How to Reduce Costs by Optimizing Packaging
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How to Reduce Costs by Optimizing Packaging

By Manjeet Singh, Research Director, Operations Science & Analytics, DHL Supply Chain

Manjeet Singh, Research Director, Operations Science & Analytics, DHL Supply Chain

Challenges

• Pallet packagingdecisions are often an overlooked area of a warehouse operation. However, the pallet remains the primary storage medium in warehouse operations and decisions on how to orient case patterns on a pallet can lead to significant storage utilization increases.

• Carton utilizationin a warehouse and addresses the problem of packaging orders into cartons that are too large for their contents, this leads to additional dimensional weight charges from the parcel carriers. Since shipping is often 2X fulfillment costs,this can be very significant.

Potential Solutions

• Pattern Optimization: Pallet case patterns usually follow simple configurations. In one example, each layer of a pallet has 6 cases along the one side of the pallet repeating 3 times. This particular configuration would yield 18 cases per layer, but leaves unused space on the pallet footprint. A more complex pattern increases the cases per layer to 21 cases with no cases overhanging from the pallet. Note, case overhang may be acceptable in certain situations and thus utilization could increase further. Across 4 layers on a pallet this is a 12 (3 cases per layer X 4 layers) case difference and increases storage utilization by 15%. Note, this new case pattern is not intuitive and calculated with a complex algorithm. However, once set it could be usually implemented at the end of the manufacturing process into the automated palletizer’s configuration template, leading to better utilization in both storage and transport. There are optimization models in the academic literature that target getting more cases on a pallet. All of these models work within current infrastructure and do not come with any capital outlay, just changes to cases orientations. Case studies have shown storage utilization increases of up to 20% can be realized, leading to getting out of expensive outside storage and trailer demurrage charges.

• Pallet Stackability: Pallets are often stored on the floor and stacked on top of each-other. The ability to stack pallets safely depends on several factors: case orientation, vertical edges, storage time, case weight, humidity, materials, etc. Stack height decisions are often arbitrary and sometimes done through trial and error. In numerous instances, pallet stack heights can be increased simply by changing the case orientation on a layer to create more vertical edges. Increasing stack heights from 2 to 3 represents a 50 percent increase in storage utilization and a significant space savings. Product storage guidelines within a company are often universal, but sometimes it is possible to stack pallets higher in a low humidity region for example a warehouse in Denver or Phoenix may have a greater stack height potential versus a warehouse in a high humidity zone like Atlanta.

• Carton Optimization: In e-fulfillment and other unit pick operations, orders are often placed into cartons for shipping. The size of the carton used is often somewhat arbitrary and depends on a combination of what is available, packer judgment and WMS guidance. With the recent changes in how parcel carriers charge for dimensional weight, this relaxed approach to choosing carton sizes often leads to additional shipping charges. There are analytical approaches (see DHL Supply Chain’s approach below) that lookat the order profile and match the best preconfigured array of cartons to maximize carton utilization. Results show a decrease of >10 percent in shipping charges can be realized through intelligent use of carton selection. Also such models serves as a good gauge of when to use ‘made-to-order’ packaging to increase carton utilization even further. Case studies at a large eCommerce fulfillment operations can yield approximately 12 percent reduction in shipping charges.

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