The right assortment of carton sizes will improve operational efficiency and reduce material, freight, and labor costs. Shippers can determine the right mix by analyzing order history data and examining the frequency of use for current carton sizes.
Shawn Hebb is an analyst at Glen Road Systems, a systems integrator that specializes in packaging automation. He can be reached at shawn_hebb@grsinc.com.
If you are responsible for warehousing and distribution
operations, then you probably have considered the following
questions at some point: How many and what sizes of shipping cartons
should you purchase? Should you get by with a few, carefully
selected carton sizes, or should you keep a larger assortment on
hand to cover every shipping contingency?
These appear to be straightforward questions, yet finding the
right answer is far from simple. A cost-benefit analysis of the two
choices quickly becomes quite complicated when you consider such
packing-related factors as material suppliers' volume discounts,
freight charges, damage claims, order history, throughput rates, and
the cost of void filler, to name just a few.
For many companies, using a limited selection of cartons makes the
most sense. Consider the example of a distributor of CDs, DVDs, and
other entertainment media that ships several thousand random piece
orders each day. When the distributor switched from a large number
of different-sized cartons to just four sizes, it realized a number of benefits.
For one thing, operators' efficiency and productivity improved.
For another, using a small selection of cartons made it economical to
further automate packing by pre-erecting cartons and allowing them
to flow through the packing stations. As a result, the company was
able to increase its daily shipments while controlling labor costs.
Excess material costs resulting from operators choosing the wrong
cartons also decreased because the farther apart cartons are in size,
the less likely it is that an operator will choose the incorrect one.
In addition to achieving operational improvements, the distributor
is spending much less on packing materials. Because it now
orders large volumes of just a few carton sizes, it has been able to
negotiate competitive volume discounts with its consumables supplier.
As a result, the company is saving US $15,000 to $20,000 a year on cardboard costs
alone. Cutting back on carton sizes also helped it save money by reducing the
amount of void fill required, and because both freight charges and damage claims declined.
Although this example makes the case for cutting down the number of different cartons, it
also raises some questions: How are material, labor, and freight costs affected by shifting the
carton sizes around, adding another size, or cutting out a superfluous size? What number of
carton sizes is most efficient? What are the best carton sizes to use? When does the cost of
adding another carton size exceed the benefit of reduced void space? This article
will outline some ways to answer those questions.
"What if" and how often?
Careful analysis is necessary to determine the advantages of reducing the number
of carton sizes while maintaining efficient carton utilization. An important step is
to perform a quantitative analysis of a warehouse's or distribution center's order
history, using dimensional and weight data for each item the facility stores and
ships. With that information and a selection of actual orders for a given span of
time, you can repeatedly model "what if" scenarios and determine what your material
and freight costs would have been if those orders had been packed in different
numbers and sizes of cartons.
Examining these scenarios can be done using frequency distributions. This is a
statistical analysis method that identifies the frequency with which variables meet
specified conditions. The frequency distribution of order sizes depicted in Figures
1 and 2 show the smallest possible cartons a population of orders could fit.
The blue-shaded regions show the subset populations that fit inside of a
particular carton size. The arrows point to the largest segment of the order
population within each carton size. The location of each arrow provides
an indication of the carton's efficiency (how closely matched in size are
the carton and the order items inside). Orders that are close to
the right side of a carton's range take up the most space
in the carton and hence are an efficient fit.
Looking at these distributions can guide you
in selecting carton sizes. For instance, a parabolic
distribution (such as the subset for carton size
4 in Figure 1) strongly suggests splitting the population
between two carton sizes. A downwardsloping
distribution (such as the subset for carton
size 3 in Figure 1) indicates relatively low
efficiency and a high cost per carton, suggesting
that a different carton size should be chosen.
Finding the perfect carton size
For each carton and order, there is a total liquid volume
of the carton (the product of a carton's dimensions) and a total
liquid volume of the order (the product of the items' dimensions). The
difference between them is the amount of void space remaining.
Whenever an order is placed in a carton, there is almost always leftover
space requiring void fill. However, for every order there is a theoretically
perfect carton size that leaves the smallest amount of void space. This can
be visualized as packing the items together as tightly as possible and then
drawing a cuboid around the resulting combination.
Previous attempts to determine perfect carton sizes have focused on liquid
volume. But that method has drawbacks. For one thing, it does not provide a
sufficient degree of precision, because liquid volume fails
to consider information about the shape of each item
to be contained in the carton. For another, an infinite
number of cartons could have identical volumes yet
not all accommodate products of various shapes.
Liquid-volume estimates represent a "top down"
approach: they help operators choose the right carton
from a predetermined set of carton sizes by volume.
