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Packaging Logistics.
A case study in dairy sector
GRUPO DE INGENIERÍA DE ORGANIZACIÓN (GIO)ESCUELA DE INGENIERÍA INDUSTRIAL
UNIVERSIDAD DE VIGO
Jesús García Arca,
J. Carlos Prado Prado,
A. Trinidad González-Portela Garrido
1. Introduction
2. Objectives and methodology
3. Case Study
4. Results, conclusions and futureresearch
Agenda
2
1. Introduction
• In a global and turbulent world, companies must seek a better management of their processes as a source of competitive advantages (Bolwijn and Kumpe, 1998; García and Prado, 2008)
• Logistics Management, and more globally Supply Chain Management, is a keyfactor to achieve competitiveness´ improvement (Stank et al., 2001; Christopher, 2005)
• Growing sensitivity in society towards a responsible management of business activities Sustainable Supply Chain (Ciliberti et al, 2008; Carter and Rogers, 2008; Seuringand Müller, 2008; Andersen and Skjoett-Larsen, 2009; Mejías-Sacaluga et al., 2011)
• Although an increasing number of companies (especially multinationals) are adopting sustainable and efficient strategies in their supply chains, many companies consider both strategies as incompatible (Andersen and Skjoett-Larsen, 2009)
Logistics, sustainability and competitiveness
Role of packaging in the adoption of efficient and sustainable strategies
in logistics management
DIFFERENT REQUIREMENTS
DIFFERENT AFFECTED DEPARTMENTS
DIFFERENT COMPANIES IN SUPPLY CHAIN
(packaging suppliers, packers, distributors, Third-party Logistics,..)
COORDINATION!
Packaging Design Requirements
García-Arca and Prado-Prado, 2008
• “Packaging logistics” is the process of planning, implementing and controlling the coordinated packaging system of preparing goods for safe, efficient and effective handling, storage, retailing, consumption and recovery, reuse or disposal and related information combined with, maximizing consumer value, sales and hence profit (Shagir, 2002)
• The core of the concept of packaging logistics is the integration of the packaging functions and the coordination with the levels of the packaging system (Shagir, 2002; Hellström and Saghir, 2006; García-Arca and Prado-Prado, 2008)
• Going beyond, in many cases packaging design supports the development of competitive advantages in supply chain management from a global perspective of efficiency and sustainability
• Many companies have opted by redesigning their packaging from a strategic perspective: IKEA, PROCTER AND GAMBLE, NESTLÉ, MERCADONA, PESCANOVA GROUP…
• So, a greater emphasis should be given to the strategic aspects related to packaging design (García-Arca et al., 2011)
“Packaging Logistics” (1)
“Packaging Logistics” (2)
7
• In the Spanish food sector (García-Arca, 2004), the total costs (purchases, packing, handling, storage, transport, waste management and claims) affected by packaging design (directly and indirectly) are 40% of packers companies’ turnover and 10% of distributors´ turnover (excluding handling in supermarkets)
• These last handling costs are 10% of the product price (Saghir and Jönson, 2001)
• The indirect impact hinders an adequate understanding of the repercussions of certain decisions in designing the packaging
• More than two-thirds of the unit loads must be re-palletized along the supply chain An extra 1.2% of the final price (AECOC, 2000)
• At least, the 18% of the pallets were inefficient due to volume or weight (Garcia-Arca and Prado-Prado, 2008)
• The volume wasted between primary and secondary packaging varies between 34% and 50%, while this wasted volume increases between the box and the pallet (between 46% and 64%) (EUROPEN, 2009)
• On average every European citizen generated 156 kg./year of packaging waste (European Comission, 2013)
• In IKEA, 10% more articles/m3 gives a yearly saving of 300-400 MEUR (Dickner, 2012)
“Packaging Logistics” (3)
8
“Packaging Logistics” (4)
9
4.- “BEST PRACTICES” ADOPTION
2.- ORGANIZATIONAL STRUCTURE FOR PACKAGING DESIGN AND
DEVELOPMENT
1.- DEFINITION OF DESIGN REQUIREMENTS
MATERIALS
DIMENSIONS
GROUPING
GRAPHIC ART
Adapted from García-Arca and Prado-Prado (2008) and Garcia-Arca et al. , (2011)
Model for “Packaging Logistics” implementation
3.- MEASUREMENT SYSTEM
Search for efficientand sustainable
alternatives
2. Objectives and methodology
Objectives and methodology
To illustrate the potential of applying “Packaging Logistics”
approach in the dairy supply chain
• An exploratory study was carried out in a dairy company:
1. Going beyond “Case Study” methodology, authors have used the “Action
Research” approach, directly leading and coordinating a “packaging logistics”
project in the company.
