The Role of Packaging in Distribution Center Performance

Distribution center operations rely on the alignment of several critical components, from receiving performance all the way through to distribution. Packaging is an often-overlooked, yet crucial piece of the puzzle, that can negatively affect distribution center performance.

At best, poorly designed packaging can lead to a host of inefficiencies. In some cases, packaging issues can have serious ramifications along the entire supply chain.

This article examines these inefficiencies and consequences closely, in addition to highlighting how optimized packaging can help improve distribution center performance overall.

How Packaging Can Affect Distribution Center Operations

Damage and Injury

Both durability and efficiency should be a focus when designing packaging. Packages that don’t hold up during transportation may result in damage to the packaging, or worse, product damage. Damaged packages may need to be repacked or temporarily stored and returned to the manufacturer. Poorly designed or inferior quality packaging also poses a safety hazard. For example, packaging that crumbles under the weight of other boxes when stacked could topple and fall on a warehouse worker. The potential for injury leaves the distribution center vulnerable to legal action.

Flow of Operations

Packaging that makes handling and processing problematic or labor-intensive will affect receiving, put-away, picking, packaging and dispatching (if it even makes its way to this final stage). Performance metrics that may be negatively affected by poorly designed packaging include:

Order receiving, putaway and picking accuracy
On-time shipping
Order fulfillment accuracy
Cycle times
Percentage of damaged products
Inventory to sales ratio
Units per transaction
Rate of return
Back order rate
Perfect order rate
Carrying cost of inventory
Labor and equipment utilization

Space Utilization

Inbound packaging directly impacts space, a finite resource for most distribution centers. The best packaging solutions boost the efficiency of racking systems which, in turn, lead to increased access, productivity and cost-savings. However, packaging that creates roadblocks can have the opposite effect and create issues when it comes to distribution center capacity.

During peak season, when space becomes an even greater consideration given the need to accommodate extra inventory, well-designed packaging can spare distribution centers the cost of rental storage space.

How Optimized Packaging Can Improve Distribution Center Metrics

Well-designed packaging can positively impact distribution center metrics in a variety of ways:

Reliability: Warehouses and distribution centers aim for the Perfect Order, a “calculation of the error-free rate of each stage of the purchase order.” Optimized packaging can help warehouses and DCs avoid many of the setbacks, delays and errors attributed to poorly designed (and poorly spec’d) packaging. The net positive impact of optimized packaging means more orders make it through the supply chain, on time and in one piece. Higher on-time shipment rates can enhance brand value by giving customers greater confidence that they will get what they order.

Number of touches: Packaging that is ready to rack and labels that are easy to read improve overall distribution center efficiency and fill rate. Ideal systems allow packages to be moved through distribution centers without being touched, increasing both ease and speed of delivery.
Repacking: Well-designed packaging protects the products they contain, thus resulting in less damage. Damaged cartons need to be reworked in the warehouse or DC before next delivery. Optimized packaging can help warehouse managers avoid the extra expense of time and labor associated with repacking; fewer damaged cartons translates into lower demand for rework.
Labor: Streamlining packaging is one way to reduce labor costs, often one of the highest categories of distribution center spending. Optimized packaging solutions can significantly reduce assembly and packing time, boosting employee productivity and efficiency. Enhanced packaging solutions facilitate improvement in a variety of labor metrics, including overtime hours, contract employee hours and percentage of cross-trained employees.
Cross-docking: An effective packaging system makes it easier for brands to cross-dock. Unloading materials from incoming delivery vehicles (trucks or rail cars) directly onto outgoing delivery vehicles significantly reduces or, in some cases, eliminates the need for storage. Cross-docking affords many benefits to distribution centers, including reduced storage space, greater efficiency and an overall reduction in costs.

Importance of Robust Packaging for Automated Systems

Packaging specifications and receipt become even more critical for distribution center operations that are more automated, especially those that increasingly utilize artificial intelligence.

Inferior packaging materials — such as lower quality paper or ink — can become easily smudged and therefore illegible by machine readers, causing errors in automated systems. Even more so than humans, automated systems rely on specs such as weight and size, the location of graphics and legibility of labels to accurately fill orders.

In the future, robotic operations will likely drive decisions about how packaging can reduce labor costs. Roles like picking are already being replaced by robotic arms that operate with the help of sensors and artificial intelligence. While more jobs involving repetitive tasks are likely to disappear, other types of roles, including developing and overseeing more sophisticated technology, will increase in demand.

Work with Packaging Experts

Because packaging plays an essential role in the performance of distribution centers and the success of the supply chain overall, it’s important to entrust the right partner with your packaging needs. At Billerud, we believe in progress and are committed to sustainability. We offer first-class packaging materials, innovative packaging solutions and a network of like-minded partners. We’d love the opportunity to partner with you.