Small Changes Can Bring Big Supply Chain Savings

by Rich Lindgren, CPP
Chainalytics


In the world of Consumer Packaged Goods (CPG) there is an eternal struggle between the demands of marketing, operations and optimizing your packaging for the supply chain.  As an everyday consumer, you probably see packages all over the grocery store where you wonder why there is so much air around the product or food in the packages you purchase.  For the most part, air is waste and below you will read why!

There are a few reasons for this air.  The first is driven by operations and that is the functional air space so they can run their automated filling equipment at speeds which maximize efficiency and profitability.  For the most part this is a good thing, this ultimately contributes to you getting the products you want at your local stores at a fair price.  Secondly and usually the larger driver for the size of the packaging is due to marketing billboard space.  When you walk down the aisle at Target or Walmart, almost every package is a mini billboard of sorts trying to call your attention much like driving down the interstate in your car.

Aisle of "Packaging Billboards"

The bigger the packaging face the larger the product image or area that can be used by marketing and graphics teams to inform you and entice you to put it in your cart.  Packaging size also has an inherit suggestion to the amount of product inside said package.  Consciously or subconsciously if you see two pizza boxes next to each other for the same price, you may select the larger one without actually reading the ounces labeled in small print at the bottom of the carton, thinking you are getting a better value. Sadly, not very often is a larger package an indication of amount of product or food inside and even can be consider non-functional slack fill, which can lead to fines on companies.

Typically the process works as follows, a leading brand owner will launch a product into the market with a large billboard area so they can "be heard" on the shelf to tell you what is new and great about the new product.  If the product is successful, it is natural for competing brands to launch their "me too" versions into the market to grab a share of the new market.  When those "me too" products launch they often copy the size of the current market leader for that product category whether they need the space or not, so they can look the same size wise on the shelf.

As a packaging engineer the trick is to balance the concerns of marketing and operations while delivering an optimized packaging system that will serve the company's bottom line.  Below I will outline a case study for a project our team delivered for a past frozen foods customer.  This particular frozen pizza item was the follower or the "me too" in the market.  Even though the product was a different shape and size then competitor, they launched product in a paperboard carton the exact dimension of the competitor.

We proposed a sensitivity analysis showcasing the range in cost savings, while maintaining a similar size graphic facing. The key was finding the sweet spot for this packaging system while meeting the needs of the marketing team.  Even though there were other options with larger supply chain savings, marketing would not support the billboard reduction.  The selected option is what we labeled as "Visual Indifference".  Basically it was the smallest change I could find that would still make a big impact.  Such a small change, that it would be impossible to perceive it in a freezer case.

Small changes to the retail carton leading to big savings!

By reducing the length and width of the carton by just an 1/8" in each direction and reducing height or riser panel by a 1/16" we made a huge impact.  The 1/8" reduction allowed us to add a whole row of cases along a 53" Dry Van trailer as well as one additional row at the back of the trailers.  The 1/16" reduction allowed for pack out ratio change on the freezer shelf.  Getting more pizzas in a freezer leading to less out of stock.  This also helped propel a change going to 14 count shipping case from 12 count.  In the end, this also allowed one additional row of pizza cases along the top of the trailer as well, in the end the customer got an additional 6,848 pizzas on each truck shipped.

Click Images to Enlarge

In the end, with an annualized savings of $600K, the time to payback was only 7 days.  Adding on top of that, there was a great sustainable story to tell as well.  On top of the hard savings, the reduced out of stocks, reduced touches and many other soft benefits throughout the supply chain.

Total Supply Chain Impacts

Does it make you wonder what products in your company's portfolio could have a similar opportunity for greater efficiency and supply chain savings?

The packaging team at Chainalytics focuses on packaging cost reduction efforts that lead to a chain reaction of savings across the entire supply chain for their customers.