2. Researchers have the opportunity to witness the process, not only as mere
observers, but also as real “agents of change” in intervention and know-how
compiling processes (Maull et al., 1995; Prado-Prado, 2000; Coughlan & Coghlan, 2002)
3. The analysis was complemented by a literature review and a field study of dairy
products (based on briks) in three supermarkets chains.12
3. “Case study”
Introduction
• Based in Galicia (Northwest Spain)• Annual turnover of over 100 million euros • Over 250 employees in its factory• Milk, liquid yoghurts, cream and butter, milkshakes and cheeses• One of the most important manufacturers (among top 12 manufacturers)• Packaging design mainly a commercial responsibility
• Study focused on milk briks• Company packs more than 100 million liters/year • Initial Packaging Structure
– 1 liter milk brik with cap (primary packaging)– Packs of 6 briks (secondary packaging)– EUR pallet (tertiary packaging; 720 briks/pallet)
Packaging Suppliers…
Factory
Distributor Warehouse
DistributorWarehouse
Distributor Warehouse
…
…
…
…
Packaging reverse logistics (Green Dot)
Raw
mat
eria
ls´s
uppl
iers
Supply chain
Costs in supply chain affected bypackaging
PROCESSES UNITS OF COST IMPACT ON SUPPLY CHAIN
Packaging purchases Brik, pack (purchases) Manufacturer
Packing Brik, pack (setups, productivity) Manufacturer. Factory
Handling, storage and pickingPallet
Manufacturer´s warehousePack (picking)
Transport(MAINLY FULL TRUCK) Pallet Manufacturer and distributors
Handling, storage and pickingPallet
Distributors´ warehousesPack (picking)
Transport(MAINLY COMBINED TRUCK) Pallet Distributor and supermarkets
Handling Pallet, pack Supermarkets
Reverse Logistics Brik and pack waste (Green Dot) Manufacturer
Breaks and complains Correction costs and quality All parts in supply chain
16
Analysis of alternatives
No changes in liters/brik and briks/pack (commercial requirements) 17
Type and Brikdimensions
(mm.; W*L*H)
Type of pack and dimensions (mm.;
L*W*H)Palletization
Pallet height
(m., incl. pallet)
Pallet weight
(kg.; incl. pallet)
Transportefficiency
(FULL TRUCK)
Type A 60*90*195
Type A.1 720 briks
1.33 807
30 pallets/truck Cardboard box(wrap-around)
24 packs/layer; 5 layers/pallet 21,600 briks/truck
282*127*216 (initial solution)
Type A 60*90*195
Type A.2 720 briks
1.3 800
30 pallets/truck Cardboard tray and plastic
cover24 packs/layer; 5
layers/pallet 21,600 briks/truck
282*128*210 (no improvement)
Type B 65*70*252
Type B.1 768 briks
1.31 848
28 pallets/truck
Plastic cover (+6.66%) 21,504 briks/truck
219*130*265 32 packs/layer; 4 layers/pallet (-0.44%)
Type C 71*75*204
Type C.1 864 briks
1.4 951
25 pallets/truckPlastic cover and carboard
sheet (+20%) 21,600 briks/truck
227*150*205 24 packs/layer; 6 layers/pallet (no improvement)
Type D 62*70*239
Type D.1 816 briks
1.23 903
27 pallets/truckCardboard tray and plastic
cover (+13.3%) 22,032 briks/trailer
228*128*245 34 packs/layer; 4 layers/pallet (+2%)
Analysis of alternatives. Logistics
18
The impact of packagingin transport chain
Packaging Suppliers…
Factory
Distributor Warehouse
DistributorWarehouse
