Packaging Systems: Sizing an opportunity

When FedEx announced that, effective Jan. 1, 2015, it would begin charging based on the dimensions of a parcel instead of just its weight, the industry’s response was mixed. Some scrambled to prevent imminent cost spikes. Some asked, “dimensional what?” And others stifled an “I told you so.”

Most telling is the response of UPS, the Coke to FedEx’s Pepsi, which followed suit very quickly instead of taking the opportunity to differentiate itself with its own next-gen pricing model. The staring match had finally ended, and UPS’s sigh of relief signaled that both companies’ networks had been under a lot of strain. But they’re not the only ones.

The ascent of e-commerce has dramatically increased the number of single-line, single-piece orders and the complexity of fulfilling those orders. For a time, packaging was near the bottom of the list of concerns, since a steady supply of boxes, void fill and labor could at least get items out the door. The industry now has a better sense of the cost of labor and materials with that approach, both of which pale in comparison to a consumer’s response upon receiving a thumb drive in a shoe box. Paying a carrier to ship all that air is the icing on the cake.

But controlling costs and keeping customers happy is not as simple as just using smaller boxes. The pressure to condense the size of a shipping container will push packaging closer to the contours of the product inside, very few of which are neatly rectangular. Poly bags could prove an efficient alternative, but they have already begun to wreak havoc in an industry that has spent a century handling materials with flat sides and straight edges.

Whatever 2015 brings, it will take more than any one solution to meet the challenge. “With announcements like dimensional pricing, it’s all the more pressing to make sure all systems work together,” says Randy Neilson, director of sales and marketing for CubiScan. “Picking, packing, sorting, weighing and shipping are all part of the larger system. We can’t continue to try to put out fires from place to place any more. We need a more holistic system.”

Letting the air out
Specifically, the new dimensional, or “dim” charges, apply to packages smaller than three cubic feet, which were previously priced by weight. A Wall Street Journal report recently cited research by ShipMatrix, which found that 32% of all ground packages could be affected by the coming change, a majority of which weigh less than five pounds. It’s true that companies who tend to ship large but lightweight boxes will be hit hard and those with dense and heavy products might dodge costs or even benefit from the new rates.

In any case, those shipping any unnecessary amount of air will soon be penalized for it. According to Hanko Kiessner, CEO of Packsize, as much as 40% of the volume of a company’s outbound cases and cartons could be unnecessary. Eliminating that space can translate into a 66% transportation efficiency gain for the shipping company, he says, which explains their interest in dim rates. Ironically, the empty space is often there because of flat rates or standard box sizes the carriers themselves designed.

“Especially small- and medium-sized businesses will potentially be squeezed by this move,” Kiessner says. “Margins are often very narrow in some industries, so to add a significant freight charge could eat up the entire profit margin of some businesses.”

Whether based on a carrier’s “if it fits, it ships” sizes or an analysis of SKU and order profiles, many companies have settled on an assortment of standard box sizes. Rick Morse, vice president of sales and marketing for Box On Demand, says those collections might range from a handful to as many as 50 box sizes.

Standard box sizes aren’t meant just for customer satisfaction or reduced shipping costs. Neilson says they are also informed by storage and putaway efficiencies. “You want to manage space and get more out of your real estate,” he says. “To minimize the impact of the dim rate announcement, some customers have established ‘gates’ on the inbound side to capture dimensional information as early as possible in the process. This way, the data can inform storing, handling and shipping.”

Finding the right shape
In the process of switching over to this approach, the customer might use a mobile workstation in the aisles to cube and weigh all existing carton-sized inventory in as little as a few weeks. However, Neilson says it is more common for companies to rely on the pack station operator to assess the size of an item or order and select what they feel is the appropriate carton on the fly. Equipment that creates cartons on demand is therefore appealing to help reduce empty space, but such solutions are heavily dependent on the availability of per-item dimensional data.

Some companies already have product dimensions in their warehouse management systems (WMS). There are often some issues with the accuracy and completeness of that data, but most with a WMS are at least capable of taking a multiple-item order and running a calculation to direct the packer to use, say, box size No. 8, or to direct an on-demand solution to create the ideal box.

