Lecture 2 : Instrumental role of packaging in

supply chain management.

2nd Semester, SY 2022 – 2023
Product Packaging
Product packaging is more important than some might think. As
a brand owner, you want your products to be enclosed in a
sturdy material that looks good and gets your customers
excited about receiving them.
Proper packaging can help ensure that your business
operations run smoothly—from the order processing to your
customer’s hands.

The departments involved in packaging go beyond design.

Production, procurement, and distribution each play their own
part in the process. These are all important aspects of packaging
you may consider.
Product Packaging
In both B2B and B2C environments, packaging can play a crucial role in the
product’s supply chain. This discussion walks through supply chain management
and how optimizing the entire packaging process can positively affect the
efficiency of your brand’s business.
Business to Customer
B2B (business-to-business),
a type of electronic
commerce is the exchange
of products, services or
information between
businesses,

Business to Business
It is the exchange of
products, services or
information Rather than
between businesses and
consumers
 WHAT IS SUPPLY CHAIN MANAGEMENT?
Supply chain management is the
process of facilitating the
movement of goods and services.
This includes taking raw
materials or goods and turning
them into finished products.
Supply chain activities
encompass product
development, sourcing,
manufacturing, logistics, and
tracking.
WHAT IS SUPPLY CHAIN MANAGEMENT?
Optimized supply chain activities
should manage product packaging
efficiently, affordably, and with
little to no error. A streamlined
supply chain can minimize
businesses’ costs and boost
productivity in the production
cycle,
while a poor supply chain process
can negatively impact ROI and
customer satisfaction
 THE GENERAL SUPPLY CHAIN MANAGEMENT FLOW
The supply chain management process is often arranged in five workflows: procurement, material
management, manufacturing and production, order management, and distribution.

1. Procurement
This step involves the sourcing and
purchasing of raw materials needed to
create the packaging from vendors.
Using flowcharts to refine the
procurement workflow helps prevent
duplicate supplier research.
Key processes: purchase order
processing, receipt confirmation, and
invoice verification
 THE GENERAL SUPPLY CHAIN MANAGEMENT FLOW
The supply chain management process is often arranged in five workflows: procurement, material
management, manufacturing and production, order management, and distribution.

2. Material Management
Material management is the process of
ensuring that there are sufficient and
necessary components available and ready
for use during manufacturing and
production.
Key processes: acquisition, inspection,
inventory management, identifying gaps,
and purchasing missing or remaining
items
THE GENERAL SUPPLY CHAIN MANAGEMENT FLOW

The supply chain management process is often arranged in five workflows: procurement, material
management, manufacturing and production, order management, and distribution.

3. Manufacturing and Production

This step assigns production orders and
schedules manufacturing execution in
specific sequences and time frames in
the middle of the supply chain. A
carefully planned flow chart for this
step can decrease lead times.
Key processes: production planning,
scheduling, and quality control
THE GENERAL SUPPLY CHAIN MANAGEMENT FLOW

The supply chain management process is often arranged in five workflows: procurement, material
management, manufacturing and production, order management, and distribution.

4. Order Management
This step covers the collection,
validation, and documentation of all
information required to fulfill and
process customer orders. Proper and
efficient customer data management can
minimize order errors, speed up the
distribution process, and enhance
customer happiness.
Key processes: sales order processing
and billing process
THE GENERAL SUPPLY CHAIN MANAGEMENT FLOW

The supply chain management process is often arranged in five workflows: procurement, material
management, manufacturing and production, order management, and distribution.

5. Distribution
The distribution process involves coordinating orders,
inventory and warehouse management, and delivering
the products or goods to the customers. An optimized
distribution process can decrease order errors and
improve inventory location accuracy.
Key processes: transportation planning, execution, and
costing

The efficient manufacturing and distribution of products

are directly associated with excellent packaging systems.
Packaging protects goods from external damage and
showcases their quality, allowing for reliable
transportation.
 Packaging has many functions that address specific
challenges in the supply chain, including the following:
 Protective function: must safeguard the goods from external factors
and ensure that products survive handling during transportation.

 Storage function: Since the products can travel and be contained in

multiple locations before reaching the final destination, the packaging
should use materials that allow convenient storage while meeting
storage requirements.
 Transport function: Proper and efficient packaging design enables
easy handling, stowing, and stacking during transportation in a
way that maximizes the space available.
 Tertiary function: This refers to the extra protective carrier that
safeguards the secondary and primary packaging of the goods. It also
has an organizational purpose—grouping individual products into one
box.
Below are some of the factors that contribute to efficient supply chain
management:

 Weight of the
packaging: Weight and mass
pose significant challenges to
the costs of logistics. That’s
why it’s more strategic to
develop a protective primary,
secondary, and tertiary
packaging that adequately
protects the item, doesn’t take
up too much space and
weight, and is easy to handle
and transport.
Below are some of the factors that contribute to efficient supply chain
management:

 Sustainability: Consumers are becoming increasingly mindful of their

purchases for the benefit of the environment. Packaging that reduces the
materials used and is reusable can minimize costs and cut the lead time in
procurement.
Below are some of the factors that contribute to efficient supply chain
management:

