Jack Ampuja is president of Supply Chain Optimizers. Jack’s firm has completed more than 500 packaging optimization projects for manufacturers, retailers, and ecommerce companies, saving an average 10% in supply chain costs on each project. Jack was a recent guest on the Unboxing Fulfillment Podcast with host Harry Drajpuch discussing, among other things, how eCommerce shipping boxes can increase costs and erode profit. Following is a Q&A summarizing the discussion. Listen to the full episode here.
Jack, you've been a senior supply chain executive at several Fortune 500 companies. Why did you gravitate toward shipment packaging as a career focus?
Over 20 years ago, I met a consultant who had a different take on how to make supply chains more efficient. He approached it from the packaging side and how optimal shipping boxes and bags could reduce storage, handling and, most of all, shipping costs. He proved it by showing me how to save $1.8 million for my then employer’s large distribution operation – just by right sizing our shipping boxes.
Are ecommerce companies generally good at optimizing shipment packaging?
No. The problem is you have the wrong people making decisions about packaging. For consumer product companies, it's often marketing that decides on the type and size of eCommerce shipping boxes and other packaging elements. But these folks are not thinking about the broader supply chain implications of box choice.
If you take a dollar of supply chain costs, maybe $0.10 goes toward the actual box; maybe $0.25 to $0.30 goes to warehousing costs for storage and handling; and then the big magilla is freight at $0.60 or $0.65 out of that dollar. A marketing person doesn't really know how to connect the dots between box choice and how it impacts shipping and other costs.
It's the same reason a small company like mine regularly beats out the huge box manufacturers on bids for package optimization projects. While they're focused on the eCommerce shipping box alone – the 10-cent cost bucket – I'm focused on all those downstream costs impacted by the box choice. It's a lot easier to find savings in that 90-cent cost bucket.
Would you consider your team to be packaging engineers?
Absolutely not. Packaging engineers design or choose boxes that will protect the product. They are focused on the box alone. The job of choosing the right eCommerce shipping box or bag to reduce total supply chain costs is a math problem, not an engineering problem. Based on the required cube for a product or combination of products, we are analyzing all the options for what box or bag provides adequate space and protection at the lowest possible total cost (package costs, storage, handling, shipping). Most packaging engineers are not knowledgeable about UPS and FedEx rules and dimensional weight charges. You attack this challenge with math and a good knowledge of how freight costs are calculated.
What's the lowest hanging fruit for ecommerce brands who want to reduce operational costs?
Rightsizing eCommerce shipping boxes is a good start. We've all gotten that almond-sized item delivered in a box big enough for a toaster. There's a bias among eCommerce companies to have as few boxes as possible. That may be easier but it's certainly not economical. We find that around 6 boxes is the right number for a manual fulfillment operation. More than that and workers get slowed down trying to make the right packaging choice. When more box choices are involved, you need technology to direct that choice
Talk more about technology as it relates to shipping boxes.
Fulfillment associates are under tremendous pressure to pack products quickly and get them out the door. They can't take the time to evaluate which eCommerce shipping box might work best. But if your systems houses the information on each SKU’s exact dimensions and weight, there is software that will direct the packer to use the best, most economical box based on pure mathematics, not guesswork.
What's the typical cube utilization for eCommerce companies on outbound shipments?
Cube utilization is the percent of space in a shipping box actually taken up by the product. Most e-retailers are at around 65% cube utilization and ship about 35% air and protective filler. There is definitely an upside to this number, but it's very hard to get up to the 80% or 85% range – unless you shift to bags or envelopes.
Then should more brands be taking advantage of poly bags to bring down package weight and shipping costs?
For durable, lightweight products, polybags are a wonderful solution. There is virtually no wasted cube. If you’re shipping products like textiles and nutraceuticals (that ship in small plastic bottles), there are a lot of savings that can be had switching from boxes to bags.
How much can online sellers save from optimizing eCommerce shipping boxes?
The cost components for a manufacturer include the box, warehouse storage, warehouse labor/handling, and shipping. When you consider all these costs, the typical savings we see is 10%. We've seen numbers as high as 20% or, for a well-operated Fortune 500 company, around 5%. The biggest savings, by far, will be in the shipping bucket. When you are dealing with hundreds of thousands or millions of orders that ship annually, reducing the weight of each shipped item by just a few ounces can yield enormous savings.
