Packaging plays a pivotal role in safeguarding products, promoting sustainability, minimizing shipping expenses, and maximizing customer satisfaction. And now, a powerful new tool called packaging optimization significantly reduces shipping costs and product damage.

Listening to the loudest voice in your company often emphasizes solutions that are not optimal. Optimization finds the best possible solution from all the viable options. It can either maximize desirable components (like profits or throughput) or minimize components (like cost per order) that you want less of.

Any optimization begins with a thorough understanding of supply chain, sales, and operations. As a first step, gather a baseline profile of the items and quantities you sell, the rates (transportation, warehousing, and packaging) you have negotiated, the packaging (material, size, and grade) utilized, damage reports, and any “secret sauce” used to attract and retain customers.

Next, talk with stakeholders about defining the project goals and identifying any relevant constraints. There are two types of constraints (see table 1) that influence the end solution. Hard constraints must be satisfied. Soft constraints are preferences that would be nice to have.

Packaging optimization takes a holistic approach. It goes beyond cutting costs — it's about creating value for your business and your customers. It finds the sweet spot where companies protect without overdoing it on packaging materials or costs. It is good for the environment, it is good for bottom lines, and it ensures online orders arrive safely and securely.

Optimization balances tradeoffs to arrive at a solution that is better than all other solutions. Simpler solutions can be developed in spreadsheets. For more complicated situations, companies may rent analytical engines or use artificial intelligence (AI) techniques to quickly model all permutations.

Packaging solutions cannot be developed in a vacuum. They rely on the skill and sophistication of warehouse operators. There is no use designing for optimality if the warehouse is unable to pick the right box and fill it correctly. Here are some common outcomes that organizations realize once they have optimized their packaging.

Right-sized Packaging

The size and weight of packages directly influence shipping costs. Right-sizing packaging involves selecting the smallest possible packaging that still provides adequate product protection.

Often, businesses use standard-sized boxes or envelopes. Optimization often suggests a better “regime” of boxes and envelopes tailored to a particular order profile and business need.

Invest in flexible packaging solutions such as variable dimension boxes, mailers with variable depths, or custom-sized on-demand cartons to eliminate excess space. Total shipping costs decrease from minimizing dimensional weight, the tare weight from dunnage, and reduced damage from products shifting during transit.

Utilize Lightweight Alternate Materials

In addition to size, the weight of packaging materials directly impacts shipping costs. Lightweight materials reduce the tare weight of packages and are often more sustainable.

The choice of packaging materials significantly impacts both product protection and shipping costs. Opt-in for materials that strike a balance between durability and weight to ensure adequate protection during transit. Also consider packaging that serves multiple purposes, such as protective cushioning that also acts as branding material, further optimizes packaging efficiency.

Alternative materials can replace heavier materials. Some weight minimizing examples are upgraded singlewall vs. doublewall corrugated, different fluting, different liner combinations, different ECT strengths, and wall thickness changes.

Additionally, consider padded envelopes or pouches for smaller non-breakable items, as these can provide sufficient protection while minimizing weight. Reducing the weight of your packaging not only cuts shipping costs but also demonstrates your commitment to environmental stewardship —a win-win for your business and the planet.

Enhance Product Protection

Product damage during transit not only incurs replacement costs but also damages your brand's reputation and diminishes customer satisfaction. Enhancing product protection through optimized packaging is essential for reducing these risks.

Investigate packaging solutions such as cushioning materials, shock-absorbent inserts, or custom foam packaging tailored to the specific fragility and shape of your products. Conduct thorough testing to simulate real-world shipping conditions and ensure that the packaging effectively protects items from impacts, vibrations, and compression forces.

One quick win to minimize damage is to isolate out incompatible items. This could be a light damage prone item with a heavy item, liquids, hazardous materials, etc. There are two options: ship these items by themselves or use custom-designed packaging inserts or dividers to securely hold products in place and prevent shifting.

Streamline Packaging Processes

Inefficient packaging processes not only waste time and resources but also contribute to higher shipping costs. Streamlining packaging operations can lead to significant cost savings and improved efficiency throughout the supply chain.

Evaluate your packaging workflow from order fulfillment to shipping and identify opportunities for optimization. Now is the time to automate repetitive tasks and reduce manual labor.

Invest in packaging automation solutions such as carton erectors, carton sealers, on-demand packaging, and automated labeling systems. Automation accelerates packaging efficiency, ensures consistency and accuracy, and reduces reducing the likelihood of damage and errors.

Additionally, consider the shape of the package and eliminate irregular shapes that may be more difficult to transport efficiently. Collaborate with your manufacturing partners to produce more conforming product that decreases costly accessorials.

By correctly packaging products upfront at the manufacturer, you can reduce warehouse handling, decrease additional packaging, and lower the risk of damage enroute to customers.

Promote Sustainability

Linking sustainability with a reduction in packaging is not only logical but imperative in today's environmentally conscious world. Sustainable practices minimize the environmental impact of packaging materials throughout their lifecycle, from production to disposal.

Less packaging means fewer natural resources used in production. This translates to reduced energy consumption, decreased water usage, and minimized extraction of raw materials, all of which contribute to a lower carbon footprint.

Streamlining packaging and minimalistic packaging designs reduce waste generation and waste sent to landfills. This promotes a circular economy where materials are reused, recycled, or composted.

Sustainable packaging often involves the use of eco-friendly materials such as recycled paper, molded pulp, biodegradable plastics, or compostable alternatives. These materials break down more easily in the environment, reducing their ecological impact and mitigating harm to wildlife.

Moreover, sustainable packaging practices resonate with consumers. By aligning with sustainable values, businesses can enhance their brand reputation, attract eco-conscious customers, and foster long-term loyalty.

In conclusion, packaging optimization is more than a one-time fix; it is an ongoing journey of continuous improvement. Take a proactive approach to packaging optimization by conducting regular audits of your packaging practices, exploring innovative packaging solutions, and seeking feedback from customers and logistics partners.

Start optimizing your packaging today to reap the benefits of reduced shipping costs, enhanced sustainability, less damage, and delighted customers. Your bottom line and customers will thank you for it.

Jeff Haushalter is Partner at Chicago Consulting where he focuses on decreasing costs and improving service via warehouse operations, parcel spend management, and optimal packaging practices, among others.

TABLE 1 Common Constraints

This article originally appeared in the May/June, 2024 issue of PARCEL.