When it comes to optimizing and automating your supply chain, don’t overlook the carton your product is shipped in — along with all of that empty space inside. It’s the last part of the pre-COVID B2B warehouse to escape modernization: the massive, cluttered storage area where the corrugated cardboard, boxcutters, polybag mailers, tape, packing peanuts, plastic air pillows and mailing labels are stored.

Most manufacturers and retailers order standard size, collapsed corrugate boxes and mailing envelopes for their fastest moving items, and fit the rest as best they can. Oversized or odd-shaped pieces in square boxes are full of air, crumpled paper and Styrofoam, as are the most popular small SKUs when the smaller boxes run out.

One fix is on-demand packaging — where software-driven equipment layered onto a warehouse management system cuts and configures a continuous feed of z-fold corrugate into right-sized boxes based on order dimensions. This is typically seen as nice to have, but low on the supply chain priority list.

But as the low-hanging fruit of last-mile optimization is picked, and companies hunt for small-but-mighty efficiency improvements that yield meaningful cost savings and sustainability benefits, they’re asking: How much scarce, costly warehouse square footage is eaten up by packaging inventory? How many more orders might fit on a truck if cartons were right-sized? How many truck trips might be eliminated? How much less fuel consumed? How much money saved in parcel freight charges? How many more orders could be filled by the same workforce in the same workday with less risk of damage?

“More and more companies are seeing this as mainstream,” explains Steve Larsen, vice president for global strategic partners and customer solutions with Salt Lake City on-demand packaging equipment provider Packsize. “They have a customer use-case and experience problem they need to solve, a sustainability story they need to tell, and regulation on the horizon to think about. Plus, freight carriers are running out of capacity; a big issue in recent years.”

Packaging Waste is Serious Business

Impacts from packaging inefficiency vary widely across sectors, says Packsize chief technology officer and executive vice president Brian McCarson. A winery with years invested in harvesting and fermenting grapes might worry more about broken bottles in transit; an e-retailer may worry about customer experience and frictionless returns.

“There’s no one-size-fits-all solution for what is environmentally and economically sound,” he explains. “But what’s certain is that shipping air better be for a good reason. If you’re shipping air, it should be in pocketed, padded cells to protect the goods, not because you can’t figure out the right size package to put it in.”

On-demand packaging solutions that provide equipment and software for on-site customization can reduce packaging by up to 40%, void-fill by 60% and corrugated stock by 25%. A right-sized box, cut and constructed in as little as three seconds, improves productivity by nearly a third, with fewer errors and less training required.

Think of the Planet

Packaging waste is a serious global problem. According to statistics compiled by U.K.-based Business Waste Management, the EU countries together generate 84 million tons of packaging waste annually; the U.S. generates about 82 million tons, 33 million of it sent to landfills, according to U.S. Environmental Protection Agency (EPA) data. Cardboard and plastic are the two leading types of packaging waste.

Global e-commerce accounts for more than 1 million tons of packaging waste annually — eight times as much as for the same orders purchased in-store or through other offline channels. More than half of that waste is single-use. Amazon, which shipped 89,000 tons of plastic packaging in 2023, 94% of it within and to North America, has since phased out most plastic air pillows as filler and is working with partner sellers to ship product in its original packaging. Walmart has switched from plastic to recycled paper for its mailers and has used on-demand packaging to cut filler by 60% and corrugate by 26%.

An average corrugated shipping box ships 40-60% empty space, sometimes to protect product, but often because a business can’t buy and store individual boxes sized for its entire product line. Crumpled paper and plastic filler add to the waste — and the cost — of shipping air. Losing 25% of the cardboard containing 40% void and filler translates into a lot of wasted carrier truck-miles, extra fuel and higher emissions.

A warehouse that once averaged 6 to 12 standard cartons may now stock up to 25, according to DHL Trend Research. Unsurprisingly, global carton-board production nearly doubled from 27 million metric tons to nearly 51 million over 2000-22, according to Statista. That’s a lot of trees.

Wasted Capacity = Wasted Capital

Larsen describes making the rounds to customer warehouses across a range of sectors and seeing the same thing: a packing associate under time pressure receives a product, studies the order, looks around for a likely box, starts to pack it, maybe puts a label on, then realizes it’s too small and discards it, grabs a box that’s too big as a fallback, then throws everything in with excess filler.

