You, too, could save millions through packaging optimization

A powerful supply chain tool, packaging optimization improves product protection and can present additional efficiency opportunities in your supply chain. And no organization takes better advantage of these benefits than the Swedish furniture empire IKEA. Packaging optimization is one of IKEA’s defining characteristics. Their trademark flat-pack packaging, continuously perfected since 1956, is essential to the brand’s design philosophy.

It’s also key to their financial success.

These optimization techniques have made affordable, contemporary design accessible to consumers around the world. Progressively improved flat-packing techniques let customers take purchases with them for home assembly, reducing stocking and delivery costs.

Supply chain operations require a keen eye to spot overlooked opportunities. Remarkably, even minute adjustments, such as a fraction of an inch, can have significant ripple effects throughout the chain, potentially saving millions. These opportunities often lie hidden in plain sight, awaiting discovery.

Packaging optimization affects the entire supply chain

Optimizing packaging creates a domino effect of benefits throughout the distribution process. For instance, redesigning primary packaging can improve space efficiency, allowing more SKUs per pallet, trailer or container. Besides cutting packaging costs, you can achieve substantial savings through reduced handling, storage and transportation costs. Consider how minor optimizations can compound throughout supply chains.

One NTT DATA client modified the primary packaging of a frozen pizza box, reducing dimensions by a mere 4%, with minimal impact to the graphic presentation. While these adjustments are invisible to consumers and may seem minor, they yielded over $600,000 in annual cost savings through efficiencies such as:

• 100 tons of CO2 emissions removed
• 133 fewer truckloads every year
• Reduced transportation costs
• 9,500 fewer gallons of diesel fuel per year
• Eliminated 146 tons of corrugate and paperboard material

Companies like IKEA are continually optimizing their packaging with increased manufacturing and transportation efficiency in mind. This is what NTT DATA supply chain consulting calls “designed for distribution.”

Saving sooner: educate your sales and marketing teams

Marketing departments prioritize shelf presence and customer appeal, often overlooking supply chain efficiency. But, with packaging’s outsized influence on downstream transportation and storage costs, involving teams early on can make efficiency part of their creative process.

Supply chain and packaging experts should show sales and marketing teams how packaging optimization can affect the value proposition and give products a leg up. As companies realize that efficient distribution is crucial to staying competitive, this strategic vision urges participation in packaging development decisions earlier in product development.

Engineering excess costs out of your supply chain

Small packaging changes integrated with product design can deliver dramatic savings. Small, ongoing packaging optimization on their catalog of nearly 12,000 products has saved IKEA a sizable amount: as much as €12 million (nearly $13 million) in a single year.

This commitment to ongoing improvement aligns with NTT DATA supply chain consulting’s concept of design for distribution. It’s the key benefit of integrating a supply chain perspective into the process of product development at the start.

Another element involves designing both product and packaging together to endure the hazards of transportation. Damage during transit can disrupt supply chain costs and hurt service. So, we take an integrated engineering approach during development, considering product durability and distribution risks to create a satisfying customer experience.

For instance, NTT DATA helped a 3D printer company minimize shipping damage for its latest printer model. We optimized the shipping unit and its protective packaging to mitigate risks. The project significantly reduced damage and return rates for this precise and delicate product, clinching customer satisfaction by refining the product design and packaging from the outset.

Sustainability impacts: money isn’t the only green benefit of packaging optimization

Another intangible advantage of these efficiencies is sustainability. Many companies struggle to make a business case based solely on sustainability as a primary objective and gain traction. However, green and efficient supply chains aren’t mutually exclusive but mutually dependent. As such, sustainability is always a positive byproduct of packaging optimization. For instance, the frozen pizza box initiative that saved our client money also removes 100 tons of CO2 emissions and saves 3,000 trees annually.

Packaging optimization offers numerous benefits, including inherent efficiency and cost savings. These advantages can create opportunities to gain a competitive pricing edge or to reinvest in ongoing optimization efforts, taking your organization forward.

Contact us and learn how NTT DATA Supply Chain Consulting’s Packaging Optimization practice can guide you through the design and testing process, engineering cost-effective, dynamic designs with reliable product protection. Our top supply chain talent, enabled by proven, leading-edge digital assets — tools, methods and content — deliver actionable insights and measurable outcomes to some of today’s largest and most complex supply chains.