Spend Matters welcomes this guest article by Aleksejs Volcenkovs, chief marketing officer at Kronus.
Supply chain activities are likely the most costly endeavors of any organization. Of course, it is an expected expense that can account for up to 75% of your overall budget, according to a recent article in Inbound Logistics, depending on whether you are using sub assemblers or not. Labor can account for about 16% of your supply chain costs. Cutting back on your labor costs can help you to save quite a bit on costs but sacrificing quality work is not an option. It is a balancing act to be able to save money on labor while enhancing the supply chain.
Reducing your costs can be accomplished by reigning in your expenses. There are some areas where you cannot fully realize any savings no matter how you frame it, but there are other areas like labor that you can reduce costs that most organizations do not really consider.
Making the Assessment
How effective are your supply chain tools? There are certain packaging options that can easily save your laborers a great deal of work.
Here is a scenario: You have three shipments that have to go out. One shipment is in crates. One shipment is in corrugated boxes. One shipment is on pallets with pallet collars. Before we discuss how these options are going to save on your labor let’s look at what the options have to offer you:
- Crates and pallets with pallet collars are sturdy options. Corrugated cardboard boxes only can provide only so much stability. Crates and pallets with collars offer a much better option if you are looking for something that can protect your goods and reduce risk of unauthorized entry.
- Corrugated boxes are not quite as stackable as pallets with pallet collars and crates. Pallets and pallet collars are actually the best choice of the three for stacking options. We will discuss this further later on in the document.
- Corrugated boxes are great for temporary storage but they cannot stand up to long-term storage because they are not completely pest proof.
Pallets and pallet collars are the best option to meet all the needs. They are easy to use and cost effective.
Back to the example: Crates are cumbersome and difficult for one person to maneuver and carry. Corrugated boxes also are not easy to maneuver — actually, corrugated boxes are generally not an ideal solution at all unless they will be used temporarily.
When you are using crates, you may have to assign two people to move, construct and load them. Crates are a great way to protect fragile items but they are not the best choice when you are trying to reduce your labor costs.
Pallets and pallet collars require one person to construct without tools and without help. Anything on a pallet can be loaded and moved by one person.
Saving on labor does not necessarily mean that you have less labor on hand, it means that your labor is working more efficiently. The supply chain becomes more efficient and it works harder for less. You also have to consider how injury risk reduction plays a role in saving on labor costs.
Many companies are saddled with huge compensation claims for injuries that are sustained on the job in the warehouse. Utilizing a packaging solution that reduces risk of physical injury to keep compensation costs to a minimum. Injuries can drive up the cost of your supply chain greatly.
Not Just Labor in the Warehouse
The right packaging options are not only good for the labor in the warehouse, they can help your supply chain work harder for you and they can also help you to make your logistics arm work harder.
Making the most of your freight options is more important as well. Corralling costs comes down to making the most efficient decisions when it comes to movement.
Efficiency is the key to really getting your supply chain working harder with less labor whether that is human labor or the labor of the trucks moving your goods.
A couple things you can do to cut back on costs include:
- Consider the shape of your supply chain
- Consider how you ship
You can take better advantage of what your supply chain has to offer by considering the actual shape of your supply chain. We tend to think of a supply chain as an end-to-end function but with the global economy and a supply chain that can span not from end-to-end but more in a zigzag pattern around the globe using the right packaging has now become an even bigger point of importance.