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W H I T E P A P E R

IMPROVING
PA C K A G I N G :
The Cost of
Shipping Air
is Going Up

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W H I T E P A P E R I M P R O V I N G PA C K A G I N G :
The cost of shipping air is going up

RETAILERS AND MANUFACTURERS that insist on using inefficient and


sloppy packaging methodsoversized boxes, inefficient packaging, poorly
constructed palletized contentsare paying for their mistakes in sharply
higher freight rates.
Carriers say inefficient packaging is terribly However, many shippers are reluctant to change
wasteful. It wastes trees to make excess their old ways of packaging. Often they arent
cardboard for packages that are too big for even aware that there are better, more efficient
products being transported. It wastes space methods. Sometimes, because of the complexity
on trailers in an era when trucking capacity is of a manufacturers operation, packaging is often
stagnant. And it wastes fuel for extra trucks to an after-thought that falls through the bureaucratic
move those excessively large packages. cracks of a large organization.

Due to the driver shortage, the Its a ticking time bomb, says Jack Ampuja,
Many progressive growth in e-commerce traffic, as president of Supply Chain Optimizers, the North
companies say they well as the rise in bulky lightweight American leader in packaging optimization with
are onboard with the freight, carriers say that theyre more than 500 completed projects over a 30
cubing out their trucks before year period.
green movement to save
coming even close to reaching full
resources and fuel. One weight capacityand theyre reacting According to Ampuja, packaging inefficiency is
way to do that is by to these market place changes. endemic to the logistics industrybut it doesnt
making your packaging have to be. Over the next few pages, we offer a
Many are beginning to measure guide to how to package more efficiently, why
as efficient as possible.
shipments by their package dimensions. this is important to both shippers and carriers,
These so-called dimensional why changes are occurring in packaging, and
pricing methodologies are putting pressure on how an effective packaging strategy can save
manufacturers to find smaller, more efficient both large and small shippers big dollars in their
packaging methods to move their goods. freight budgets.

There are ancillary benefits as well. Smaller Why packaging is an issue


packaging yields less waste, and it also means Most large organizations dont necessarily view
that more freight can be stacked efficiently on packaging as part of their supply chain. And
a pallet inside a truckwhich could also equate since its never been truly understood by senior
into fewer trucks and lower emissions. supply chain management, the cost reduction
gained by efficient packaging methods is often
Many progressive companies say they are grossly underestimated.
onboard with the green movement to save
resources and fuel. One way to do that is by Corporate bureaucracy also plays a role.
making your packaging as efficient as possible. Often many departments are involved in
packaging decisions. Personnel from marketing,
purchasing, logistics, manufacturing, quality
control and engineeringall with separate goals
and areas of expertiseoften have a say in the
design and manufacturing of packaging.

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W H I T E P A P E R I M P R O V I N G PA C K A G I N G :
The cost of shipping air is going up

But no one takes ownership, says Ampuja. So in effect, shippers are now paying for their
Everybody has a piece, and thats the inefficiencies that in the past were either
problemno one takes on the responsibility. ignored or picked up by the carrier. Because of
And as a result, all the members of the supply space limitations, carriers can no longer afford
chain feed into this inefficiency. to be giving away capacity. The result is a new
emphasis on packaging efficiency.
This is hardly a new phenomenon.
Theres going to be more Back in 1999, the late Robert All the inefficiencies are going back to the
and more of this trend. I Delaney, in his Annual State company that created them, which is where it
of Logistics Report, identified belonged all the time, adds Ampuja.
cant blame the carriers for
packaging optimization as the
pushing back and taking Doug Dick, former Manager of Pricing and now
last major logistics opportunity.
these steps. Sixteen years later, the opportunity is a Pricing Consultant for freight transportation
Jack Ampuja, president of is just as big in most companies. services provider Pitt Ohio, says that there
Supply Chain Optimizers In fact, the need today is much are 18 classes of freight in the NMFCand
greater than 16 years ago. the higher the class rating, the higher the
freight rate. These classes are developed and
One of the main reasons for heightened maintained by the Commodity Classification
awareness around packaging is the tightening Standards Board (CCSB).
capacity in the trucking industry due to the
chronic driver shortage. Carriers are striving to Over the last three years there have been
make the most efficient use of their available 14 dockets filed and approved by the CCSB
capacity, and they certainly dont want to send that approved changes in the NMFC. That
out two trucks on an identical routeespecially indicates a strong desire on the part of carriers
if the same amount of freight can be efficiently to collaborate with the shipping community
loaded onto just one. and work toward improving the packaging of
products, says Dick.
Theres going to be more and more of this
trend, says Ampuja. I cant blame the carriers On that line of thinking, Dick adds that shippers
for pushing back and taking these steps. should be constantly looking to improve their
packaging for two reasons: to minimize their
For years, shippers may have been moving carriers exposure to liability and to minimize
freight as a specific class. They may have never cube of their shipping containers. Thats
knownor caredthat the same product could actually a double edged sword, he says. Its
be repackaged more efficiently and shipped for a often easy to eliminate packaging, but in doing
lower class rate. But because of the changes in so shippers may be increasing the potential
the National Motor Freight Classification (NMFC) for damage. Its not so much about eliminating
rating methodology, those days of ignoring Class packaging as it is about improving packaging.
rating tariffs may soon be overor else shippers
will be paying sharply higher rates for the same
amount of freight.

