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Choosing the Best Amount of Packaging for Your Product

Products need enough packaging to prevent damage, but no one wants to spend more on packaging than needed. Packaging and pallet decision-makers alike will benefit from having a better understanding of downstream supply chain costs.

Over the last several years, consumer products supply chains have trended towards more frequent deliveries and smaller order sizes. Such an approach has enabled retailers to minimize their pipeline inventory while promoting better product availability – having the products that customers are looking for, on the shelf. However, such a strategy poses different challenges.

Smaller orders may require product suppliers to build multiple SKU pallets for inbound delivery to retail distribution centers. Such an approach translates into extra handling during the assembly of the order, as well as at the distribution center when those same orders are sorted and received. Furthermore, smaller, more frequent retail store orders may result in more case touches for distribution center personnel as they are challenged to stack stable pallets for retail store delivery.

According to experts, around 90% of product damage in the CPG supply chain occurs at the DC or retail location. Further downstream in the supply chain there are more interactions between people and products, which increases the likelihood of damage.

So what exactly is the best amount of packaging for your product? Ultimately, it is the amount that delivers the lowest total packaging cost. Take the graph below.

Packaging cost and Product damage

The connection between packaging cost and the amount of packaging is shown in white, while the interaction between the cost of product damage and the amount of packaging is revealed in red. The total packaging cost per package (the sum of packaging cost and damage cost, is outlined in purple.

The lowest cost per package is located at the intersection point of cost and damage. At this point, an extra penny spent on a package would generate a saving of under a penny’s worth of product damage reduction. In the other direction, cutting the amount of packaging by a penny would result in more than a penny’s worth of incremental damage.

While this approach seems obvious, we are left to ponder why product damage is still an ongoing issue. One reason might be a lack of visibility into supply chain damage that happens further downstream.

If the package design does not reflect all product damage costs associated with a package, then the packaging decision will be suboptimal. A suboptimal package design leaves an unrealized opportunity for supply chain improvement.

By better accounting for actual costs, the product damage cost shifts upward, resulting in a new intersection point – one that dictates an additional investment in a package, as shown in Figure 2, below.

Optimal packaging costs graph

Another way to visualize packaging optimization is with the Innventia AB Model (formerly known as the Soras Curve), shown below.

Innventia AB Model

When a product is underpackaged, excessive damage results in a negative environmental impact. When a product is overpackaged, likewise there is a negative environmental impact resulting from excessive resource consumption and residuals.

When it comes to determining whether or not your package provides the perfect amount of product protection, a collaborative supply chain process is essential. With packaging as with pallets, more accurate supply chain feedback can make a positive difference.

Armed with better information designers and decision-makers can better identify costs downstream, enabling them to select the best package – or pallet – for the job.

Wood Pallets and ZIKA: Get the Facts

How Mosquitos Cross Borders

The spread of the Zika virus within the United States has changed the protocol for exporting shipments to other countries. However, this hasn’t changed the way wood pallets are prepared for export. As described in our previous post, the ISPM 15 requirements exist to prevent the spread of wood-boring insects across international borders. Mosquitos are not wood boring insects. The types of mosquitos that spread the Zika virus breed in pools of water. To prevent the spread of Zika, cargo containers and airplanes are subject to special treatment.

Chinese Regulations

Photograph by Flickr, distributed under a CC-BY 2.0 license.

Photograph by Flickr, distributed under a CC-BY 2.0 license.

China, in particular, is strict on this rule. According to the American Journal of Transportation, China’s fumigation requirement is effective for all shipments from the US after August 5, 2016. On September 2nd, they modified the requirement to apply only to shipments originating from Florida. Products being shipped don’t have to be exposed to the fumigation process if certain conditions are met. For instance, fumigating the empty container prior to loading the cargo into it is considered acceptable. Another method it to keep the temperature at 15 degrees Celsius or less during transit. Passenger and cargo airplanes must also comply with these regulations. The space in commercial airlines for storing baggage and in the passenger seating areas should be fumigated prior to departure. Airlines must supply proof of fumigation to the Chinese government.