A more effective route is a "ground up"
approach that determines optimal carton sizes for a
given order population based on individual items'
and orders' characteristics.
Frequency distributions can be helpful here. In
addition to providing a good estimate of how many
orders on average would fit a particular carton, they
also can show the carton's efficiency relative to void
space. With the proper software, it is possible to generate
a frequency distribution of perfect carton sizes
for a particular order population. This involves applying
algorithms that examine the shapes of each item in an order and keep track of the
ideal cartons (the cuboid drawn around each combination) for every
possible arrangement of those items. It is important to
identify all possible arrangements, not just the one
with the lowest total volume; for every order ratio
chosen for examination there may be more than one
ideal carton, depending on the arrangement of the
items inside the carton.
One caveat: to generate frequency distributions of
ideal carton sizes for an order population you must
choose a fixed ratio of the carton's dimensions. While
this necessitates analyzing multiple frequency distributions,
a systematic approach to this analysis can
readily determine the ideal combination of cartons.
For any order population that is compatible with a
specific carton size and shape, there will be a distribution
of orders by volume showing how many will
leave the most and the least void space. The best possible
scenario will look something like those in Figure
2: an upward-sloping distribution with a peak at the
end, meaning that most orders that are
packed in that carton leave little void
space. In such a case, the efficiency of the
carton is high and the average carton cost
per order is at the optimal level.
Another objective of these frequency distributions
is to isolate large populations (peaks) and choose a carton size that
accommodates them. Several apparent peaks suggest optimum carton sizes for those
orders; orders that are not ideal may be better suited for a carton with a different
ratio of dimensions.
Once you have identified a carton size
that is most efficient for a segment of the
order population, you can remove those
orders from consideration to simplify further
examination. This method—looking
for peaks in distributions, assigning an ideal
carton size to that peak, removing those
orders from the population under consideration,
and then reexamining the remaining
population—can be repeated until all of the
order possibilities have been addressed. To
be successful, this method requires a structured
approach for examining many different
combinations of carton sizes using many
different carton-dimension ratios. Thus, the
order-population frequency distribution in
Figures 1 and 2 represents just one of many
for a given fixed ratio.
To analyze multiple ratios, start with a
cube-shaped ratio (1:1:1) and work outward.
This ratio has the largest volume per
square inch of cardboard, making cube-shaped cartons the best value. Isolate order
populations, and then examine the remaining orders by
looking at distributions for carton-dimension ratios
that become increasingly elongated rectangles (thus
increasing the cost per cubic inch of the carton).
Although this is a complex process, it has the advantage
of allowing you to objectively compare two different
sets of cartons and identify which set can best
accommodate the greatest assortment of orders. The
final result of this rigorous analysis is the identification
of a set of carton sizes that would accommodate
the largest number of orders with the least amount of
void in the box. Because you are quantifying the benefits
that would have accrued if you had used those
cartons for actual orders handled in your distribution
center, the results will be realistic.
Bear in mind, though, that carton-size analysis should not be a one-time
exercise. Regular re-evaluation is required to reflect changes in the order
population and make adjustments to prevent waste and inefficiencies
caused by less-than-optimal carton sizes. This dynamic re-evaluation, applied at
time intervals ranging from quarterly to every couple of years, can
significantly increase efficiency. There are times when
it is better not to wait for a scheduled review, however.
If you know that the order population is going to
change—because of the addition of a new product category
or a new customer segment, for example—conducting
an analysis beforehand can help avoid a costly
trial-and-error period during the start-up phase.
Proven benefits
The benefits of conducting a carton-size analysis—
and of subsequently stocking the right assortment of
cartons—have been shown again and again:
When operators select from a large assortment of
cartons, they are more likely to choose the wrong size.
They may place the order in cartons that are too big
and end up filling them mostly with void-fill materials.
Each time this occurs, it can cost you an extra US
$1 or more per order. A carton that is too large but is
not adequately cushioned with void fill increases the
instance of damage claims and product returns. When
well-suited carton sizes are used, there is less void
space and operators are less likely to overuse or underuse
void fill.
Carton assortment affects productivity. When
given too many choices, operators may choose one
that is too small and waste time starting over with a
larger size, or vice versa. In addition, operators who
are under pressure to work quickly often disregard efficient
material consumption. Having the right cartons
on hand helps operators get it right the first time.
For random piece orders, matching orders with the
optimal sized cartons boosts pallet and truck capacity,
which translates to freight savings over time.
Moreover, for any business that frequently ships
orders that are billed by dimensional weight, trimming
only one or two inches off carton dimensions
can generate extraordinary savings.