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W H I T E P A P E R I M P R O V I N G PA C K A G I N G :
The cost of shipping air is going up

The dimension pricing effect A 24-inch high x 24-inch wide x 24-inch deep
In the past, freight used to be priced using a package equals 13,824. Divided by 166 equals
matrix of weight and distance. Back in the day, an 83.3-rating, which is rounded up and billed
the actual size of the package mattered little. as an 84 pound shipment.
What was important was how much it weighed
and how far it was going. So why are carriers doing this? In the past, small
package shippers used to be large sophisticated
That matrix has changed. companies such as Boeing, John Deere, and Ford
Sophisticated e-commerce Dimensional weight (dim weight) Motor Co. They shipped many packages daily to
shippers are certainly pricing began in earnest on Jan. 1, limited destinations, primarily B2B commerce.
2015. At that time, dim weight was
catching onand realizing
applied to all ground shipments The impact of e-commerce changed that
significant savings as smaller than 3 cubic feet by the landscape. Now there are thousandsif not
well as boosting their major small package carriers millionsof new shippers who are using little
sustainability initiatives. except the U.S. Postal Serviceas science or thought to their packaging, shipping
well as some LTL carriers. many daily shipments of one box per destination,
often to many residences in B2C commerce.
And because most small package cartons are
smaller than 3 cubic feet, virtually all of them are The result has changed the cost profile of carriers,
now subject to dim pricing. Ampuja says that which in the past had to rate their shipments
the result is about one-third of all small package traditionally only by weight and distance. But now
shipments are moving under higher rates in both the typical e-commerce shipper is only achieving
the U.S. and Canada. what Ampuja says is a 60-percent cube efficiency
utilizationin other words, 40 percent of their
UPS, FedEx, and some LTLs have equipment capacity is either air or filler.
that automatically weighs and laser scans
dimensions of each package at their terminals However, shippers can immediately minimize
and automatically applies the higher ratein the impact of dim pricing by downsizing their
either weight or cube charges. The results of packages; conducting better employee training
a couple of example cases are stunning, and to select the right box for the right product;
cleary show the cost of packaging inefficiently. cutting down boxes to lessen void space; using
durable polybags for lightweight goods such
Lets take two packages and multiply their case as socks and shirts; not overfilling boxes; and
dimensions in inches and divide by 166 (the checking for void space in all boxes.
factor used to determine class ratings):
Sophisticated e-commerce shippers are
A 12-inch high x 12-inch wide x 12-inch deep certainly catching onand realizing significant
package equals 1,728. Divided by 166 equals a savings as well as boosting their sustainability
10.4-rating, which is rounded up and billed as initiatives. Large shippers such as Office Depot,
11 pounds. Target, and Toys R Us are using computer-aided
software to measure the weight and cube of
each item and selecting the best box based on
total weight and cube.

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W H I T E P A P E R I M P R O V I N G PA C K A G I N G :
The cost of shipping air is going up

Manual operations to help drive down cost


Best practices for more efficient packaging by thinking of packaging first, rather than an

S HIPPERS SEEKING THE BEST EFFICIENCIES in their packaging afterthought.

strategies should keep in mind several tips from Jack Ampuja,


president of Supply Chain Optimizers, the North American leader in Computer-aided box selection software to

packaging optimization with more than 500 completed projects over a work with order processing.

