How to Keep Packaging from Becoming the Weak Link in Supply-Chain Digitalization
Digitalization is transforming the supply chain by eliminating inefficiencies, improving customer service and lowering costs.
While the TMS and WMS serve as the engines for digitalization in transportation and warehousing respectively, a host of complementary software, analytics tools and automation systems are being employed to enhance digitalization within these operations.
However, the value of digitalization is only fully realized when operations across the supply chain are both digitalized and integrated to enable end-to-end visibility and predictive forecasting. According to management consulting firm McKinsey, companies that aggressively digitalize their supply chains can boost annual earnings growth by 3.2% and annual revenue growth by 2.3% – numbers that will catch the attention of any business executive.
Yet, while many organizations are continuing to invest in warehousing and transportation digitalization, fewer are making similar investments in packaging. That disparity can create a digital divide that not only reduces packaging efficiency, but also creates a weak link in supply chain digitalization.
Changing the Packaging Mindset
The first step in strengthening this weak link is changing the packaging mindset. Historically, packaging was viewed as something of a secondary operation within supply chain management and outsourced to off-site third-party packers who were largely disconnected from other supply chain operations.
Today, many organizations have moved packaging operations into the warehouse to eliminate the unnecessary time and costs of shipping products to and from dedicated packaging operations. They are also increasingly recognizing the strategic value of packaging in enhancing customer service and responding to changing market demands. However, simply co-locating packaging with warehousing does not by itself put packaging operations on equal footing with warehousing and transportation in terms of digitalization. Supply chain managers need to think about packaging digitalization in the same way they already think about digitalization in transportation and warehousing.
The Engine for Packaging Digitalization
Similar to the role the warehouse management system (WMS) and transportation management system (TMS) play in warehousing and transportation, a dedicated packaging software platform is the engine for packaging digitalization.
A packaging software platform must, of course, support the unique workflows encountered in packaging operations, managing the entire process and providing full tracking from initiation to completion. It should also provide detailed reporting on the efficiency and productivity of the operation.
An additional feature that supports digitalization is material resource planning (MRP) capabilities. When packaging software with MRP capabilities is integrated with the WMS, the critical process of demand planning becomes substantially more efficient and effective.
Finished goods forecasts from the WMS can be automatically loaded into the packaging system, which then generates detailed bills of material for each finished good. By having visibility into future demand, the economies of scale represented by the aggregate demand can be leveraged to achieve bulk pricing while material deliveries are scheduled to arrive on site as needed to minimize material storage requirements.
In addition, when the packaging system is communicating with the WMS, product inventory can be managed more efficiently and the impact of peaks in the packaging operation on warehouse inventory can be planned for and minimized.
Achieving End-to-End Visibility
Beyond software integration, there is an opportunity to consolidate relevant data from the packaging management system with data from other supply chain operations to achieve a holistic view of supply chain performance and product movements.
At DHL Supply Chain, we accomplish this through our MySupplyChain platform. MySupplyChain provides single pane-of-glass access to warehouse, packaging and transportation data, including convenient dashboard views that simplify performance monitoring. MySupplyChain integrates packaging data with data from other supply chain operations to deliver full supply chain visibility, including near realtime inventory and order tracking across the network.
Automation and Optimization
Just as robots are proliferating in warehouses and robotic process automation is being increasingly employed in transportation management, automation and optimization tools can enhance the performance of packaging operations in many cases. Robotic palletizing systems, in particular, eliminate the tedious process of building pallets for retail distribution while enabling mixed case pallets to be built to a retailer’s specifications.
For eCommerce operations shipping in a variety of packaging sizes, DHL Supply Chain has developed a carton optimization tool that works with the packaging software to eliminate packaging waste and optimize transportation costs. Using sophisticated optimization algorithms combined with an on-demand approach to packaging, the right package can be produced at the right time for each shipment. With on-demand packaging, right-sized packages are available at the packaging line when needed to enable lower transportation costs and reduced waste while ensuring the product is protected.
Similar types of tools are being used to analyze and optimize the efficiency and productivity of packaging lines. Today, it’s possible to create a digital twin of packaging lines to preview how changes in layout and design will affect efficiency and productivity.
Digitalization represents the future of supply chain management, and packaging is an integral and strategic component of today’s supply chain. Working with a supply chain partner that has experience managing digitalized packaging operations and can deliver unique solutions for packaging optimization increases the value of packaging to the business and enhances other digitalization initiatives across the supply chain.
Alicemarie Geoffrion is the vice president of packaging operations in North America for DHL Supply Chain.