The video is worth a thousand words: A tube of mascara arrives in a box that’s multiple times its size and swaddled in layers of packing material to protect what is hardly a fragile product.
James Malley, co-founder and CEO of Paccurate.io, a New York-based company founded in 2020 to help businesses optimize their packaging to reduce waste and shipping costs, has seen this movie too many times. Malley manages an internal Slack channel he calls the “Hall Of Sadness,” which includes photos and videos of parcel packaging gone awry.
Wasteful packaging plagues many industries, but cosmetics retailers seem to be notorious offenders, according to Malley. (The packaging in the video, which was reviewed by Malley’s team, was “one of the worst ones we’ve seen,” he said.)
The packaging follies has been a long-running show in the parcel-delivery industry. And it is a long way from closing. Despite advancements in knowledge, processes and technology, far too many parcels, especially those shipped in e-commerce, are still delivered with massive amounts of what is known in the packaging trade as “void fill,” or a box’s space and material that is separate from the product.
Depending on the source of the estimates, void fill accounts for 40% to up to 58% of a typical box’s size. What’s more, many household name brands haven’t changed their box sizes in 10 years, said Malley.
The problems exist in both the business-to-business and business-to-consumer categories. However, the contents of B2B shipments tend to be composed of several heavier items, and B2B shippers typically do a more effective job of filling the box. In fact, B2B shipments can be so densely packed that they run the risk of what is known as overfill. Because of this, shippers will pay higher shipping costs based on weight. It can also lead to product damage.
B2C or direct-to-consumer (D2C) packaging can be another world, especially with mom-and-pop merchants that aren’t packaging experts and generally can’t afford the high-tech equipment and the consultants that could help improve their processes. But the problems also beset larger retailers — such as the one whose product was in the video — and their third-party logistics providers that have to optimize their own packaging consumption while ensuring that their customers have enough of the rightsized packages.
In e-commerce, the speed of fulfillment center throughput is the priority, and so-called cartonization, the step in the packaging process in which associates select the appropriate box for the orders being packed, often takes a back seat. In the case of the shipment shown in the video, the package may have simply been the minimum dimensions chosen by an automated system, according to Will Brown, a consultant.
The fact is that it can be complex and expensive to keep large quantities of different packaging around to fit the unique needs of multiple SKUs. Fulfillment center operations often choose the most uniform packaging that supports faster throughput and accept the inappropriate package sizes as a cost of doing business.
“There is a lot of low-hanging fruit in package rightsizing, but many companies will never get to it,” said John Moore, founder of IQpack Global, a packaging managed services and software company in Jeffersonville, Indiana. The problem, according to Moore, is most companies lack accurate product item master data, specifically in shipment sizes and weights. ”The associates packaging the orders in warehouses are instructed to choose a particular box based on an algorithm. The algorithm is using flawed item master data (sizes), so it is classic ‘garbage in garbage out.’ The cost of bad data is enormous, especially with the dimensionalization of freight.”
The good news is that some headway has been made. In what seems like a logical approach to reducing excess packaging, Amazon.com Inc. (NASDAQ: AMZN) in August launched a program in which it ships packages without any of its boxes, meaning that only the product’s box is delivered. This saves on material and labor, although some brands may be concerned that any damage to their boxes might reflect poorly on their image.
About 11% of items that Amazon delivers arrive without extra packaging, according to published reports. It’s what the company calls “ship in its own container.” Customers are able to choose at checkout if they want extra packaging or prefer their orders without it. Malley, whose company doesn’t work with Amazon, has called it a “big step forward” in reducing packaging costs.
In addition to providing a cartonization API, Paccurate has an analytical tool called PacSimulate, which runs millions of data-driven simulations to align the proper set of boxes for a fulfillment center operation. According to the company, the tool can help customers determine the appropriate quantity of material needed to better manage their packaging for maximum shipping value.
Paccurate, which touts its software as the only one of its kind that balances shipping contract and materials costs, said it can save customers between 6% and 15% in shipping costs, reduce corrugated use by 14% and cut CO2 emissions.
“With the increasingly complex structures of [parcel] rate cards today, having an actual simulation tool to calculate transportation cost using actual order, rate and shipping information can lead to much smarter decision-making and cost avoidance,” the company said in a blog post last week.
Moore of IQPack said the company’s approach is to “scrub, harmonize, and manage the data end-to-end for operations use.” Good data “enables accurate warehouse planning,” he said. “It also allows the packaging algorithm to choose the correct box or bag.”
Poor packaging doesn’t pay
Inefficient packaging has two big drawbacks: First, it is costly. Shippers overpay by using more aircraft and trailer space because parcels can’t be optimally cubed out. Better packaging means using less air cargo capacity, fewer trailers and less corrugated material. The less-favorable status quo means that carriers lose on fuel costs and elevated emissions.
Packaging consultant Kevin J. Mireles previously was a senior product manager for e-commerce at FedEx Corp. (NYSE: FDX) and worked on a major project to improve the company’s packaging processes. He said at the time he left FedEx in early 2022, he reviewed an analysis showing that in the Southern California market alone, a 5% reduction in customer package size would save the carrier 1 million gallons of fuel and cut 22 million pounds of CO2 emissions.
The latter number points to the second issue: sustainability. Delivery trucks and aircraft are primary sources of CO2 and shippers don’t do the environment any favors by utilizing oversized packages for items a fraction of their size, thus inhibiting proper cubing by carriers and ultimately requiring more physical assets to handle the same amount of freight.
A possible turning point in the rightsizing battle may occur on social media, as environmentally conscious consumers try to shame brands, and hopefully get their attention, by posting unflattering photos and videos of their packages, experts said.
Parcel carriers have tried to administer tough love to shippers. FedEx and rival UPS Inc. (NYSE: UPS) price their services based on a package’s dimensional weight or its actual weight, whichever is higher. A package’s dimensions are calculated by multiplying its length, width and height in cubic inches and dividing the total by what’s known as a dimensional “divisor,” which today for the carriers is at 139.
For example, a parcel measuring 3 cubic feet — or 5,184 cubic inches — and divided by 139 would yield a dimensional weight equal to a 37-pound shipment, even though its actual weight would likely be much less. Because of the higher cost of shipping excess air, shippers in theory would be incentivized — with help from their carriers — to package more efficiently.
In reality, big shippers demand, and often receive, waivers on dimensional weight (DIM) charges, according to experts. Mireles said for many shippers the divisor is well into the 200s, meaning fewer shipments are hit with DIM prices and as a result there is less incentive for shippers to improve their packaging. Moore of IQpack said for some shippers the divisor is set in the 300 range.
Jack Ampuja, president of consultancy Supply Chain Optimizers and E-Commerce Optimizers, said the smaller shippers are the ones that take the financial hits from the carriers for inefficient packaging. “The small guy gets whacked. The big guy gets waived.”
Ampuja said hardware technology is readily available to help shippers, but in many cases it’s too costly, takes up a lot of space and won’t be able to process very small items.
No matter how difficult the process, the payoff is worth it, said Moore Of IQpack. “Reducing the average size of a package has an enormous impact on freight cost,” he said. “Even incremental improvements in package sizes can significantly reduce (the cost) of outbound freight.”