30 year period.
Building a database of all item weights

1 Executive sponsorship is the best support for launching a project.


Getting the company chairman or other C-level executives involved
is highly recommended from the start. Sometimes I get a call
and cubesalthough this system must be
continually updated with new product items.

from a brand new employee saying that his boss asked him to look
into packaging optimization to see if there was anything to it, says Still, Ampuja says that many shippers are

Ampuja. Not surprisingly, those projects go nowhere fast. unwilling to spend money on these systems, so
inefficiencies are still quite prevalent. Packaging

2 An efficient packaging strategy requires focus on cost reduction


and efficiency. Otherwise, says Ampuja, why bother? optimization is all about supply chain integration.
Everybody talks about integration, but very few

3 The shipper must be open to change. If you cant manage change


packaging optimization goes nowhere. companies achieve it, he says.

4 The more flexibility you exhibit, the greater the results youll have
in your packaging optimization efforts. Weve encountered clients
who told us that they cant change their retail units, cant change
And dont forget pallet efficiencies. If the pallet
isnt stacked correctly, or if it has gaps, thats

case counts, cant change their packing process, but wonder a second hit. Once that inefficiently stacked

how much cost reduction is available, says Ampuja. Naturally, pallet is run through a dimensioner scanner, that

theyre disappointed when we tell them that their cost reduction inefficiency will all add to the shipping cost.

opportunity is virtually non-existent..

5 Good data is a must. No consulting project can proceed without In the meantime, the NMFC has roughly 150

accurate info to measure and evaluate. pages of fine print related strictly to packaging

Like any major corporate changes, it takes commitment, specifications. If you have a packaging engineer

communication and a willingness to accept a new way of doing who doesnt know about the NMFC code, how

things, adds Ampuja. But successful process change in packaging can you make right packaging decision? Its

nearly always results in big savings. like telling a 12-year-old that hes a bad driver,
Ampuja says. How do they know? Theyve
never been taught properly.
Ampuja says that the typical savings in applying
this type of technology is a 10 percent cost Carriers focused on sustainability
reductionwhich can mean $1 million or more A progressive trucking company like PITT
for a large shipper. While this used to require a OHIO is working to reduce its carbon footprint.
major investment in ERP systems, this same However, shippers make that task more difficult
technology is now available in a stand-alone, by sending inefficiently packaged shipments that
less costly system. However, Ampuja says that cube out their trailers long before they reach
there are many other improvements shippers their weight limits.
can do to make their packaging more efficient,
including:

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W H I T E P A P E R I M P R O V I N G PA C K A G I N G :
The cost of shipping air is going up

Its astounding how much waste there can be a single location. The elusive question is how
found when re-engineering a manufacturers many different boxes are required to achieve
packaging processes, says Ampuja. But the best the lowest total cost for 4 million shipments?
part is nobody loses when you do. Everybody and clearly this level of shipping analysis cannot
benefits if its done the right way. be done manually.

But dont look for your typical box Corrugated cardboard is infinitely recyclable,
Corrugated cardboard supplier or packaging engineer to Ampuja says. Ultimately that box comes
reduce your package freight cost from a tree. The smaller the box, the better it
is infinitely recyclable.
issues, he says. Thats because is for everyone. Everyone benefits. But first,
Ultimately that box comes
they typically dont understand shippers must train employees to get the
from a tree. The smaller the minutiae of freight details right-sized box and fill those boxes properly
the box, the better it is or how LTL and small package and that requires senior managements
for everyone. Everyone freight is priced. commitment for ongoing training.

benefits.
This can be an issue for large Packaging optimization delivers both financial
Jack Ampuja, president of shippers which often carry more and sustainability benefits, Ampuja says.
Supply Chain Optimizers
than 15,000 products in a single Companies make bad decisions on packaging
warehouse generating over 1 because they dont understand all the trade-
million combinations of outbound weight and offs. Unfortunately, many still insist on saving
cube each year. Supply Chain Optimizers has nickels on packaging by spending quarters in
dealt with clients shipping more than 4 million transportation, and thats not sustainable and it
combinations of weight and cube annually from makes no sense. 

About PITT OHIO


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solutions. As an organization that is Customer Driven, People Driven and Quality Driven,
we remain committed to innovating in every area with our SUPPLY CHAIN, GROUND, LTL,
and TRUCKLOAD services. For more please call 1-800-366-7488 or visit pittohio.com. At
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