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The Improvement of Packaging Logistics. Cost Cutting and Value Enhancing

Hausarbeit (Hauptseminar) 2015 15 Seiten

BWL - Beschaffung, Produktion, Logistik


Table of contents

List of appendices

List of abbreviations

1 Introduction

2 Analysis
2.1 The process of PL within the whole logistics chain
2.2 Relevant aspects of the IKEA Packaging Concept
2.3 Ways to improve PL before launching a product and related benefits
2.4 Possibilities to make top management aware of the importance of logistics
2.5 Industry sectors besides retail in which PL is of special strategic relevance
2.6 Further ways to increase the performance of logistics in a firm with respect to the top management´s influence

3 Conclusion

4 Appendix

5 Bibliography

List of appendices

Appendix. 1: Example of the Grid Approximation Model, following Wong and Z X Guo (2010), p. 6079.

Appendix 2: Graphical illustration of the ECR strategy, following Markus Mau (2003), p.23.

List of abbreviations

illustration not visible in this excerpt

1 Introduction

Today´s business environment of tight competitiveness forces companies to cut cost whenever possible in order to maintain or increase profits. Most companies focus their cost-cutting effort on the production process. Therefore the potential of cost savings from an efficient supply chain is underestimated. Although, regarding worldwide service dispersion and increasing environmental concerns, improvement of logistics would be a valuable starting point for cost and pollution relief.

In this paper, the cost cutting and value enhancing potential of an efficient supply chain is discussed in detail, with a special focus on the integral element Packaging Logistics (PL). The analysis is structured alongside given research questions, which will be sequentially addressed.

2 Analysis

2.1 The process of PL within the whole logistics chain

PL is the fundamental element in logistic systems, as it has a significant impact on logistics cost and performance. It is a recurring process that pulls through the entire supply chain and that involves the process of planning, implementing and controlling of the coordinated packaging system from the first step on to reuse and disposal. Within this process lies the responsibility for providing adequate primary, secondary and tertiary packaging for each transportation occasion to secure the protection of the product[1]. These three packaging layers are then used for transport packaging, retail- and group packaging and consumer packaging. Nowadays, the growing conscience of waste management and environmental protection also imposes pressure on PL to minimize waste disposal to a minimal extent[2]. Therefore, used packaging, returnable and reusable packaging and raw material recovery got as well into the focus of PL.

Further, providing important visual information about the package content for positive customer experience as well as for save and facilitated logistics processes, “including transport and handling as well as storage, order processing and warehousing”, is part of PL[3].

Through coordination of the mentioned elements at each level, cost efficiency and effectiveness of the supply chain, as well as the maximization of customer value and company profits can be achieved.

2.2 Relevant aspects of the IKEA Packaging Concept

The IKEA Packaging Concept is the realization of an internal idea generating support function that covers the whole supply chain management process, having the long-term goal to secure a closer location of packaging technicians to the product development process and the product itself.[4] As element of the distribution service competence function, the concept combines some of the most important steps relevant in cost reduction. It fosters the development of new and more efficient packaging design as well as the realization of crucial product adaptations and related supply chain processes. Proximity to day-to-day operations ensures a holistic view over the supply chain and simplifies the detection of inconsistencies.

The most crucial resource is management support, which enables the realization of operational and material related adaptations throughout the entire supply chain process. Management support involves direct reporting to the managing director of the IKEA packaging department and his direct involvement. Result is the linkage of logistics to the strategic level, which makes it a powerful element and fosters efficient packaging solutions tailored to IKEA´s operation structure and business purpose.

2.3 Ways to improve PL before launching a product and related benefits

In the IKEA case study, the improvement of PL for the established product “GLIMMA” took up a considerable amount of time. The emerging question is how PL can be improved before launching a product, in order to save valuable time and to ensure efficiency from the first packaging on. Addressing PL, a handful of elements, which are primary-, secondary- and tertiary packaging, group packaging, transport-, industrial- or distribution packaging, display-, retail-, and used packaging come into play[5]. In the logistics value chain, the five recurring components are inbound logistics, production processes, outbound logistics, marketing and sales[6]. Due to this complexity and dependency, the integration of packaging in logistics needs to be dynamic. “Analysing the packaging system from a logistic viewpoint and the logistic system from a packaging viewpoint”[7], as suggested by Graman (2006), can be a valuable approach. In the following, special attention will be paid to the first stages of the logistics value chain.

