4 Packaging Strategies To Help Control Shipping Costs

William R. Armstrong, CPP
Technical Development Manager
Sealed Air

2005 will go down in history as the year in which crude oil prices went above $60 (and ultimately $70) per barrel - the highest it’s ever been. Considering that the year has still some time to go before it’s over, who knows what price oil will achieve by 2006? It is hard to read a newspaper or magazine, listen to the news or watch it on television without this information coming up in one story or another. It also is difficult to avoid the impact this will have on the packaging industry.

Although it seems intuitive that the biggest impact crude oil pricing has on our industry is the cost of materials, I believe that the price has far more impact on the cost of shipping goods - both raw materials and finished products. According to data posted on the Department of Energy’s Energy Information Administration (EIA) Web site, the average price for a barrel of crude has increased 38 percent in the past year, while average prices for diesel fuel have increased 43 percent.

The magnitude of this sort of increase cannot help but have significant impact on what we pay to ship our products. The Web sites for the top three parcel shipping companies in the United States now post current fuel surcharges based on diesel prices at the pump. As of early September, these surcharges range from 12.5 to 15 percent for air and international shipments. These represent 3 to 38 percent increases compared to August 2005 levels. And, according to the EIA, diesel fuel is forecasted to remain in the mid $2 per gallon range though 2006.

It is not unreasonable to assume that many manufacturers are going to be paying closer attention to shipping budgets in the foreseeable future. Additionally, we should expect that many are going to be actively seeking ways to keep these costs under control. In thinking about this, I have come up with several packaging strategies that I believe can help control these escalating shipping costs.

Strategy #1 - Reduce, Reduce, Reduce:

Right out of the gate, in order to control shipping costs, the first approach is to examine all elements of the current package to determine if you can use less. Can you use a smaller container? If so, then you can reduce corrugated costs along with cutting back on the amount of cushioning and/or void fill you may be using currently. The important factor here is to be totally sure that your products will still be delivered safely if you do cut back on the container and interior packaging.

Part of this approach might also be to consider alternative interior protective packaging materials to what you are currently using. Plastic based closed cell air cellular cushioning materials and foams provide more efficient cushioning performance than cellulose-based materials. This means that these more efficient materials can provide equivalent cushioning protection with less thickness, resulting in smaller container sizes, better cube utilization, reduced corrugated usage and lighter shipping weights.

If you’re using a number of stock size boxes for pick-and-pack operations, could you add a few intermediate sizes without incurring excessive handling or inventory costs? Orders which can be placed in these intermediate size containers will require less void fill materials to fill out the packs and the overall reduction in shipping weight and cube can result in significant savings for these specific orders thus having a positive impact on overall shipping costs.

Reducing weight in existing packs can also have positive impact. Using low density void fill (inflatable air cells, etc.) can take ounces or even pounds out of every pack. In today’s environment, even a few ounces per pack savings can help offset the increasing costs of shipping. (Learn about our inflatable packaging options)

Strategy #2 - Think Outside The Box

Actually, the packaging strategy here is to determine whether you really even need a box. Many products can be safely shipped using any of a number of types of padded and non-padded mailers or may be able to be shrink-wrapped instead of going into corrugated containers. If so, there may be substantial materials and shipping cost reductions when making such a switch.

As an example, I recently received materials from a cohort who had borrowed them for a presentation he was preparing. As repayment for my having loaned him these materials, he burned a mini-CD of the presentation and returned everything to me in a custom-made corrugated container. Since I was thinking about this article, I investigated and found that the bill for overnight delivery for that package was $14.28. All told, the package, plus contents weighed 0.77 pounds which rounded up to 0.8 pounds for shipping.

Since the materials being returned were relatively rugged and not easily damaged, they could have been shipped in a #5 lightweight padded mailer instead of the box. Had this been done, the total shipping weight would have been just over 0.5 pounds, rounding up to 0.6 pounds for calculating shipping costs. Using the same cost per unit weight basis as the original, using a mailer instead of the box would have resulted in an estimated $3.57 savings in shipping charges. This is somewhere from 2 to 3 times the cost of the original package. So, stop and think before grabbing a corrugated box for that next shipment. Ask yourself if it is really necessary, or are there other ways to ship your product without it? (Learn about our line of protective mailers)

Strategy #3 - Get it Right the First Time:

Implementing the first two strategies can entail significant risk unless steps are taken early on to ensure that any change being made will not threaten the safe shipment of your products. Savings achieved through packaging reduction strategies may be soon more than offset by the costs of damaged goods unless such changes are made only after we are sure that the resulting packaging methods will provide sufficient performance.

The preferred approach to gaining this assurance is through the use of appropriate pre-shipment performance package testing procedures. Requiring that new packages be tested to existing industry standards such as ISTA Procedures 1A, 1B, or 3A can help validate changes or new designs before implementing them on a broad basis. Catching protective performance issues in a testing lab before shipping is far preferable (economically, logistically and physically) to having these problems first arise when customers receive damaged shipments. (Learn about our package design and testing labs)

Strategy #4 - Do More With Less:

Increased shipping costs can become the catalyst in streamlining processes through mechanizing or automating operations which may have been manual until this time. Increasing productivity can be a powerful contributor to bottom line results. More packs per shift on the same lines can often significantly reduce overall costs.

Innovative approaches in automated packaging solutions available today can result in increased packaging rates while combining several labeling and tracking functions into integrated line operations. One such system from Sealed Air is a high-speed product containment and protective packaging solution with advanced sensor technology for fluctuating volume and variable packaging requirements. This system allows operators to create up to 20 packages a minute, depending on the size of the item, compared to three packages a minute with manual packaging methods.

How it Works:

• The operator places a product on the conveyor belt and lets the system go to work.
• Smart-sensing technology scans the item’s shape and size to deliver the correct amount of packaging from two rolls of cohesive material.
• This material forms a protective package around the product. The Cold Seal® process seals the edges, locking the product in place for a tight and secure fit.
• The package emerges in seconds, centered, secured and ready to ship.

(Learn more about this system)

Conclusion

There are surely any number of other packaging strategies that can be envisioned to control the overall costs of getting your products safely into the hands of your customers. As shipping costs continue to rise due to the unprecedented increases in crude oil prices, the pressure to develop and implement these strategies will only increase over time. Ultimately, these influences will most often result in more efficient packaging design, development and operations. Packaging materials and solutions offering these efficiencies will then provide greater opportunities for controlling overall packaging costs - including the cost of shipping.

Contact us for more information.