Not Enough Product in that Package? Blame It On Slack Fill

By: Rob Kaszubowski, Sr. Packaging Engineer




Food manufacturer, Perfetti Van Melle, was recently handed a hefty $5 Million law suit for a slack fill violation on their Mentos gum (50 count container).  

Essentially, the firm was accused of committing slack fill deception--putting a small product, inside a much larger container to make the product packaging look much bigger and ensure it takes up a bigger spatial/visual footprint on a shelf. 

What Exactly is Slack Fill?

Slack fill is the difference between the actual capacity of a container and the volume of product contained within the enclosed container. While federal laws administered by the FDA regulate slack fill on behalf of consumers, states also weigh in on the issue. 

In California, a slack fill violator is a package that is filled to “substantially less” than its capacity for other than any one or more than the applicable exceptions (California Fair Packaging and Labeling Act, Cal. Bus. & Prof. Code § 12606(c) (1-15)).

Wherever they originate, slack fill laws are aimed at protecting consumers from being duped into buying a packaged product that is misleading. A container that does not allow the consumer to fully view the fill levels is deemed deceptive and misleading unless it contains “functional” slack fill, there are six exceptions which are outlined here. 

A Closer Look at the Mentos Slack Fill in Action

Oftentimes, articles in the business and trade press mention the offending product packaging and the amount the company was penalized or fined, but fail to show exactly “how bad” the slack fill was or exactly what the ratio of product vs. packaging was in these law-breaking products.

We were curious ourselves, so we bought a few containers of this Mentos gum to take a deeper dive.  

Take a look at what we found. Does this packaging deceive you?

Mentos product fill level

Upon opening the container, it looks to be approximately 2/3 full. Further analysis shows this container to be 72% full by weight (28% empty or non-functional slack fill). This is gathered from the ratio of product currently in the container compared to the maximum weight it can hold of the same product. How You Can Measure the Immeasurable

These images above might make the everyday consumer feel deceived upon opening their new purchase and lead them to think “I can’t believe there isn’t more product in this package.” 

The lack of a hard and fast number as to what fill ratio qualifies as “substantially less” than full obviously makes California’s slack fill standard a difficult one to follow. Consumer goods manufacturers must make the judgement call on exactly how much product is enough to meet the minimum requirements—and avoid being penalized. One could argue that the lack of any parameters to define fill levels in a package is similar to driving down the highway with no speed limits posted--only a sign that simply warns “Just Don’t Go Too Fast.”

As a team of packaging engineers, we are focused on optimizing packaging and improving cube efficiencies throughout all supply chain distribution channels—from manufacturing all the way to the retail shelf. We couldn't help ourselves... 

We shortened the Mentos Gum container by 1/2" inch. The original pallet could only hold 3,120 containers. The newly optimized, shortened container allows for a total of 3,744, or 624 more units per pallet - a 20% improvement in pallet utilization! 

With proper packaging, the amount of air space in these individual canisters could be reduced to allow for greater than 20% improvement in pallet counts simply by adding an extra layer of product to the pallet. An incremental change in a package this small can lead to a cascading effect of material savings, logistics savings, warehousing improvements, less out of stocks at retailers, and so on and so forth.

So after reviewing the Mentos packaging dilemma and how much product is actually in the packaging, would you consider 72% full to be bad? What about 28% empty? 

If you feel your products may be a slack fill risk, it’s often a good approach to perform an internal audit and slack fill review. Aside from taking a preventative step to avoid any slack fill penalties, there may be additional cost savings tied to some of those incremental packaging savings. 

The Chainalytics Packaging Optimization practice is a seasoned team of packaging engineers, dedicated to addressing risks and opportunities end-to-end throughout the supply chain.

Questions? Contact us at Packaging@chainalytics.com or give us a call at +1 612.260.7845.

Rob Kaszubowski is a Manager in Chainalytics Packaging Engineering practice. His track record of success ranges from delivering packaging cost savings and damage reduction projects to optimizing packaging throughout clients’ entire supply chains.