your sustainability goals.

By peeling back the layers of these supply chain cost categories, you may be able to identify much greater reductions. You may easily find cost savings and reduced environmental impact in pallet layouts, trailer loading efficiencies and double-stacking freight, to name a few.

In some cases, it may be to your advantage to spend more on materials to enable larger supply chain efficiency gains.

Access savings more than once a year

When you have a one-year runway to find savings and sustainability gains, there’s no sense of urgency to push the envelope and move things quickly. You can achieve better results for your organization by developing success metrics that transcend what can be obtained through an annually contracted savings percentage and less packaging material.

It’s possible to build a machine that can continuously crank out and implement productivity improvements and CO2 savings. Get started by empowering an internal champion and setting milestone dates for projects that resolve missed package optimization opportunities in your supply chain network.

A limited perspective limits your potential gains

There’s an old saying: “When all you have is a hammer, everything looks like a nail.” Conversely, when you task material suppliers with finding packaging efficiencies, their limited perspective gives them an incomplete toolset to make that happen. They can only use factors they can influence, like lighter-weight materials or reduced package size.

But if your suppliers can’t find a concrete way to find the needed gains for you — they may just give you a price discount. There’s nothing wrong with a discount; it does move the cost needle but doesn’t do anything to reduce your carbon footprint. But discounts pale in comparison to the long-term efficiencies available by optimizing packaging to ease handling or increase environmental sustainability. There may be alternative materials or completely fresh design ideas available. Starting with a clean slate and exploring all of the available options will give you the best chance for success.

Don’t be bound by the scope of your existing suppliers

The information and advice you get from vendors is inherently limited. The scope of their input is defined by the products, materials or equipment they can offer. Reliance on a long-standing set of incumbent suppliers further limits your options. Other vendors may have better solutions, such as equipment that has enhanced capabilities or runs at a higher speed. Your packaging material suppliers and other vendors can be resources in your cost-cutting and sustainability journey, but they should never be your only method or approach.

Contact us and learn how NTT DATA Supply Chain Consulting’s Packaging Optimization practice facilitates design and supply chain testing, helping you create cost-effective, environmentally sound designs with protection you can rely on. Our top supply chain talent, enabled by proven, leading-edge digital assets — tools, methods and content — deliver actionable insights and measurable outcomes to some of today’s largest and most complex supply chains.