Companies find cost-effective systems for handling packaging supply chain issues
By Steve Lang, Vice President, Supply Chain, SupplyOne, Inc.
Domestic and global companies have experienced rapid shifts in supply chain planning, operations and inventory management that have led to disruptions in recent years. Many are looking for better systems for using the limited workforce they have available to handle inventory management tasks. Read on for tips on managing packaging inventory and see how several different manufacturing companies have met the challenges head on.
Benefits of outsourcing packaging inventory management
A company’s total cost of packaging management includes everything that goes into selecting, procuring, receiving, paying for, storing, transporting, and assembling packaging supplies. And that system can have a significant effect on the bottom line and cash flow.
An inventory management process that accounts for and optimizes the costs of all packaging-related activities has many benefits. It can save money and increase overall efficiency, working capital, cash flow, and competitiveness. Yet, current challenges may make managing packaging inventory more difficult. Outsourcing packaging inventory management can be one efficient and cost-effective option. Benefits may include:
- Improve overall process efficiency by enabling a company to focus on its core business and competencies, avoid outlying, resource-intensive tasks, and reduce logistics and carrying costs.
- Free up resources by improving working capital, reducing management administration costs, reallocating employees to other tasks, and even reducing sourcing and shortage issues.
- Save inventory space by freeing up space for production activities and reducing pressure to invest in more facilities or buildings.
- Achieve direct cost savings by purchasing from one supplier to build overall order size and potentially reduce cost.
- Help companies take advantage of just-in-time delivery (JIT) delivery of supplies as needed for the production process. JIT results in less cash tied up in packaging inventory, less space needed for inventory storage, and less chance packaging will become obsolete, damaged, or otherwise unusable.
Manufacturing companies of all types gain from outsourcing packaging inventory management
Meat processor improves efficiency and gains production space
A family-owned lamb and veal processor serving restaurants in a large U.S. city found itself with too many packaging machines and costly vendor redundancy. The handling of bone-in meat cuts was causing excessive packaging failures, or “leakers.” Too many packaging machines in their production line and costly vendor redundancy in both their janitorial and consumable packaging supplies meant they were dealing with multiple inefficiencies.
SupplyOne created a food packaging program that redesigned the customer’s production flow and gave them access to a web-based e-commerce portal that helped them identify a new film and pouch vendor who offered a better product for less money, reducing leakers. The program reduced ordering costs and took the customer’s invoice number from 180 to 12. The 30 percent reduction in leaker rates cut waste, and improved inventory management through significant SKU reduction of consumables. By thoughtfully eliminating excess packaging equipment, SupplyOne improved the customer’s efficiency and added much-needed production space.
Dairy and cheese processor improves production efficiency
A dairy and cheese processor with two plants in different states found itself with inefficient automation and technology. Due to problems arising from the distance between the two plants, logistical issues often arose, and the customer wanted to expand to additional states. A lack of in-house expertise led to inefficient automation and technology. Because outside co-packers performed the bagging work, the customer did not have sufficient control over the packaging aesthetics. In addition, the image on the packaging was inconsistent, depending on the plant of origin.
SupplyOne collaborated with key stakeholders to discuss manufacturing concerns with a manufacturing partner and four equipment partners. They outfitted the plants with new packaging equipment and improved their inventory management. All products now have an improved and consistent look, regardless of plant of origin. Eliminating the co-packer improved production efficiency and gave them great control. Products can now be launched in a timelier manner. Additional bonuses include an additional revenue stream gained through a new private labeling program, and improved speed-to-market for new SKUs resulting from a simple artwork change.
Dried meat processor improves inventory management and brand awareness
A branded dried meat processor of entry- to mid-level quality products serving a northeastern tristate area and distributing to restaurants and specialty stores was looking to launch a new, high-end, eight-SKU product line. They wanted to expand their customer base to include mass market marketers and improve profitability by commanding more for their products. However, they found they could not effectively manage packaging inventories and lacked the necessary space for efficient operations, storage of finished goods, and expansion. Plus, their existing equipment did not adequately address marketing and production requirements.
SupplyOne identified the customer’s packaging requirements through collaborative meetings with their key contacts. They addressed manufacturing concerns by introducing a manufacturing partner and shrink bag supplier. In addition, upgrading outdated equipment enabled the company to address image, marketing, and production requirements.
The strategies enhanced the customer’s operational efficiency and cash flow by improving inventory management and introducing flexible bracket pricing and just-in-time deliveries. The program ultimately improved their brand awareness through enhanced packaging design.
Meat processor reduces equipment costs and improves cash flow
A meat processor to restaurants and wholesale markets with $7M in revenue and a $350,000 packaging spend was saddled with excess and obsolete inventories, straining their working capital and cash flow resources. This led to a lack of space for efficient operations, storage of finished goods, or expansion. Their costs were skyrocketing, from labor to processing to machinery and equipment.
SupplyOne collaborated with key stakeholders to outline a plan and introduced new manufacturing partners for their primary packaging. Beginning by significantly reducing inventory and SKUs, an outsourced inventory management program led to a cost avoidance of $65,000 in equipment and a $70,000 cash flow improvement. The program improved their packaging integrity and dramatically reduced their leaker rate. The new operational efficiency gave the plant manager and key employees more time to focus on higher-impact matters.
Popcorn producer reduces inventory, consolidates vendors, and achieves price protection.
A maker and distributor of various flavors and styles of popcorn with retail shops in Virginia Beach, was storing product in trailers at a cost of more than $3,000 per month. They were looking to reduce inventory, consolidate vendors, achieve price protection, and change some of their packaging lines.
They selected SupplyOne inventory management services, which consolidated their vendors and provided them with new equipment and design services, as well as online ordering, summary billing, and a packaging use assessment. Despite a corrugated price increase, the popcorn producer maintained its costs and was able to reduce their storage requirements as they work to reduce their inventory from their previous supplier.
Military uniform decorations manufacturer improves inventory management and gains space savings
A manufacturer of military hardware, ribbons, and uniform decorations was working with far too many suppliers and had an excess of unnecessary inventory, which created financial waste. SupplyOne recommendations reduced the customer’s vendors from seven to two, introduced summary billing, and replaced their packaging equipment. The result was improved inventory management, space savings, and protection from pricing volatility.
Use inventory management to reduce costs
According to research from the Operational Excellence Society, poor packaging management can create costs throughout the product supply chain that are as much as half of the cost of the product itself. The right combination of inventory management services can reduce a company’s direct, indirect, and process costs.