For those who live and die for packaging sourcing, unit cost savings is not the only prerequisite for success. Sure, it's possible to achieve savings through classic e-sourcing approaches. But the returns companies can achieve through traditional sourcing approaches -- even those which leverage e-sourcing and reverse auction technology -- will eventually top out. Rather, to achieve the best possible packaging results over the long haul, both large and middle market companies should incorporate engineering and design specifications into their approach. In other words, they must consider the total package -- unit cost, total cost, green and other factors included. Fortunately, companies can take a crawl / walk / run approach to packaging, focusing first on sourcing to build momentum before tackling design and related specifications in later waves.
If you’re curious to learn more about this topic, I'd strongly encourage you to check out the latest Spend Matters Perspective on the topic. Titled ”Have You Got the Total Package? Combining Sourcing and Engineering to Drive Packaging Savings and Innovation” (free, but registration required), the Perspective is sponsored by Connell Spend Management. Looking for a flavor of what's included? I've excerpted some of the introductory material below.
"In today's business environment, packaging represents an ideal category to prioritize and target from both sourcing and design/engineering perspectives. This is especially true in the middle market where most companies have not dedicated resources to anything more than keeping the proverbial plant running. Even in the current inflationary market environment, savings can be significant. In the case of packaging, 20% savings is quite possible through better sourcing, and 40-50% is not out of the ordinary when factoring in design and engineering into the cost equation ... [but] most strategic sourcing approaches obtain near-term savings at the expense of selecting the right long-term partner who might be able to offer even greater category savings and related improvements down the line."
"That's why packaging sourcing must expand to introduce design and engineering variables into the equation -- not to mention a supplier's willingness to take part in cost reduction and operational improvement efforts. Indeed, as companies begin to consider factors that go beyond simple unit cost comparisons, they can move up the packaging value curve, creating greater savings, reducing operational risk, enjoying better service levels and improving their overall environmental/green credentials in their customer’s eyes. But this type of evolution does not have to happen overnight. It's not a question of a one hundred and eighty degree change in strategy. Rather, companies can take a crawl / walk / run approach to achieving packaging savings results."
The rest of the Perspective explores specific packaging sourcing and engineering tactics that companies can follow to reduce costs throughout the supply chain, providing anecdotes and examples for organizations to model their efforts on. Click here to read more.
- Jason Busch