If there is no dimensional data, or if the operation doesn’t care to collect or maintain that data, they might instead measure and pack an order as it arrives at pack out. A conveyor-mounted scanner or a stationary scanner can capture each item and virtually assemble the order in a box. Kiessner says such systems can also include a self-learning database. As it captures the data, it stores and retrieves the data the next time that product is ordered.

Ideally, per-item data should also go beyond basic dimensions to include information about how it should be packed. Because fragile items should go on top or be buffered by some protective packaging, simply matching the box to the size of the order is not good enough. In other words, not all empty space is waste. “Software is good at creating the optimum box, but you don’t want the operator to have to solve a puzzle when filling it,” Morse says. “Therefore, the system might also present the packer with a visual diagram of how to pack the box.”

But in many cases, it might not be ideal to process every order with a customized shipper. Morse says a growing number of customers are categorizing orders and packaging them with different processes. “Once an order is received, the system can calculate whether it will save money by making a box on demand or using the standard packing process,” he says. “The idea of designing multiple parallel processes as opposed to committing to a single packing methodology is gaining momentum.”

Assessing the impact
Even if a company can efficiently measure, pack and ship an item, it doesn’t end there. E-commerce creates an increased number of returns. Lance Wallin, vice president of e-commerce solutions for Sealed Air product care division (a position created at the end of 2013), says returns have turned into a part of the business model for e-commerce companies. “It’s part of the customer experience and, if anything, e-commerce retailers encourage returns,” he says. “It’s no longer a sign of a shortcoming, or a process you’re working to minimize or eliminate.”

Depending on the type of business, like apparel and shoes, Wallin says a facility might need to prepare for 25% to 30% returns. “Unfortunately, too many returns are not in good enough shape to get back into inventory,” he says. “I think returns are a part of the business that can be improved the most.”

A facility equipped for only a linear flow of product in and out must therefore be prepared for return traffic. Austin Power, business development manager for Retrotech’s distribution and warehouse division, says there are places where the loop can overlap, and a return system could check in inventory and reroute it to the appropriate area. “This requires inventory management discipline to check it in, perform quality control, repack it if needed, or delete it from inventory,” Power says. “You can utilize the software platform and routing capabilities to piggyback returns on your outbound tools.”

This capability has the potential to further complicate the pack-out line, which Power identifies as the final bottleneck coming out of the four walls of a DC. Even something as simple as physical geography, how a pack-out station is laid out for expansion and flexibility, can make or break a facility’s throughput.

“One company had pack-out tucked in a corner,” Power recalls. “They had modern technology to pick it, route it and sort it at a high speed, and they thought they could just throw people at packing to get it out the door. That strategy doesn’t work anymore.”

Between increased returns and the pressure to reduce packaging, the impact of the dim rates extends much further into a fulfillment engine than simply the pack station. Tim Kraus, product management supervisor for Intelligrated, says a carton with nice square edges is easy to track as it goes through system. A photo eye slightly above the elevation of a conveyor belt can reliably log the leading and trailing edges of a box.

“But if a football-shaped bag comes along, depending on the placement of the photo eye, you have a 3- or 4-inch difference,” Kraus says. “If a conveyor system is trying to set a gap and establish length for accurate positioning on a belt, tray or what have you, everything becomes exponentially more complicated.”

Poly bags are likely to be even more widely used going forward, Kraus suggests. The shift presents three main issues: Can a facility’s existing technology handle items, correctly assess their dimensions, and identify or scan them accurately? “Say you have a 10 x 10-inch bag. The way you handle that depends entirely on what’s in the bag,” he says. “If it’s a stapler, you’re essentially handling a stapler—but with a bunch of extra catch points on it.”

A rise in bags also challenges traditional methods of getting items from pack-out to the shipping dock. In the past, it made sense to put boxes on a conveyor line where they can accumulate, but it might not be possible to preserve a singulated line with bags. It might make more sense to handle in bulk, collecting items in a bin and manually or automatically separating them before a sorter.

“As opposed to keeping everything singulated throughout the system, this leads to a rethinking of what the entire materials handling system looks like,” Kraus says, “and that’s good for the whole industry.”

Companies mentioned in this article
Box On Demand, boxondemand.com
CubiScan, cubiscan.com
Intelligrated, intelligrated.com
Packsize, packsize.com
Retrotech, retrotech.com
Sealed Air, sealedair.com