When it comes to e-commerce retailers, one of the most overlooked operational investments is the packaging process for outbound parcel shipments. Many of today’s retailers are pushing their orders out the door as quickly as possible and in doing so are often plagued by inefficiencies and costly processes. Let’s explore three aspects of investing in the overall packaging process, including insight into possible investment indicators, the most common reasons for improving the packaging process, and lastly, at some possible starting points and areas of caution.
Indicators That Investment May Be Worthwhile
Perhaps investing in your packaging process is so far off of your capital expenditure radar that you are not sure if an investment is worthwhile. Some of the most common symptoms that indicate time for investment are:
– Missed ship dates
– Pack line falling behind
– Volumes over 600/day
– Inconsistency in packaging
– Damaged products
– Labor attraction, retention, training costs too high
– Material waste
– Human error/packages sent to wrong recipient
– Limited warehouse/floor space
The other side of whether or not an investment is cost-effective depends on the investment’s payback. By drilling down to a per unit cost, you can determine the average cost of getting a package out of your building. By estimating the time, labor, material, and shipping savings that your new process uses you can quickly determine if the purchase will meet your investment requirements. Should you need assistance with this process, there are many integrators and equipment manufacturers who would love the chance to help. Reaching out to some of them is a great place to get inexpensive consulting on the best options for your particular business.
Possible Benefits of Investment:
Just as each business is unique, the benefits realized from investment in the packaging process may be unique as well. There are many specific areas that you can target with your investment and most of the larger systems will improve many, if not all, of these functions.
Speed: In a world where delivery speed is paramount, systems that get packages out the door quickly increase overall shipping capacity and growth potential.
Human Error Reductions: Mistakes and inefficiencies are deceptively costly to a company. Putting the wrong shipping label on a package, for example, incurs the cost of the original shipping, the return, restocking, re-shipping, and the consequences of two dissatisfied customers. This type of error will usually eliminate all profit from the sale and most times have a direct negative impact on the company’s bottom line. Investment in verification systems can prevent these types of errors.
Space: Warehouse space is a limited resource, and as such, making the most of it becomes increasingly important as capacity limitations are approached. Calculating your throughput per square foot and ways to incrementally improve it are a great indicator of progress made in space utilization. Invest in systems that maximize your ability to utilize space.
Automation: As a company grows, employee attraction, compensation, retention, and training become expensive. If volumes can justify automation, many of these costs can be reduced and the operations of the company simplified.
Product Protection: Over protecting or under protecting products can be very costly for companies, but most elect to err on the side of over-protection. With the new DIM weight shipping policies used by FedEx and UPS, as well as the increase in material costs, this is an expensive policy. There are methods of investing in the packaging process that can reduce void fill and enhance product protection without increasing package size.
Customer Experience: In today’s market, delivery promises, package friendliness, and the ability to include marketing/promotional materials in your package can play a huge role in your business development efforts. Amazon.com places such a high level of importance on this that they allow consumers to rate their packaging as well as provide a “frustration free packaging” designation for sellers that meet their requirements. Investing in the impression your package makes on the consumer is hard to measure, but could be a game changer for your company’s future.
Meeting Demand: Depending on the nature of your business, there may be peaks and valleys throughout the year. During peak times, it is important to have the processes in place to make sure that you don’t run into capacity related issues. It is not uncommon to see online retailers with up to 10 times their regular volume during the holidays. Trying to bring in temporary employees or working overtime can help, but investing in automated or semi-automated systems can really allow companies to capture that demand.
At first glance, it may not be obvious that the packaging process is so integral to the success and development of your business. Without proper management and appropriate incremental investment, it should be clear that skipping over the packaging process can result in many lost opportunities to improve your business.
Final Remarks
Engrained in the nature of investment is risk. Just because we throw money and time at a problem does not guarantee that we will realize the desired result. As such, it is important to find methods to minimize and mitigate that risk. The most important method to do so is by performing adequate research into the nature of your challenges. This due diligence will often include finding the right partners who will steer you in the direction that is best for your company and not best for what they are selling.
Some areas to be conscious of at the outset are: the size of your company, your specific growth projections, your current cash flow, the effect this investment will have on your taxes, the processes and machinery you have already put into place, and the total cost of ownership to take this action. Finding the right balance for your company may take some leg work, but it will definitely alleviate a lot of potential headaches in the future. Good luck and happy investing.
By Philip McAndrew (Originally written for Parcel Magazine)
