hat percentage of your products will be returned because of damage? When I walk through the warehouses of our customers and ask that question, few have a real answer.
No one denies that waste is a problem, and that issue is magnified during particular peak e-commerce events. But understanding the magnitude of the problem you are trying to solve is often the most difficult step. And most consumer goods companies are not collecting the right data to do so.
Waste is a two-pronged problem in the consumer goods industry. On one side, you have products that are disposed of for a variety of reasons. The product might not have been constructed properly, or the packaging did not protect the product through the supply chain.
Meanwhile, using oversized boxes or overpacking orders adds to our packaging waste problem. Containers and packaging made up 30 percent — or 75 million tons — of solid waste generated in the United States in 2012.
That waste has a financial impact as well. Damaged goods and excess packaging can cost consumer goods companies up to $40 billion each year, according to Sealed Air’s estimates.
Most companies have no idea about the profits they are losing. Some companies are tracking metrics that are focused on short-term goals such as the order velocity and throughput. But this approach fails to provide the big picture of what's happening in their supply chains. Meanwhile, others are throwing sensors on everything because they think that more data is always best.
Instead, we need to be smarter about the data that we are tracking. When you have the right data, it’s amazing how quickly inefficiencies in the supply chain can be rooted out and eliminated.
“Good data allow companies to specifically target their biggest problems and solve them.”
Good data allow companies to specifically target their biggest problems and solve them. One of our customers in the online grocery market was tracking customer data and found that some of the delivered packages had been crushed or contained leaking products. Our team of data scientists partnered with them, analyzed their raw data, and identified the cause: The damaged packages were being routed through a specific hub in their carrier's network. So the company switched carriers for that specific region until they worked with the carrier to resolve the situation at their hub.
The more often a packaged is touched in a supply chain, the more likely it is that the product will be damaged. Over the past decade, the market has shifted from solely traditional brick-and-mortar store distribution to include more complicated e-commerce channels, resulting in more touch points in the supply chain than ever.
As the number of touchpoints changes, packaging design must as well. Consumer goods companies need to understand the different channels and then adjust their packaging. Leading companies are already collecting data to adjust their packaging needs. For example, Walmart has leveraged its data analysis capabilities to improve cardboard utilization by 30 percent while still protecting its products.
While innovative packaging and new standards are part of the solution, the industry also needs more data experts. These recruits will help us understand what data to collect and what to do with that data. At Sealed Air, we’re excited about the opportunity that data presents, and we are partnering with our customers to lend our own data analytics expertise.
No doubt, it can be expensive to collect and analyze data from these complicated fulfillment systems. Waste might seem secondary to getting your products out the door and meeting growth expectations, so companies kick supply chain optimization down the road for someone else to solve.
The truth though, is that the investment in data analysis to understand the problem is offset by the waste reduction in labor, product, and other resources. And the earlier in the development process you can focus on reducing waste, the greater your potential is to scale efficiently and to reduce waste along the way.
While most e-commerce companies may not realize the opportunity presented by reducing waste, some of today's market leaders do. We're going to see that shift over time as more companies begin to ask themselves just how much of their products are returned because of damage.
To learn more about how the right packaging solution can reduce your damage rates, read “Glassware Distributor Reduces Waste 10x, Increases Efficiency with On-Demand Solution.”