On-site observation suggests that even the most
finely tuned warehouses and distribution centers
would realize significant savings on at least one-third
of the orders they ship if they conducted a carton-size
analysis. The per-carton savings varies for each facility,
of course, but even a 25-cent to 35-cent material
savings on only one-third of orders would add up to a
large sum for most warehouses.
Almost any warehouse or distribution center, then,
is likely to benefit from an examination of the usage
frequency for its current carton sizes. In high-volume
warehouses in particular, careful shifts in carton sizes
can significantly improve material, labor, and freight
costs. For supply chain professionals looking at ways
to cut packaging expenses, carton-size analysis should
become a standard practice.
MAYBE YOU DON'T EVEN NEED
CARTONS?
The increase in electronic commerce means that many
companies are experiencing rapid growth in direct-to-consumer
shipments. They're also finding that the cartons
they use for business-to-business orders are too large and
costly for consumer orders, which are often very small.
This was the case for the large distributor of entertainment
media mentioned at the beginning of this article. As
part of an overall review of its packaging processes, materials,
and labor, the distributor examined its fast-growing
direct-to-consumer business—and determined that the
most cost-effective choice was no cartons or void fill at all.
Instead, it switched to a cold-seal packaging system that
measures the dimensions of the order and seals packaging
material around the items.
The change in packing material reduced the overall package
weight by 1 ounce, which saved approximately US $0.09
on freight charges per order. That may not sound like much,
but at an average rate of 5,000 consumer orders per day, this
equated to savings of US $450.00 daily, or $135,000.00 per
year (300 business days). Not only did it save on shipping, but
the cold-seal machine allowed the company to reduce the
number of packaging operators from 23 to 1, a 95-percent
reduction in packaging labor costs.
Supply Chain Xchange Executive Editor Susan Lacefield moderates a panel discussion with Supply Chain Xchange's Outstanding Women in Supply Chain Award Winners (from left to right) Annette Danek-Akey, Sherry Harriman, Leslie O'Regan, and Ammie McAsey.
Supply Chain Xchange recognized four women who have made significant contributions to the supply chain management profession today with its second annual Outstanding Women in Supply Chain Award. The award winners include Annette Danek-Akey, Chief Supply Chain Officer at Barnes & Noble; Sherry Harriman, Senior Vice President of Logistics and Supply Chain for Academy Sports + Outdoors; Leslie O’Regan, Director of Product Management for DC Systems & 3PLs at American Eagle Outfitters; and Ammie McAsey, Senior Vice President of Customer Distribution Experience for McKesson’s U.S. Pharmaceutical division.
Throughout their careers, these four supply chain executive have demonstrated strategic thinking, innovative problem solving, and effective leadership as well as a commitment to giving back to the profession.
The awards were presented at the Council of Supply Chain Management Professionals (CSCMP) annual EDGE Conference in Nashville, Tenn. In addition to the awards presentation, the leaders discussed their leadership philosophies and career path during a panel discussion at the EDGE conference.
The surge of “nearshoring” supply chains from China to Mexico offers obvious benefits in cost, geography, and shipping time, as long as U.S. companies are realistic about smoothing out the challenges of the burgeoning trend, according to a panel today at the Council of Supply Chain Management Professionals (CSCMP)’s EDGE Conference in Nashville.
Those challenges span a list including: developing infrastructure, weak security, manual processes, and shifting regulations, speakers said in a session titled “Nearshoring: Transforming Surface Transportation in the U.S.”
For example, a recent Mexican government rail expansion added lines to tourist destinations in Cancun instead of freight capacity in the Southwest, said panelist Edward Habe, Vice President of Mexico Sales, for Averitt. Truckload cargo inspections may rely on a single person looking at paper filings on the border, instead of a 24/7 online system, said Bob McCloskey, Director for Logistics and Distribution at Clarios, LLC. And business partners inside Mexico often have undisclosed tier-two, tier-three, and tier-four relationships that are difficult to track from the U.S., said Beth Kussatz, Manager of Northern American Network Design & Implementation, Deere & Co.
Still, dedicated companies can work with Mexican authorities, regulators, and providers to overcome those bottlenecks with clever solutions, the panelists agreed. “Don’t be afraid,” Habe said. “It just makes sense in today’s world, the local regionalization of manufacturing. It’s in our interest that this works.”
A quick reaction in the first 24 hours is critical for keeping your business running after a cyberattack, according to Estes Express Lines, the less than truckload (LTL) carrier whose computer systems were struck by hackers in October, 2023.
Immediately after discovering the breach, the company cut off their internet, called in a third-party information technology (IT) support team, and then used their only remaining tools—employees’ personal email and phone contacts—to start reaching out to their shipper clients. The message on Day One: even though the company was reduced to running the business with paper and pencil instead of computers, they were still picking up loads on time with trucks.