Distributor Warehouse
…
…
…
…
Packaging reverse logistics (Green Dot)
Raw
mat
eria
ls´s
uppl
iers
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
110%
0.45 m 0.65 m 0.85 m 1.15 m 1.45 m 1.85 m 2.3 m
322 kg.*EUR*1 m height
401 kg.*EUR*1 m height
500 kg.*EUR*1 m height
624 kg.*EUR*1 m height
645 kg.*EUR*1 m height
Maximum load limit of 33 EUR pallets and 24.4 tonnes in a full truck
19
The impact of packagingin reverse logistics (green dot)
Brikmodel
Brik weight (gr.; without
cap)
Brik Green Dot (million euros/year)
Pack model Type of pack Pack
weight
Pack Green Dot (million euros/year)
TOTAL GREEN DOT
(millioneuros/year)
A 38 1.227 A.1 Cardboard box (wrap-around) 87 gr. 0.098 1.325
A 38 1.227 A.2Cardboard tray (C) and plastic cover
(P)
44 gr. (C)0.149 1.376
(+3.44%)12 gr. (P)
B 39 1.26 B.1 Plastic cover 15 gr. 0.118 1.378 (+3.90%)
C 36 1.162 C.1Plastic cover (P)
and carboard sheet (C)
14 gr. (P)0.135
1.297
22 gr. (C) (-2.11%)
D 36 1.162 D.1Cardboard tray (C) and plastic cover
(P)
51 gr. (C)0.160
1.322
13 gr. (P) (-0.23%)
Ecoembes fares, 2013 20
6. Results, Conclusions and Further Research
Results
• The selected alternative was format D: – Based on a global supply chain vision (total savings)– No substantial changes in packing system of brik and pack– This alternative implies savings in handling and storage of over 16,000
pallets a year (a reduction of 11.7%)– Only in transport between the manufacturer and distributors an annual
reduction 92 full trucks (2% reduction); Transport savings of 60,000 euros/year (total savings with initial solution of at least 35,000 euros/year)
– Additional savings could be achieved thanks to the reduction of handling and storage in manufacturers, distributors and supermarkets, but also of the transport costs between the distributors' warehouses and supermarkets
• Even major savings changing base of unit loads (up to 800 kilograms in an initial full load truck with 30 pallets)
Conclusions and future research
• Based on an understanding of how the packaging system works and how this is integrated in the logistics system in line with the “packaging logistics” concept, it is possible to conduct a reasoned search for packaging alternatives and improvement
• The results of the case study highlight the different vision of each department and company throughout supply chain
• In this case study, the need of a suitable and global measurement system is outlined in line with the multi-functional and multi-company nature involved within the supply chain management
• So, a greater emphasis should be given to the strategic aspects related to packaging design
• As future research, the authors will analyze, in a more wide basis, the level of development of “Packaging Logistics” approach in non food sector
THANK YOU FOR YOUR ATTENTION
¿ANY QUESTION?
AUTHORS
Jesús García Arca
J. Carlos Prado Prado
A. Trinidad González-Portela Garrido
Packaging Logistics.
A case study in dairy sector
GRUPO DE INGENIERÍA DE ORGANIZACIÓN (GIO)ESCUELA DE INGENIERÍA INDUSTRIAL
UNIVERSIDAD DE VIGO
Jesús García Arca,
J. Carlos Prado Prado,
A. Trinidad González-Portela Garrido
