Companies that pay close attention to packaging operations can uncover myriad economies upstream and downstream in the supply chain. Among the benefits:
Lower Freight Costs. In a traditional scenario, products ship out to the contract packager, then back to the DC for final distribution. These additional runs hike freight costs an estimated 38 percent. Eliminating these legs on an $8-million spend saves $3 million, not to mention the added environmental benefit of taking trucks off the road and reducing carbon emissions.
Lower Inventory Carrying Costs. Using an outside contract packager can add seven days to the distribution cycle. Worse, companies typically lose visibility of their product, creating uncertainty about the amount of product available for sale. Manufacturers deal with this uncertainty by adding inventory, which, in turn, adds warehousing, labor, and financing costs.