 Waste prevention: Eliminating any needless

movement to fulfill an operation, such as piling
products and reloading, can enhance operations.
The recycling or reusing of packages sent back
by the customer or as leftovers from previous
steps can be utilized for the next shipment,
cutting costs and waste significantly.
Below are some of the factors that contribute to efficient supply chain
management:

 Simplified packaging solutions: Some businesses can use the same size and
packaging format for all their products, eliminating the complexity of their
packaging process. While this may not apply to companies that offer various
goods, studying the best packaging that balances the complexity and efficiency of
your packaging process can significantly reduce wasted space and waiting time in
supply chain management.
 The Impact of Packaging on Supply Chain Performance

 Packaging material: impact of all packaging material

 Transport: Impact of packaging on transportation in all

parts of the system

 Material handling: impact of packaging on material

handling activities in plants and in warehouses

 Waste handling: include waste, recycling and reuse of

packaging systems as well as damaged components because
of insufficient packaging

 Capital: impact of packaging on capital costs of

components in inventory
Making even minor
improvements in your packaging
design can make a world of
difference in production
operations and costs. As a
business owner, it’s essential that
you continuously look into ways
and opportunities to improve
your supply chain management
to refine your processes.
 OPTIMIZING THE PACKAGING PRODUCTION PROCESS FOR SMOOTH
OPERATIONS
Businesses can minimize costs, improve profitability, and enhance
transportation efficiency by being strategic and smart with packaging.

 Decrease the weight of packaging materials

Weight determines the number of pallets needed per truck
for transport. Weight-efficient packaging allows
businesses to move many products without sacrificing
protection. Lightweight packaging also helps lower
shipment costs.
Ensure that your product’s packaging is designed to be
carried and transported easily. A well-engineered
packaging structure makes it easier for employees to
move the products around, prioritizes warehouse safety,
and protects your brand’s inventory.
 Manage redundancy in produced
packaging
Make sure to request the exact packaging
quantities needed for your production orders.
There should only be a small percentage of
what goes beyond the margin to cover
production errors and minimize waste.
 Source the right raw materials
The process of procuring and processing
raw materials varies depending on the
product. Knowing the ins and outs of every
step in the workflow and identifying the
materials needed for the packaging can
eliminate delays in the operation.
 Optimize the production and printing process
Packaging design is crucial for an optimized production process. Design aspects such as
identification, barcodes, hazard cautions, instruction, and other relevant information should be
displayed appropriately and easily spotted.
It’s also imperative to finalize the design and ensure all necessary information is included to
avoid any last-minute design changes that could negatively affect the production and printing
process.
 Manage transportation costs effectively
The costs involved in transportation covers from
manufacturer to distributors and activities involved
during handling and storage. Choosing a more efficient
packaging format can reduce the costs of handling,
storage, and transportation of products, whether by land,
sea, or air.
When you start to implement lean thinking from the top
of your packaging production (e.g., decreased materials)
in the supply chain, you can save more in the final costs
of transportation and handling of the goods. Managing
transportation costs is crucial for businesses working
within a budget.
 Economic Order Quantity: What Does It Mean and Who Is It
Important For?

Economic order quantity (EOQ) is the ideal quantity of units a

company should purchase to meet demand while minimizing
inventory costs such as:
- holding costs,
- shortage costs,
- and order costs.
- This production-scheduling model was developed in 1913 by Ford
W. Harris and has been refined over time. The economic order
quantity formula assumes that demand, ordering, and holding
costs all remain constant.
Economic Order Quantity: What Does It Mean and Who Is It
Important For?
Formula for Calculating Economic Order Quantity
(EOQ)

Why are we discussing this?

-Packaging Cost is part of
the Inventory Holding Cost
Formula for Calculating Economic Order Quantity
(EOQ)
Assume, for example, a retail clothing shop carries a line of men’s jeans,
and the shop sells 1,000 pairs of jeans each year. It costs the company $5
per year to hold a pair of jeans in inventory, and the fixed cost to place an
order is $2.

The EOQ formula is

=Sqrt of {(2 x 1,000 pairs x $2 order cost) / ($5 holding cost) }
= 28.3 with rounding.
The ideal order size to minimize costs and meet customer demand is
slightly more than 28 pairs of jeans
THE IMPORTANCE OF PACKAGING IN SUPPLY CHAIN
MANAGEMENT
Brands should see packaging as a vital component in enabling a smooth-running supply
chain. Packaging, as a protective carrier, is critical to the production, sales, marketing, and
distribution of products or goods, making packaging a vital part of the overall process.
In a typical supply chain management workflow, product packaging safeguards the
finished products as they move across the entire process, especially during transport to
retailers and the final destination.
 GET THE MOST OUT OF YOUR PACKAGING
An optimized supply chain management
in packaging can:
- increase a business’s cash flow,

- maximize resources and time in the

production cycle,
- improve the overall efficiency of the
process,
- and make the operation smoother
from the procurement stage to the
time the products reach the end-user.
 ACTIVITY 3

Group by 3s,

Find 3 companies/products that have

considered SCM or logistics in their
packaging.
Describe the packaging and explain how they
have considered logistics in the packaging.

Submission: today until 12:30

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