SMALL BUSINESS HACK: UNIFIED PACKAGING
Unified Packaging
A potential way to significantly reduce costs across the company is to reduce packaging complexity. This can save money in the long-term and can have an impact on space savings as well. Having a diverse product offering is often critical to the success of a small business. However, an increase in product complexity will increase packaging requirements as every product may have unique packaging specifications. Unifying the packaging can help to reduce costs and increase efficiencies.
When ordering packaging from a cardboard or print manufacturer, the more uniform the product the lower the price. Each time a new iteration is added the price goes up. A reduction in complexity will increase the economies of scale. Ordering a larger quantity of the same size item will reduce the per piece rate. This is an effective strategy in all areas of packaging.
Reduce Boxes, Reduce Costs, Reduce Space
While it is tempting to have a box for every item, if the product isn’t fragile, reducing the box varieties will help reduce prices. Boxes cost less to make per piece the longer the machine runs after startup. These are savings that you can take advantage of by increasing run times through reduced complexity.
Creating a single box that is used for multiple items will reduce machine changes. Finding a box size that can accommodate different items can help eliminate any box sizes that overlap. One important step in this process is creating a fixed number of items per box. Using this number as the ordering quantity for customers will improve box efficiency.
Moving to a system with a reduced number of boxes will have an effect on price and space efficiency. Each box company has a minimum order quantity. When there are several different boxes, each box must be ordered in at least the minimum quantity. As a small business, ordering the minimum quantity of multiple boxes can cause cash flow issues and unnecessary stock.
When the number of box types is reduced, fewer multiples of the minimum number of boxes must be ordered. This will reduce the total number boxes, which will reduce the space required to store the boxes. If there are multiple different box styles, then each will need to be stored in an accessible location, which will take up additional space.
Reducing the number of boxes will reduce the space needed for storage in two ways. First, fewer total boxes will need to be stored. Second, less space to access different box styles is required. These improvements have a compounding effect on cost reductions throughout the organization.
Cardboard Box
Simplifying boxing reduces training costs. When a new employee starts, it is no longer necessary to train them to handle as many packaging requirements. Instead, the boxes are self explanatory, two of widget A in a box or three of widget B in a box. Reducing the need for training will also reduce the possibility for mistakes during shipping. A more uniform shipping process helps keep chargebacks low.
Super Hack: If there is no way to reduce the number of different boxes and the number of box iterations is high (> 100), contact the local box maker and discuss using an RSC boxing machine. Corrugated manufacturers are often vertically integrated and each time they need to process the paper it costs more in labor. Speak to the corrugator about bringing a box machine in-house and paying only for the sheeted corrugate. Producing the boxes in-house will reduce the need to order a large quantity of different boxes at once.
Printed Material
Tags and labels are necessary to communicate product information to the customer. Each product may have unique attributes or a list of components that need to be prominently displayed. If boxing is unified, then printing can also be unified to a certain extent. There are several ways to achieve this, each of which involves reductions in complexity.
Labels and tags may require special shapes or sizes. This will involve purchasing cutting dies. A cutting die can be a very expensive capital cost. Designing all products to have the same size label or tag can greatly reduce die costs. Reusing the same cutting dies when product lines evolve and change can also keep startup costs of a new brand down.
Color is another driver of cost. Finding and using a digital printer can offset the need for multiple colors but significant quantities are needed to make this route cost effective. If it is not possible to use a digital printer, reducing the number of colors in a design and unifying those colors across lines can reduce costs. In flexographic, offset, and screen-printing, it is costly to change inks each time a new job starts. Using the same colors across each line will keep costs associated with changing colors down.
Unifying labels to all have the same design and verbiage will reduce ordering complexity and increase economies. As an example, micro distillers create a unified label and then write the unique information on the label during production. Be careful not to increase production complexity when simplifying packaging. This can lead to a drop in productivity and cost savings.
Vendors
Small businesses may have a decentralized purchasing structure or lack a purchasing plan. If this is the case, there is a chance the company is using several different vendors who all have the same abilities. Consolidating purchasing to one or a handful of vendors can reduce costs in several areas.
Paying to ship different items from different vendors is costly and inefficient. Reducing the number of vendors can also reduce shipping costs. Receiving a pallet of different items from one vendor is much cheaper than receiving multiple UPS or FedEx shipments.
Reducing the number of vendors will also reduce the burden placed on the purchasing agent. If a purchasing employee needs to contact multiple vendors, there is a greater chance that mistakes will be made. It also takes much longer to submit POs to multiple vendors rather than a single PO to a single vendor.
Increasing the efficiency of packaging will have significant impacts in many areas. There are cost savings in purchasing labor, per unit cost, capital equipment costs, production labor, and shipping labor. The savings in each area will add up to big cost reductions quickly. Simplicity is the key to low cost packaging.