“Customers never want to hear bad news, but they really don’t want to hear bad news from someone other than you,” the company’s president and COO, Webb Estes, said in a session today at the Council of Supply Chain Management Professionals (CSCMP)’s EDGE Conference in Nashville.
After five or six painful days, Estes transitioned from paper back to computers. But they continued sending clients daily video updates from their president, and putting their chief information officer on conference calls to answer specific questions.
Although lawyers had advised them not to be so open, the strategy worked. It took 19 days to get all computer systems running again, but at the end of the first month they had returned to 85% of their original client list, and now have 99% back, Estes said in the session called “Hackers are Always Probing: Cybersecurity Recovery and Prevention Lessons Learned.”
As the final hours tick away before a potential longshoreman’s strike begins at midnight on the U.S. East and Gulf coasts, experts say the ripples of that move could roll across the entire U.S. supply chains for weeks.
While some of the nation’s largest retailers were able to pull their imports forward in recent weeks to soften the blow, “the average supply chain is ill-prepared for this,” Tom Nightingale, the former CEO of AFS Logistics, said in a panel discussion today at the Council of Supply Chain Management Professionals (CSCMP)’s EDGE Conference in Nashville.
Despite that grim prognosis, a strike seems virtually unavoidable, CSCMP President & CEO Mark Baxa said from the stage. At latest report, the White House had declined to force the feuding parties back into arbitration through its executive power, and a voluntary last-minute session had failed to unite the International Longshoremen’s Association (ILA)’s 45,000 union members with the United States Maritime Alliance that manages the 36 ports covered under their expiring contract.
The ultimate impact of a resulting strike will depend largely on how long it lasts, the panelists said. With a massive flow of 140,000 twenty foot equivalent units (TEUs) of shipping containers moving through the two coasts each week, each day of a strike will require 7 to 10 days of recovery for most types of goods, Nightingale said.
Shippers are desperately seeking coping mechanisms, but at this point the damage will add up fast, whether a strike lasts for an optimistic “option A” of just 48 to 72 hours, a pessimistic “Option B” of 7 to 10 days, or even longer, agreed Jon Monroe, president of Jon Monroe Consulting.
The first full day of CSCMP’s EDGE 2024 conference ended with the telling of a great American story.
Author and entrepreneur Fawn Weaver explained how she stumbled across the little-known story of Nathan “Nearest” Green and, in deciding to tell that story, launched the fastest-growing and most award-winning whiskey brand of the past five years—and how she also became the first African American woman to lead a major spirits company.
Weaver is CEO of Uncle Nearest Premium Whiskey, a company she founded in 2016 and that is part of her larger private investment business, Grant Sidney, Inc. Weaver told the story of Uncle Nearest—as Nathan Green was known in his hometown of Lynchburg, Tenn.—to Agile Business Media & Events Chairman Mitch MacDonald, in a keynote interview Monday afternoon.
As it turns out, Green—who was born into slavery and freed after the Civil War—was the first master distiller for the Jack Daniel’s Whiskey brand. His story was well-known among the local descendants of both Daniel and Green, but a mystery in the larger world of bourbon and a missing piece of American history and culture. Through extensive research and interviews with descendants of the Daniel and Green families, Weaver discovered what she describes as a positive American story.
“I believed it was a story of love, honor, and respect,” she told MacDonald during the interview. “I believed it was a great American story.”
Weaver told the story in her best-selling book, Love & Whiskey: The Remarkable True Story of Jack Daniel, His Master Distiller Nearest Green, and the Improbable Rise of Uncle Nearest, and has channeled it into an even larger story with the founding of the brand. Today, Uncle Nearest Premium Whiskey is made at a 323-acre distillery in Shelbyville, Tenn.—the first distillery in U.S. history to commemorate an African American and the only major distillery in the world owned and operated by a Black person.
Weaver and MacDonald's wide-ranging discussion covered the barriers Weaver encountered in bringing the brand to life, her vision for where it’s headed, and her take on the supply chain—which she said she views as both a necessary cost of doing business and an opportunity.
“[It’s] an opportunity if you can move quickly,” she said, emphasizing a recent project to fast-track a new Uncle Nearest product in which collaborating with the company’s supply chain partners was vital.
Uncle Nearest Premium Whiskey has earned more than 600 awards, including “World’s Best” by Whisky Magazine two years in a row, the “Double Gold” by San Francisco World Spirits Competition, and Wine Enthusiast’s “Spirit Brand of the Year.”
CSCMP’s EDGE 2024 runs through Wednesday, October 2, at the Gaylord Opryland Hotel & Convention Center in Nashville.