June 24, 2019
How Eco-friendly Packaging Saves the Planet and Your Bottom Line
Hanko Kiessner, CEO of Packsize International, recently sat down with Russell Goodman, the Editor-in-Chief of SupplyChainBrain.com, to discuss the importance of eco-friendly packaging and how it relates to a company’s overall sustainability efforts. This drive for right-sized packaging will also affect your bottom line.
What follows is an adaption of that interview that has been edited for clarity. If you’d like to watch the full video, click here!
Russell Goodman, Editor-in-Chief, SupplyChainBrain: Sustainable packaging and what it means for your enterprise. Joining us today to speak about that is Hanko Kiesner, CEO of Packsize International. Hanko, welcome.
Hanko Kiessner, CEO of Packsize: Thank you, Russell.
Russell: Hanko, let’s define terminology here when we talk about sustainable packaging. Just what does that term mean to you?
Hanko: Sustainable packaging is the combination of technology and processes that enable the perfect packaging at every point in time when a product ships. What does perfect packaging mean? First, it means that it’s perfectly sized to the products being shipped. It also means it is made from materials that are sustainable, recyclable and don’t negatively impact the environment. It also ensures the perfect delivery experience for the customer when that product arrives.
Sustainability also means that the package is then easily recyclable by the end consumer. There is technology today that enables all of this in a completely automated fashion for enterprises that ship infinitely many product configurations. And so all of this fits under the umbrella of sustainable packaging, and it comprises quite a few elements.
Russell: Well, let’s drill down on one of those elements that you just mentioned. You talked about something that was the right size for whatever is being shipped. I assume that means you’re talking about something that actually fits very closely to what is being shipped so that you’re not shipping air. Is that correct?
Hanko: Yes, if you look at the experience that we all have today as consumers, we almost never receive a package that is perfectly sized. That sounds almost unbelievable when you consider that almost 50 years ago the Americans went to the Moon…and it’s 2019 now and we cannot make boxes that fit! So that’s where the experience actually starts from the customer’s perspective.
What is the cost of not having the right size box? First of all, you use more material. You need more material to make a box that’s too large. You are then shipping unnecessary air throughout the entire supply chain only for the end-customer to open up the package and find all this additional volume and void filler that you have to remove. Now you don’t have a good delivery experience as a customer anymore and it doesn’t give a good image for the company that shipped that package. All of this adds up, and as we live in a more populated planet with fewer resources, we have to right-size every package that ships.
Russell: Let’s talk about the pressure that we are beginning to feel to improve our packaging; to move forward more sustainable packaging. Walk us through that what would you say.
Hanko: There are multiple dimensions that drive this desire to improve the packaging. The first of these is derived from the customer. The research that we have done for this indicates that the number one customer complaint about e-commerce and internet retail customers is excessive packaging. The number one customer complaint! I mean, think about that. That is what companies should be working on first before they solve any other problem if they consider themselves customer-driven. It is not a secret anymore that 26 percent of the corrugated used in packaging today is unnecessary. There are 5.8 million tons of paper that are used to make boxes too large.
The same holds true for plastic wrappers which have their own problems because they are not digestible by the biosphere. The biosphere does not have any metabolisms to digest plastic polymers. So we’re also looking at a problem that is impacting the air we breathe. Twenty-four million truckloads are unnecessary because the packages they’re shipping are filled with air. In the US alone, every year this adds up to 24 million truckloads that burn 1.7 billion gallons of diesel, leaving 17 billion kg of CO2 in the atmosphere. All of this can be avoided and improved, and that pressure is ultimately derived from the customer because we’re living in a society where information is freely available. It is no longer in the best interest for the companies to ship oversized packaging and continue to ignore the large scope of the problem.
The second dimension is the cost. All this waste is costing a lot of money, so on average between 20 and 25% of the packaging and packaging-related expenses can be saved.
The third dimension is labor. We are now at a time of labor shortages in most markets. I’m hearing about a lot of fulfillment centers being down on employees and that means more automation is now necessary. The perfect packaging is now available with zero labor. Full automation has incredibly high speeds of up to 1,200 boxes per hour and those are efficiency gains that companies can no longer overlook as they decide how they are running their facilities.
One of the last big pressure areas is actually throughput through buildings or fulfillment acceleration. With On Demand Packaging®, you’re impacting your upstream and downstream parts of the supply chain where now you can fit 18-20 percent more parcels or orders through the same fulfillment center
Russell: I know if you were to look into your crystal ball it would be impossible to predict when we all might move towards the use of sustainable packaging, but clearly, you have identified a gigantic problem here that needs to be solved. I want to move on and ask you about how it is that B2B and B2C customers are perceiving this packaging and their brand purchase equation. Just how are they looking at that?
Hanko: I think they do because the experience you have in a traditional retail environment is completely optimized and controlled by the brand operating a brick-and-mortar location. The temperature is controlled. The sound, the lighting, the scent—it’s all controlled. That kind of experience now has to translate into the package, because the traditional retail experience is now represented by the box. As a result of that, there is a tremendous opportunity for internet retailers to deliver a positive experience every time a customer receives a delivery from their brand. This is one of the most underrated opportunities today for brands to control their customer experience
Russell: Okay, so here you’ve made a compelling argument for implementing this type of technology in my enterprise, but a very important stakeholder for me is going to be the Chief Financial Officer who’s got to authorize the investment in it. When he or she comes to me and says, “Outline for me the benefits we are going to receive in our company by utilizing this type of technology,” what am I specifically going to tell that person? How is this benefiting our supply chain?
Hanko: The CFO is the one that can track all of the savings and benefits that perfect packaging delivers. It starts with the material itself, so if there is less material, now there is less material cost. Because the box is right-sized, the filler material is almost completely eliminated. So now we already have 5-to-7-digit savings already funneling up to the CFO’s PNL. Then it goes deeper into labor savings and freight savings. We already talked about the opportunity to fully automate, so all of a sudden you have a lot of labor savings. Sometimes 80-90 percent less labor in the packaging related activities in the fulfillment center.
Now, these packages have to ship. To ship a perfect package is significantly less expensive because it weighs less and also has less cube. This means that trucks can now fit up to 66% more orders on the same plane and on the same truck because all these vessels cube out before they weigh out.
Now that is all tremendous savings, but what is the value of solving your number one customer complaint? I would say for most brands, that would be an even higher number funneling up to the CFO than any of the other savings that I just mentioned. Lastly, we have the sustainability gains, because if we are all wanting to continue to do business on this planet, we have to make sure we do this sustainably. Sustainability means that we all have to become part of the circular economy in which we can do what we do forever. If we cannot do what we do forever without crippling the environment, that means we shouldn’t be doing it at all, even today.
Russell: Hanko, you convinced me and I trust you’ve convinced viewers here today. I know you’re busy here at the conference but you found time to speak with us so thank you very much.
Hanko: Thank you.
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