Tucked away in upstate New York, the order fulfillment center of a major electronics manufacturer was humming along. Conveyor belts whisked over 850,000 packages annually from one department to another. Employees moved through the distribution center, picking and packing repair parts to fulfill customer orders.
While all seemed well on the distribution center’s floor, management knew significant challenges lay ahead. Demand for electronic components was increasing; the global market is expected to reach $233 billion by 2020, driven by the growing use of smart devices in the industrial, automotive, health care, and transportation industries. Meanwhile, this company’s operational practices were behind those of competitors’ regarding efficiency and per-unit packaging costs. They would either have to raise prices or become more efficient to maintain profitability.
Raising prices, however, wasn’t an option given the industry. “They provide replacement parts for business accounts,” Lou Suffern, Automation Specialist Director at Sealed Air Product Care, explains. “The industry dictates quick turnaround and competitive pricing. They have to charge a price that is comparable to competitors in the space.”
Their only option was to reduce their order fulfillment costs without increasing headcount. Labor was the biggest cost contributor in their pick and packaging costs, as it is with many companies within the consumer goods industry. Indeed, 44 percent of consumer goods companies reported that skilled labor was one of the most significant resource challenges, according to the Global Resource Challenges Report.
Adding more labor to meet the increasing demand would not help the company remain competitive in their industry. They needed an innovative solution that would allow for greater throughput and help keep per-unit pack costs down.
“Automation was the answer,” Suffern says. “While their employees were well-trained and highly competent, automation is typically a more accurate and efficient solution that could also increase the shipment velocity within their fulfillment center.” Not only that, but automation would free up valuable employee time and energy for other aspects of the operation. The company could reallocate labor from packaging duties to other activities within the distribution center, such as picking and shipping.
The problem was that their previous packaging solution, which relied on standard air pillows, could not be automated. Beyond that, standard air pillows were costing more in shipping as well (costs are largely based on the dimensional weight of packages and standard air pillows require larger boxes to accommodate them).
In 2011, this electronics company approached Sealed Air at an industry tradeshow to learn about possible solutions. They were mostly interested in hearing more about the I-Pack®automated packaging system, which had launched earlier that year.
The I-Pack automated packaging system was designed to minimize shipping, consumable, and operating costs in fulfillment operations while optimizing productivity. The system calculates the right-size packaging in real-time, which reduces freight costs and eliminates waste. Optional shipping label and packing list invoice printing and application can further increase productivity and efficiency within order fulfillment operations.
“After learning more and seeing a demo of I-Pack, the manufacturer decided it was time to replace their packing solution,” Suffern says. “We worked together to develop a tailored and comprehensive solution that matched their exact needs, which included the label print and apply, and invoice insertion capabilities.”
As a result, the company has reduced packaging time by 35 percent, streamlining their operations and reducing the manual interaction with the packaging process. As a result, the fulfillment center is now handling more packages per hour.
In the process, the automated packaging system also reduced the size of their boxes, which eliminated an estimated 34,000 kg of air pillows annually and cut dimensional weight by 20 percent. Eliminating void fill and improving shipment efficiency reduced CO2 emissions by an estimated 140,000 kg and also provided an estimated annual savings of over $1.6 million.
