How packaging procurement can drive profitability for the entire organisation
Many businesses are looking to optimise their supply chain. Learn about how packaging procurement can drive profitability for organisations.
As companies work on rebuilding their operations after the disruption caused by COVID-19, many professionals are embracing new strategies to help drive profits. IBM reports that 55% of organisations have made “permanent changes to organisation strategy” in response to the pandemic. At a time when organisations are looking for new ways to improve cash flow and capital, they may look to their supply chain.
Supply chain optimisation can be a valuable oppportunity for businesses hoping to cut freight costs and achieve pre-pandemic levels of revenue. When it comes to long-term impact, packaging procurement can be one of the most impactful areas that can drive profitability for businesses.
COVID-19’s effect on supply chain profitability
Lockdowns and quarantines across the globe due to the COVID-19 pandemic disrupted international supply chains in 2020, and continues into 2021. According to a survey by the Institute for Supply Management, 75% of companies reported supply chain disruptions as a result of pandemic-related freight and transportation restrictions. Of these companies, 16% reported adjusting their revenue targets downward in response to these new constraints.
Supply chain executives report the pandemic has had largely negative effects on their companies, though a survey conducted by Ernst & Young indicates that some market sectors fared better than others. Companies producing consumer products reported mixed results—many experienced increased demand during the pandemic, but struggled to keep their supply chain running smoothly.
Shifting priorities for supply chain professionals
The effects of COVID-19 on international supply chains have made organisations reexamine their priorities as they plan for the future. Organisations will need to address the economic and operational challenges brought about by the pandemic, as well as plan for any future disruptions.
Deloitte outlines four key shifts that businesses should focus on following the pandemic:
- Meeting evolving customer values
- Building trusted, connected supply networks
- Designing supply chains that are optimised for cost, service and resilience
- Enabling the future of work in supply chain management and operations
For organisations looking to reevaluate their processes post-COVID, packaging sourcing and optimisation can play a vital role in business continuity planning.
Cut costs with packaging procurement
The types of packaging that companies use can have a significant effect on the overall profitability of a supply chain. To make improvements to their packaging operations, procurement professionals should begin by evaluating packaging's impact on profitability.
Many variables affect the cost of packaging, including process efficiency, product damage and the design of the packaging itself. By partnering with Managed Packaging, companies can improve their packaging’s performance in these areas, driving profitability for the business as a whole.
Streamline warehouse and shipping processes
Supply chain executives surveyed in the Ernst & Young survey listed increasing efficiency as their top priority for the next year. For international supply chains, even small changes that help improve efficiency at the warehouse and during shipping can lead to significant savings.
According to a 2018 survey by Logistics Management, insufficient space is one of the main issues impacting warehouse operations, reported by 44% of respondents. Optimised packaging can help with this by increasing product density per container, freeing up space in distribution centers and reducing freight costs.
Reduce product damage
Damage to products during the shipping process can be costly for businesses. A report by Shopify estimates that returns and repairs may account for up to 10% of a company’s total supply chain costs. Direct and indirect costs of damaged items can ripple throughout an organisation and affect multiple departments including logistics, claims, repairs, communications and sales.
By investing in strategic packaging solutions, companies can protect their products and reduce return rates. Billerud focuses on reducing damages by testing packaging at every step of the supply chain, ensuring that your products arrive at their destination in their intended condition.
Optimise design and materials
Well-designed packaging can boost profitability by making efficient use of materials and reducing the likelihood of damages. Processes such as right-sizing and right-weighting ensure that packaging dimensions are optimal for each product, which can eliminate excess material, reduce freight costs, and mitigate product damage.
Thoughtful packaging design can also have a positive impact on the consumer. According to McKinsey, 55% of US consumers report being extremely or very concerned about the environmental impact of packaging. In addition, over 60% of surveyed consumers said they would be willing to pay more for products that use sustainable packaging.
With Managed Packaging, organisations are able to improve their sustainability by switching to materials that are more environmentally-friendly and cost-efficient than traditional packaging solutions.
How packaging procurement can benefit your organisation
Packaging procurement has the potential to affect all aspects of your organisation—not just the supply chain and logistics department. Many organisations may be tempted to use low-quality, unoptimised packaging in efforts to cut costs after COVID-19, but this can have unintended consequences.
In the long run, optimised packaging can lead to significant savings due to:
- Design efficiency
- Reduced material usage
- Better utilisation of space in warehouses and transportation
- Reduced emissions in transport
- Reduced water consumption in packaging production
- Reduced product damage
- Improved experience for consumers
The savings gained from reevaluating and optimising your packaging process can then be redirected to benefit other areas of the organisation. With Managed Packaging solutions, organisations can spend less time worrying about their supply chain and more time on developing and marketing their products.
Billerud can help with your packaging needs
Strategic packaging procurement can result in long-term savings for your organisation. If you are looking for ways to boost the profitability of your supply chain, Managed Packaging can help.
At Billerud, our packaging professionals look at the entirety of your supply chain to identify opportunities for optimisation and cost savings. To find out more about how we can develop a plan that addresses your organisation’s needs, reach out to us today.