The IKEA model – packaging is your product

The IKEA model – packaging is your product

Are you giving your packaging enough thought? Let’s consider the example of IKEA. But first, let’s think about packaging in general and where the opportunities for growth are in your operation.

Think about your business model, products and supply chain. From concept to customer you are the experts. But how much thought do you give to how your product is packaged and shipped? Proper packaging optimization makes it possible to get your product to your customer in the fastest, most reliable and least expensive way—protecting not only your bottom line but also your customer relationships and your reputation along the way.

 

You can't sell air. Why are you shipping it?

 

Additionally, right-sized packaging lowers your transportation costs. As more carriers continue to move to dimensional (volume-based) pricing rather than weight, the wrong package size means you are paying to ship air. The problem is: you can’t sell air. Why are you shipping it?

And packaging optimization also creates opportunities to reduce labor costs per unit by reducing movement, touches and handling.

IKEA – proof that packaging is your bottom line

Efficient packaging is so important to eliminating costly waste that some companies like IKEA actually redesign their products to cut costs and optimize the product’s storage and shipping.

In 2015, for example, IKEA announced big growth plans aimed at increasing global revenue by 74% by 2020. A significant part of that growth was to come from selling more products through its existing stores, which meant finding ways to cut prices to move more volume.

 

Bad packaging gone even worse

 

As an aside, we’ve all seen examples of really awful packaging from companies like Amazon. But don’t take that as an opportunity to continue with business as usual, as we pointed out in a previous post, Amazon is well on its way to revolutionizing the packaging optimization space, and it’s not necessarily going to be easy on you and your profit margins—not unless you get a partner that can help you explore packaging optimization.

Here’s where things get interesting

To cut distribution costs, products like IKEA’s Ektorp sofa were actually redesigned to allow for flat packaging. The results were huge.

Flat packaging reduced pack size by 50% and meant 7,477 fewer trucks per year were needed to move the same number of products. And because of reduced shipping and storage costs, IKEA was able to drop the price of the Ektorp sofa by 14% without cutting into profits.

 

The packaging for the IKEA Ektorp sofa, a model for savings in your company.

 

Any rational business owner or manager will ask how they can achieve similar savings. But implementing change can be intimidating. How do you safely do what IKEA and other companies have already done?

It’s time to rethink your packaging

We help create a holistic picture of your operation—where the opportunities and pitfalls are, and when the timing is right to maximize savings and reduce costs.

Then we help you put knowledge into action in ways that last. There are a lot of companies that will suggest changes to packaging, transportation or workflow. They will breeze in, make changes that make sense, and leave without proving that they have saved you money. And in most cases, they haven’t.

Many companies simply move the cost to a different part of your organization. They help you save on shipping by creating more box sizes, but labor CPU and packaging spend suffers. And did they track your actual shipping savings or account for additional costs in other areas?

In the short term, the rational response is not to change at all. We understand. That’s why we show you savings before you implement changes. And then we stay with you after implementation to ensure the savings are real.

Our proprietary technology – OBI – helps us assess your entire operation and identify ways to do things better, more efficiently, and in ways that save you money.

Contact us today to find out how we can help you.