Pallet Compliance

Wood pallet companies that supply pallets for export are not responsible for fumigating cargo containers. Pallet suppliers have no obligation beyond the ISPM 15 requirements to certify the lumber on their pallets has been heat treated. The ISPM 15 requirements pallet companies must follow are intended to prevent the spread of wood-boring insects that could harm forest sustainability. The National Wood Pallet and Container Association has been working closely with the U.S. Department of Agriculture (USDA) on this subject and had determined:

The ZIKA virus is a human health issue and is related to mosquitos, not wood-boring insects. Therefore, the recognized heat treatment or fumigation of export wood pallets for ISPM 15 compliance is not applicable for ZIKA compliance of the shipment. The entire consignment and container must be anti-mosquito treated and certified pre-shipment. There is no action a wood pallet company can do to assure ZIKA compliance for their customer’s shipment. It is the shipper’s responsibility to ensure the entire shipment is ZIKA compliant.

Inbound shipments without proof of anti-mosquito treatment will be fumigated at the port of discharge in China by the authorities without prior notice. It is the Consignee’s responsibility to inform Shipper (at origin) to provide a certificate proof of treatment before loading the shipment.

These regulations are in place to prevent the spread of Zika virus by mosquitos. The Zika virus was discovered in Uganda in 1947 and is common in Africa and Asia. According to the CDC, as of September 14, 2016, in the United States there have been 43 cases of locally acquired Zika and all of them occurred in Florida. Thus, only outgoing shipments originating from Florida going to China are subject to fumigation; however, these requirements are subject to change. As of September 14, 2016, there are 3,132 cases of US citizens who have contracted Zika by means associated with travel.

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ISPM 15 and Sustainability

History of ISPM 15

The International Stands for Phytosanitary Measures No. 15, referred to in the industry as ISPM 15, is an International Phytosanitary Measure developed by the International Plant Protection Convention (IPPC). According to its documentation, the primary goal is to “reduce the risk of introduction and spread of quarantine pests associated with the movement in international trade of wood packaging material made from raw wood.” The language is comprehensive, covering all forms of wood packaging that serve as pathways for pests that could pose a risk to living trees.

The IPPC is a multilateral treaty signed into effect on December 6, 1951. As of 2010, 74 countries participate in the program. According to the IPPC, the “ISPMs provide globally harmonized guidance for countries to minimize pest risk without creating unjustified barriers to trade, ultimately facilitating their exports and imports of plants and plant products.”

How Wood Packaging Companies Comply

In North America, if a wood products company wants to export lumber then they must comply with the program. The most common way for companies to comply with ISPM 15 standards is by heat treating lumber. In order for lumber to meet these standards, the internal temperature of the timber must reach 56 degrees Celsius or 132.8 degrees Fahrenheit for 30 minutes in a kiln. Certain types of lumber, such as plywood, oriented-strand board (OSB), and sawdust are exempt from these standards as they are exposed to the heat-treating requirements during the manufacturing process. The purpose of heat treating lumber to meet ISPM 15 standards is to reduce the risk of spreading wood boring insects.

Photograph by Wikimedia, distributed under a CC-BY 2.0 license

Photograph by Wikimedia, distributed under a CC-BY 2.0 license

Wood packaging companies that participate in the ISPM 15 program are assigned a stamp with a unique number and that stamp must be clearly applied to all products used in export. They must keep written logs of incoming heat treated lumber and any outgoing orders where the stamp was used. Compliance is monitored and enforced by third party companies that make unscheduled monthly visits to the wood products companies to ensure all rules and regulations are followed. Some of the largest North American inspection companies are Timber Products, Pacific Lumber Inspection Bureau, and West Coast Lumber Inspection Bureau and they work closely with the United States and Canadian governments. If a wood product company doesn’t follow the rules of the program, they can get their stamp revoked and they won’t be allowed to certify lumber products for export.

ISPM 15 and Sustainability

Lumber and other wood packaging companies across North America have widely adopted the ISPM 15 standards and these standards are intended to help protect our forests from wood-boring pests. According to ISPM 15 language, “Pests associated with wood packaging material are known to have negative impacts on forest health and biodiversity. Implementation of this standard is considered to reduce significantly the spread of pests and subsequently their negative impacts.” By adopting ISPM-15 protocols into the manufacturing processes and by achieving the high levels of industry compliance, the wood packaging industry will enhance its role as stewards of the resource, reducing the risk of spreading wood-boring insects which results in elevating the sustainability of the products we produce.

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