One of the fundamental changes in manufacturing thinking that occurred back in the 1980’s and 1990’s was the concept of waste. Back in the 1970’s idle labor and idle machines were the primary focus in waste reduction. Industrial engineers would break down operations into elements and apply the principle of “eliminate, combine or simplify”. There were left hand/right hand charts, there were machine vs. operator graphs and other tools, but all were designed to improve labor efficiency.
Costs were divided into two categories: direct and indirect. Direct costs were costs that were easily identified as being “consumed” when building the product. This usually was the shop floor labor and the materials used to build the product. Indirect cost was essentially anything else, this included things like salary support, facility cost, depreciation, and packaging materials.
The problem was that direct costs were only a small percent of the total costs; but since it was easier to measure, it tended to be the focus of cost reduction efforts. Unfortunately sometimes labor cost reduction came at the expense of indirect costs. For example, increasing the lot size improved labor efficiency on paper, but it also created excess inventory that hid quality problems and led to higher material costs. Also some labor savings never translated to higher throughput because the material would go though one operation a bit faster, but then sat and waited at the next operation. The truth that we discovered decades ago was that direct labor was the least of our wastes.
The JIT revolution in the US caused many in manufacturing to “rethink” the definition of waste. As things evolved, the definition pointed to anything that did not directly add value to the product. In the early 70’s the following were primary targets for cost reduction because they were direct costs.
- Idle labor
- Idle machinery
Because of a broadened view of what is true waste, the following are now items that manufacturers focus on for cost reduction.
- Machine set up
- Travel distance
- Paper work
- Excess space
Because packaging was considered an indirect cost, it rarely had the scrutiny that direct costs inspired. In many cases packaging was very costly, but the costs were mainly “under the radar” because they were part of indirect costs.
There are a lot of costly wastes that can be attributed to packaging; the following are the more obvious ones:
- Product Damage: The most expensive time to scrap a product is after it has been packaged, all the value has been added, it has been counted as revenue and it is very likely to negatively affect customer satisfaction. Poor packaging design can result in unneeded damage.
- Cosmetic Corrosion: In many cases, surface corrosion on a product doesn’t result in the product being scrapped, but a ton of activity usually results from it. Added shipping costs result when products are returned. Sometime someone needs to fly out to the shipping destination to inspect the damage. Rework is added costs. Sometimes cosmetic issues generate more costs because of all the time and energy required to discuss and assess liability and methods of rework. Using corrosion inhibiting materials in your packaging will usually prevent this type of corrosion and eliminate the wasted hours and materials recovering from it.
- Facility Space: Packaging materials can sometimes take up a lot of space that could better be used in building product. Collapsible crates and boxes can save significant space. Packnet has the ability to deliver packaging materials just in time. Package systems can be pre-assembled into kits just before Packnet delivers them, and only the materials need for today’s shipment.
- Packaging Materials: There are a lot of areas that can be considered wasteful. One time use packages that are expensive are wasteful if they can be replaced by reusable systems. Sometimes packaging is “over engineered” resulting in unneeded material or labor costs. This is why using an experienced company to custom engineer your packaging can save a ton of money.
- Ergonomics Issues: Poorly designed packaging can be awkward to handle causing stress and strain on the operators and subjecting your company to the added costs of workman’s compensation, lost productivity due to injuries and even litigation risks.
There a number of other costs and issues that can be attributed to packaging including excess clutter, unneeded hardware and higher transportation costs. The truth is, there a lot of hidden costs associated with poor packaging designs. An experienced industrial packaging specialist such as Packnet has the potential of removing or reducing a ton of waste associated with the packaging, storage and shipping of your products.