On-Demand Packaging: Answering the Dimensional Equation

Editor’s note: Packaging has traditionally operated in its own silo, disconnected from the rest of the supply chain. However, the growth of e-commerce, smaller and more frequent deliveries, and proposed changes in the way that parcel and LTL carriers calculate shipping charges are combining to put packaging front and center for supply chain managers. It could be the next—or last—frontier in supply chain optimization. Last week, Jack Ampuja weighed in on the potential impact of dimensional pricing. In the following column, Hanko Kiessner, CEO of Packsize International, looks at how on-demand packaging has the potential to change how e-commerce companies and parcel shippers address transport packaging.

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For years, manufacturers put a lot of effort and expertise into making something, and then in what often seemed like an afterthought, some sort of shipping material or container was devised to get the product to the customer.

Those responsible for product delivery are wising up. An acceleration in the adoption of on-demand packaging is supported by the premise that every cost associated with outbound warehousing, order fulfillment, and transportation is driven by the cubic volume of the box used to package a product or order. Minimizing outbound cubic volume is the key to managing cost. The recent focus on dimensional sizing and advances in multi-channel distribution place increased emphasis on the box and the ability of on-demand packaging – or ODP - to reduce overall supply chain costs.

Think of ODP as a systems-based approach to packaging, a concept Mark White discussed in Packaging: Think Inside and Outside the Box in the September issue of Supply Chain Management Review. As a systems-based approach, on-demand packaging gives a wide range of manufacturers, suppliers, and distributors the ability to be more flexible, resource-responsible, and sustainable by making the box at the pack stage of their packaging processes.

Out with Box Inventories

In an ideal world, box inventories are designed to buffer against spikes and lulls in demand. In reality, the reorder points and run sizes are driven by forecasting data that is intrinsically flawed so stockouts and obsolete box inventory become unavoidable.

To address inventory issues, many online shopping companies embrace a cartonization approach where, rather than having many different box sizes in stock, they select a limited number and use software to select the optimum box for the product being packed. While drawing nearer to achieving optimum box sizing, this still can require the use of air pillows and other filling materials, which doesn’t address the current focus on box dimension, adds costs, and creates waste. While the software can specify the best box for one product, these cartonization systems cannot cope with a shipment that brings two or more items together into a “new” shape.

Instead, on-demand packaging is proficient in addressing variability in a customer’s packaging needs. This type of system simplifies the packaging into a more commoditized form—continuous corrugated. Technology-enabled box production becomes part of the material flow. The pick list that conventionally helps find the box is used to make the smallest possible box, in less time and with unlimited options for quantity, size, and style.

The immediacy of answers needed today also belays the old box-off-the-shelf method. With customization placing an emphasis on “now,” on-demand packaging systems make it easy to adapt to change, producing a new box size on the fly. This ability to react makes on-demand packaging ideal for pack to order environments, such as fulfillment, where run sizes are based on actual production demands—not forecasted or predicted demand. Purchasing is simplified as well.

A Unique Box for Every Order

Making the box on-demand as part of the packaging process eliminates guesswork. There is almost no material handling other than replenishing the corrugated at the machine. Designing and implementing the system focuses attention on the process details, wasted movement is stripped away, and best practices are identified and standardized.

The benefits of on-demand packaging are most ubiquitous today in e-commerce, where there is a dramatic shift in the way orders are picked, sorted, packed, and shipped. On-demand packaging systems have more fully developed to manage single-piece flow and batch environments as well as more complex multi-machine packaging operations. Corresponding software integrates and directs order shipment data from the production or warehouse management system so that the correct box style and size is made according to the bill of material—for one or more items. In this way, the packaging method can be continuously enhanced and improvements implemented immediately.

Although there are some basic process flows and equipment configurations that work for multiple customers, in the end, the customer’s on-demand packaging system is designed to meet their unique requirements. Almost overnight, the customer is able to realize a faster shipment process, reduced need for filler material, improved product protection, and less waste; the total cost is usually 20 to 35 percent less than conventional packaging supply chains.

With technology at arms-length, the pace of digital orders and product fulfillment is only expected to grow. The question before us now isn’t how e-commerce companies will fare this holiday season, but how quickly they are able to prepare for the dimensional cost increases on their horizon?

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