Packaging has a considerable impact on the cost of warehousing and transportation. Today´s “growth of e-commerce, smaller and more frequent deliveries”[8] challenge PL. In the example of inbound logistics, complexity arises, amongst other factors, from worldwide imports, where packaging is handed over to suppliers in low-cost countries that have no or little experience in packaging solutions. Inappropriate materials and inefficient processes implicate high costs and a high percentage of product damage. As the western company is the end user of this supply chain, it has a share “in the inefficiencies caused by sub-optimal packaging”[9]. Accordingly, the company has significant difficulties to reduce logistics costs. One logistics procedure that involves exactly this kind of problem is the Push-principal[10]. Minimal information exchange and low adaptation between the different interspaces causes overtime and inefficiencies. In order to tackle this problem, an early collaboration with the company´s worldwide suppliers should be targeted. Sharing packaging know-how and technology at an early stage would enable efficiency in the supplier´s supply chain. Collaborative Planning, Forecasting and Replenishment (CPFR) is a supply chain method that has been developed for this need for collaboration. It is a cooperative planning, prognosis and re-supply tool, that represents a strategy to improve planning- and prognosis precision along the entire supply chain from the pre-supplier, to the retailer and to trade[11]. In order to achieve the highest possible transparency, CPFR is divided into two stages. The first stage is the usage of CPFR between manufacturer and retailer, whereas the second stage comprises the interaction between manufacturer and pre-supplier[12]. Concerning especially the processes before launching a product, which is CPFR stage two, savings can be achieved through coordinative planning. First starting points can be increased staple density by placing more products in one transport container, and the adherence of appropriate safety zones to minimize damage.

For this issue, besides CPFR, mathematical programming techniques have been developed. One IT concept with the aim to “minimize the occupied space and minimize the wasted space”[13] is the “grid approximation model” of Wong and Guo (2010). In their approach, Wong and Guo reduce the complexity of product and packaging data needed. Differentiation is made between packaging of common goods, which have regular shapes and packaging of irregular items[14]. These two groups are then subdivided into classes of small, big and other-sized objects and packed accordingly. Further, the squashing of buffer space between different sized objects is prevented through object oriented arrangement and packaging rules. An example is the stapling of convex and concave packages (Appendix 1). Advantages of computer analyses are the improvement of the packaging pattern quality, easy accomplishment of optimal packaging information and easy detection of stapling overlaps[15]. Another benefit of packaging technology is the reduced amount of staff needed, as the number of boxes and carriers can be significantly reduced. This saves costs and increases pace. Fundamental to maximize efficiency is the extensive collection of both internal and client data. The more correctly these data are analysed, the higher the “speed and accuracy of the project”[16].

Increased transportation density also allows negotiations for lower rates with carriers resulting from reduced fright and warehousing costs. Computer analyses are implementable at each step of logistics, from inbound logistics processes and production flows to outbound logistics. During the production process they can be used to produce into packaging, which simply means the early stage adaptation of product design to efficient packaging solutions[17].

Another critical component of PL with room for improvement is the unit load. According to Ampujia (2014), it comprises three components that are pallets, handling, storage and transportation equipment, whereas the pallet is seen at the centre of an efficient supply chain. The pallet “is (…) the interface between the equipment, imposing the stresses at the packaged product that needs to be protected”[18]. Thus, pallet design changes towards more stability and security present another area of improvement. Even if the correlated costs first might seem to be unreasonable, a cost-benefit analysis will help to compare unnecessary costs occurring from damage and mismanaged stapling with investment into redesign and attainable cost savings.

According to Garcı´a-Arca (2008), another effective investment for improving PL is the creation of a triple-team constellation, comprising a design team, an implementation team and a support team. Through this extensiveness, the complexity of packaging can be easier controlled and tracked. At the core is the design team, which is responsible for design and control of the product as well as for the related packaging in each related area, such as trade, “logistics, production, marketing, purchases and quality[19].” The implementation team is directly linked to the design team, as it is responsible for the realization of the design team´s ideas. Packaging proposals are prepared and examined and afterwards presented to the design team. The support team serves as “consultative organ”17 for the other two teams with special focus on technical matters. Through the tight connection of processes, high interaction and steady communication, the concept can help PL to gain a major and strategic role in the supply chain.


[1] Bardi et Kelly (1974), p.53.

[2] Aarnio et Hämäläinen (2008), p. 612.

[3] « DHL Logbook ».

[4] Gustafsson, Jönson, et Smith (2005), p.5.

[5] Jönson et Johnsson (2006), p.201.

[6] Bidgoli (2013), p.336.

[7] Graman (2006), p.407.

[8] Ampuja (2014), p. 30.

[9] Ampuja (2014), p.32

[10] Mau (2003), p.11.

[11] Cp. Mau (2003), p.95.

[12] Cp. Mau (2003), p.96.

[13] Wong et Guo (2010), p.6061

[14] Cp. Wong et Guo (2010), p.6062

[15] Ibid., p. 6080

[16] Ampuja (2014), p.33

[17] Klevås (2006), p.269.

[18] Cp. Ampuja (2014), p.33

[19] García-Arca, Prado-Prado (2004), p.377.


ISBN (eBook)
ISBN (Buch)
915 KB
Institution / Hochschule
Handelshochschule Leipzig gGmbH – Lehrstuhl Logistik
improvement packaging logistics cost cutting value enhancing

Titel: The Improvement of Packaging Logistics. Cost Cutting and Value Enhancing