How to Optimise Packaging for Automated Distribution Centers

Automated distribution centers (DCs) have become increasingly common over the last decade, and this growth is not expected to slow down any time soon. According to research firm LogisticsIQ, the warehouse automation market is estimated to be worth approximately $30 billion by 2026, up from $15 billion in 2019. 

Brands looking to incorporate automated DCs into their supply chain should be aware of the standard packaging sizes, weights, recommended materials and other nuances of automated warehouses to avoid bottlenecks and costly damage. By optimising your packaging with DC automation in mind, you can ensure that your supply chain is running smoothly and efficiently. 

The Rise of Automated Distribution Centers 

While automated DCs used to be reserved for major corporations, medium- and smaller-sized brands are starting to see the value of investing in automation. A recent survey conducted by Modern Materials Handling reveals that from 2019 to 2020, automation rates increased in several operational areas including labeling, packaging, picking, replenishment, storage and retrieval. Moving forward, 59% of respondents said they planned to invest in automated equipment for their distribution and fulfillment centers. 

In addition, third-party logistics (3PL) companies are beginning to invest in automated DCs. In their Third-Party Logistics Warehouse Benchmark Report, 3PL Central reports that mid-growth 3PLs (those who experienced between 1% and 25% of growth over the last year) were more likely to list automating warehouse processes as a major priority compared to higher-growth 3PLs. This is likely due to these mid-growth companies wanting to become more competitive and keep pace with the industry.

How ecommerce drives automation trends 

The rise of DC automation can largely be attributed to the rise of ecommerce in recent years. According to a report by eMarketer, worldwide ecommerce sales rose by 27.6% in 2020. While this growth is expected to taper off in the coming years, ecommerce is still going to be the norm for many consumers across the globe. 

In order to meet the demands of ecommerce order fulfillment, DCs need to be upgraded and enhanced with the latest technology. Consumers expect reliable, fast delivery when ordering something online, and outdated systems can reduce the efficiency of DCs.

COVID-19’s effect on distribution centers

The COVID-19 pandemic has forced DCs to become more agile and adaptive. The pandemic led to a huge growth of ecommerce sales, as well as a rise in new distribution channels such as Buy Online, Pick Up In Store (BOPIS). 

The safety of distribution center staff was also a major concern. Companies were hesitant to bring more people into their DCs during the COVID-19 outbreak, even if sales were increasing. Efforts to adhere to social distancing guidelines while still fulfilling consumer demand resulted in brands increasing their use of automation during the pandemic.

What are some benefits of automation?

There are a number of reasons why companies may want to invest in automation. DC warehouse automation can help brands achieve the following goals:

• Reduced labor costs 
• Increased accuracy 
• Faster order fulfillment 
• Safer working conditions for employees 
• Greater inventory control 
• Optimisation of warehouse space 

Packaging Requirements for Automated Distribution Centers 

While using an automated DC can offer benefits such as increased efficiency and lower labor costs, companies need to be prepared for how automation can affect packaging requirements. When switching to an automated DC, brands should consider how their master outer cartons (MOCs) will flow through the automated system without damage or delays. 

In order to keep operations running smoothly, transport packaging needs to be consistent in material quality, size, and weight. Achieving packaging consistency across multiple original equipment manufacturers (OEms) located in different regions can be quite a challenge, but it is important when using an automated system. Specific guidelines and specifications must be set up for transport packaging, and brands need to make sure that these guidelines are being followed in all of their factories. 

Cartons that are damaged or do not fit the automated system may be rejected, which can lead to costly repackaging. Globally, the cost of repackaging in warehouses is expected to reach $50 billion by 2022, according to Packaging Digest. 

In most situations, packaging that gets damaged during fulfillment is manually repacked by employees. On average, it could take about two to three minutes to repack each carton. There is also a material cost associated with repackaging—companies need to supply a new carton and print new labels for each product that needs to be repackaged. 

What happens when packaging does not meet DC requirements? 

All too often, companies forget about packaging when ramping up to an automated DC and only realize the negative effects of low-quality packaging after automated systems have already been put into place.

Packaging that is not properly optimised for automated DCs can lead to a range of issues, including: 

• Packages may slip through scanners and collapse onto shelves, blocking the operation of stacker cranes 
• Cartons that are too large may cause bottlenecks on the conveyor systems
• Smaller cartons may get rejected and transferred to a repacking area
• Labels and barcodes that peel off or become unreadable may not get scanned correctly
• Transport packaging may get damaged if materials are not strong enough to withstand machinery 

Designing Packaging for Automation 

Since automated systems all have their own specific requirements, packaging should be designed for DC automation in order to avoid potential points of failure. 

If you can gain control of your inbound packaging, you can save an enormous amount of time and money by reducing the need for repackaging. This comes down to ensuring that your packaging is made from appropriately-specified materials that are designed to withstand the rigors of an automated DC. 

Consistency of transport packaging 

Typically, original equipment manufacturers (OEMs) do not optimise their packaging for automated DCs, so it is up to brands to source packaging that meets expectations for automation. Utilising Billerud Managed Packaging as the sole source of packaging can help ensure consistency. Packaging that is consistent in size, material, and shape can minimise issues associated with the placement and scanning of shipping labels and minimise the risk of labels peeling off, which can in turn increase the efficiency of automatic sorters.

Optimising the size of outer cartons can go a long way in increasing warehouse efficiency. Right-sized packaging can be designed to easily move through conveyor belts and other automated systems. Recently, DHL was able to save 5.77% on its shipping costs simply by changing the sizes of cartons in their warehouse.

Reusing warehouse MOCs

Corrugated cartons can often be reused in automated DCs, which can save companies money and lead to considerable sustainability improvements. To avoid paying twice for transport packaging, brands should consider using MOCs that are able to perform well for both inbound and outbound packaging. Ideally, you will be able to repurpose the MOCs being used in the DC for shipment to retail stores. 

Structural integrity of cartons 

New advancements in technology have resulted in the use of automated systems for picking and packing. With this in mind, it is important that outer cartons are strong enough to last throughout the entire fulfillment process. Transport cartons need to be strong enough to handle being stacked on top of one another on pallets. There are also atmospheric conditions, such as humidity and temperature, that must be considered. 

Cartons that become crushed during transport will need to be repackaged by the time they reach the DC, so using high-quality MOCs that can maintain their structural integrity is crucial. To optimise your corrugated packaging, test its performance throughout your DC’s automated systems and look for areas where it could be improved. 

Take Control of Your Packaging 

Having the right type of packaging is key to maximizing the benefits of automated distribution centers. To find out more about how to optimise your packaging for automated distribution centers, request a packaging audit today. Partnering with Billerud allows you to take control of your packaging, so you can achieve consistent quality that is able to meet the demands of automation.

You can also download our eBook, "Key Packaging Trends 2021" to learn more about how to stay competitive in this ever-changing industry.