Packaging Opportunities for Businesses: Managing the Unmanaged

Spend Matters welcomes this guest article by Dante Cadena of GEP.

Though there are many ways to use packaging, the principal one is for commercial purposes. A product’s appeal and presentation are the principal compliance and are categories that marketing, procurement and even production are managing through packaging directly.

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But, what about supply chain packaging that is for transportation, storage, handling and protection purposes? This section of the category is usually unmanaged. This packaging is normally a decision that the good’s supplier makes. Depending on the business, this kind of packaging for a specific good doesn’t appear to represent a significant amount, but the particularity of this packaging is that it can be consolidated and escalated – from raw materials to finishing and decoration levels – to the whole supply chain. This can be tailored for as many goods as the business allows, even for packaging dedicated for commercial purposes.

With that approach and holistic overview, and depending on the business needs, the best practices can be summarized in 3 points:

  • Standardize. Reduce the complexity and fragmentation of all the packaging variety: from low levels like fiber types or resins to the high ones like pallets or stretch films. Keep it as simple as possible, as that simplicity will allow reduction in lead times, improve inventory management, consolidate suppliers, reduce specifications and create consortiums for specific materials. Applying this can drive cost savings from 2% to 7%.
  • Optimize. Use only what you need and no more. Identify the features and properties that the business needs and work with the supplier to obtain the necessary amount. Everything counts; from designs, resistance and coating to thickness. Applying this can drive cost savings from 2% to 4%.
  • Go green. Reduce, recycle and reuse. Find the way to reduce the quantity of material used for packing, best for recycling the waste and scrap and reuse if possible. Hard containers for bulks, glass and bottles are trending. For some industries and cultures, going green can attract government and market incentives and can prove useful in terms of branding purposes. Applying this can drive cost savings from 1% to 3%.

Even though every business has its specific needs, there are various opportunities for packaging. New trends and technologies facilitate demand management and specification optimization that leverage cost reduction; companies that have successfully implemented this have reduced from 5% to 14% of the total cost of ownership (depending on the business). Don’t let this normally unmanaged part of the category cause invisible spend leaks, you can save more than you think.

For more interesting thinking on procurement, visit the GEP Knowledge Bank.

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