As Transportation Costs Rise, So Does Interest in Reducing Packaging or Even the Size of Product
By: MIT CT&L January 07, 2014
Densification is the process of reducing product size (volume or weight) while maintaining or increasing its value. This is not a new trend. In fact, it is a tenet of good supply chain management and logistics, according to a four-part blog series published by the MIT Center for Transportation & Logistics.
Reducing the packaging size of products is a common efficiency initiative in many organizations. Examples abound. Wal-Mart Stores Inc. reported that rationalizing the package sizes on just 300 SKUs from its Kid Connection toy line saved more than 3,000 tons of corrugated materials, 1,300 barrels of oil, over 5000 trees, and decreased ocean shipment volumes by more than 700 shipping containers. The new packaging format resulted in $3.5m in transportation cost savings in just one year.
As most firms will acknowledge, interest in reducing packaging size is highly correlated to the price of fuel. As the cost of transportation increases, so does the level of interest in sustainability initiatives to reduce shipment volumes!
Other companies focused on modifying the value density of the product itself. For example, Hamburger Helper, a product manufactured by General Mills, modified its formulation to create denser pasta shapes. The same amount of food could be packaged within a 20 percent smaller box at the same price. This densification of product saved 890,000 pounds of paper fiber and eliminated 500 truckloads. This is very similar to the effect that P&G and Unilever had in creating more concentrated laundry detergent. The volume for these concentrates can result in between a 22-percent to 43-percent decrease in volume along with the expected reduction in transportation costs.