In this three-part series, we’re looking at how vendor consolidation makes it easy for companies to remain innovative, nimble, and vigilant about their productivity and cash flow. Countless companies rely on multiple packaging vendors, resulting in increased supply chain costs, strained vendor relationships, and increasing packaging management costs.
In part one of this series, we discussed vendor consolidation – what is and how its impacts can have substantial gains for companies including lowering direct costs, improve inventory management, amp overall quality, simplify packaging and operational supply management, and strengthen supply agreements.
In part two of this three-part series we detail 10 benefits of a packaging and operational management program for your company.
By aligning with a knowledgeable packaging partner to manage their packaging supply chain, companies can experience increased speed to market, enhanced product quality, significant operational efficiencies, savings, and cash flow improvements.
Part Two: 10 Benefits of a Packaging and Operational Management Program
- PRODUCT COST SAVINGS
One of the factors leading to an abundance of suppliers is the desire to purchase products at the lowest price. This can mean investing time shopping quotes from multiple vendors. It can also lead to buying more than you need to get a low price. While this opportunistic approach to purchasing has its benefits, it leads to a purely transactional relationship with a supplier.
When vendors and items are streamlined, once fragmented purchases are combined, and purchase quantities increase. This leads to improved economies of scale and a lower product cost.
When your supplier partner has strong relationships with packaging manufacturers and distribution companies, you enjoy additional savings as they leverage their size and economies of scale on your behalf.
- LOWER FREIGHT COSTS
Freight costs can be a significant component of the Cost of Goods Sold (COGS). When your packaging items are provided by a single packaging partner, more product ships from fewer vendors lowering your per-unit freight cost. Reducing COGS has the added benefit of opening the door to increased margin.
- STRONGER VENDOR RELATIONSHIPS
As procurement quantities and vendor loyalty increases, so does the relative importance each party places on the relationship. As a result, transactional relationships are transformed into partnerships.
For small and mid-sized manufacturers, this can lead to access to additional resources, urgency, technical services, and more valuable face-to-face contact with vendor representatives that might otherwise be reserved for their larger customers.
- FEWER INVOICES
Larger quantities and or fewer purchases mean fewer invoices to process. The increased relative importance to the supplier can also have a positive impact on payment terms.
- REDUCED INVENTORY-RELATED COSTS
In addition to refining the number of products and vendors, inventory management services should be part of the consolidation agreement with your packaging partner. Inventory management services can take the form of just-in-time inventory or Customer Owned inventory arrangements that free up working capital and space for growth. Dead inventory is removed from your warehouse. Damage and obsolescence are minimized.
- IMPROVED QUALITY, SERVICE, AND REGULATORY COMPLIANCE
Managing product quality on a case-by-case basis can be a strenuous, often time-consuming activity, especially if you are dealing with multiple vendors.
The right packaging management partner will monitor each vendors’ quality and service on your behalf. They will also ensure your packaging is aligned with regulatory requirements, including packaging quality, packaging manufacturing processes, supplier monitoring, product traceability, and more. If you are a processor manufacturing a digestible product, this provides essential confidence around GMP (Good Management Practices, an integral component of SQF (Safe Quality Foods) compliance and quality standards like ISO.
- IMPROVED THROUGHPUT
The best packaging management partners will work with you to optimize your packaging to increase throughput.
Your packaging management partner will understand your packaging needs and production schedule, seasonality requirements, and needs that arise from your plans to modify or launch new products. They will make sure the packaging you need is always available when you need it in the right qualities.
Moreover, they don’t stop with the package – when their capabilities include equipment service, preventative maintenance, and packaging automation consulting, they can help reduce planned, and unplanned downtime.
- IMPROVED OPERATIONAL EFFICIENCY
Fewer suppliers mean fewer shipments to receive and store because inventory is managed to your needs.
- DO MORE WITH FEWER RESOURCES
The right packaging management program can positively impact labor costs. As they streamline processes, the best supplier partners will absorb activities otherwise required by a manufacturer’s team to manage their packaging. A proven Packaging Management program also minimizes temporary labor costs. In food plants for example, this is especially critical as many food companies such as meat and poultry processors face 50 - 80% turnover in non-salaried jobs.
- SINGLE POINT OF CONTACT
When you work with a consolidation partner, less time is spent sourcing, testing and managing packaging, communicating with vendors, processing payables, maintaining quality, and struggling to resolve issues. Fewer channels of communication mean less duplication of effort, fewer chances for misunderstandings, and the ability to focus on what you do best.
Part three of this series focusses on what companies should look for in a packaging management partner.
SupplyOne’s Packaging Management Program (PMP) is customized to your unique business needs and designed to find hidden costs within your packaging expenses. We save you money and improve your cash flow. And those savings are guaranteed—in writing.
To learn how vendor consolidation and packaging management can improve your operational efficiency, cash flow, and speed to market, please contact your SupplyOne representative or call us directly.