“The big e-commerce shippers are looking to eliminate that discretion,” he says. “They want a system to say, ‘Here’s the order, cubed on the basis of the combined SKUs, plus void for the four air pillows you need to protect the goods — and here’s the right box’.”  The next step in digital transformation, Larsen predicts, will use AI and advanced inventory management to sequence and automate the process, diagramming the pack as it cuts and configures the box.    

Decisions to adopt on-demand packaging, Larsen says, still mostly come down to dollars and cents, through increased productivity and the freight logistics savings, although in recent years considerations of sustainability have come to the fore. That dovetails nicely with carrier load planning and pricing objectives.

Void and filler in the box — whether a carton full of items or a truck full of cartons — is potential revenue lost. Dimensional weight tables were initially developed by parcel carriers to capture the proportionate network cost of an item’s weight to its dimensions — a small, heavy item, say, or an oversized, lightweight one.

The issue is not, however, always wasted space. Getting the pack wrong can also be costly. As an example, Larsen worked with a maker of dog food that was shipping its product in quantity in heavy-grade, lightweight poly-bags. While the bags had no void or fill, the total bag weight, size and sorting/handling limitations (they could not be run through the normal conveyor/sorter system) triggered high accessorial charges in the carrier rate tables. A shift in packaging strategy to low-profile boxes generated quick savings. On average, he says, shippers could see 5-20% savings from studying the tables closely and taking advantage of size or weight thresholds to split or reconfigure shipments to reduce dimensional or DIM rates and charges — or to challenge a carrier’s interpretation of the tables.

Cartonization, meanwhile, is just a small piece of a broader strategic discussion around how businesses begin proactively planning for growth post-COVID, as disruption and market volatility persist and both logistics and core operating costs — labor, materials, vehicles, facilities, fuel, construction, technology — keep rising.  

“Every one of the core variables is becoming more expensive, while e-commerce is growing, and businesses are feeling this growing pressure on margins” McCarson says. “So if technology can give you 30% more packages per vehicle, you could in theory reduce your fleet by 30% and still meet all of your demand — 30% fewer trucks or drivers, 30% less fuel, 30% less maintenance and repair. That’s very interesting for most CFOs; they want to have that discussion.”  

Regulation as a Catalyst

The main obstacle to on-demand packaging has not been cost or complexity but rather the absence of any clear internal constituency advocating for it within organizations, including the supply chain function. Getting organization-wide buy-in from risk-averse teams for a fundamental change in process to making your own shipping cartons is a challenge. But companies can solve the problem by utilizing equipment on a subscription basis, packaged with software, services and z-fold corrugate as a service, to deliver more immediate ROI.

Regulation, along with new technological advances, may well provide the catalyst that makes on-demand packaging industry-standard over time. Five U.S. states have already passed so-called extended producer responsibility (ERP) legislation, and another 10 have introduced bills this year, to make packaging-product manufacturers responsible for their products’ end of life. Those laws provide for industry funding, planning and assistance in managing relevant products in the waste stream via specially created non-profit entities.

While the biggest target is single-use plastic bags, bottles and other containers, cardboard and Stryrofoam filler are also a major focus, as landfills and recyclers reach capacity, and expansion is constrained.  

A New Jersey bill, S226, introduced in July, mandates right-sized packaging, banning cardboard or corrugate packaging that is more than twice the size of the product it contains, with $250-$500 fines per violation. The law applies to online retailers with annual gross sales of $1 million or more in — or into — New Jersey, and retailers occupying at least 475,000 square feet with 50 or more employees. New Jersey previously banned polystyrene pellet filler in 2022. Michigan proposes to mandate a 50% reduction in packaging by weight over 10 years.

Last April, the European Union adopted a sustainable packaging directive which, among its many provisions, sets packaging reduction targets of 5-15% from current levels over the course of a decade starting 2030; a 50% maximum void limit for grouped, transport and e-commerce packaging; and a requirement that importers minimize packaging weight and volume of goods entering EU commerce.

McCarson, who spent 23 years at Intel Corp. before joining Packsize, says there are mixed signals from consumers and voters who support sustainability but not necessarily if it means higher freight charges or taxes. Therefore, he argues, the biggest sustainability advances and capital investment will require regulation. But he also feels businesses will invest in technology because it can deliver meaningful, provable cost savings.

“I believe there’s an economic advantage in the supply chain, where technology can provide an immediate cash benefit to businesses that also happens to be sustainable,” he says. “That’s where things get really interesting.”

Resource Link: https://www.packsize.com/