Today’s shipping trends and environment are pressuring shippers to improve efficiency in packing & shipping in order to combat the increasing costs of operations.
The trend that is creating the most pressure is the DIM weight pricing structure, also known as dimensional weight or volumetric weight.
This structure suggests that shippers must pay based on the size and volume of packages, in addition to their weight.
This leads to more significant cost implications and a heightened focus on optimizing packaging strategies.
Carrier policies from major carriers such as UPS, USPS, and FedEx just to name a few have transitioned to DIM weight pricing, changing the shipping cost rate structures forever and this way demanding more precise packaging and shipping practices.
DIM Pricing
Under DIM pricing, the cost of shipping is calculated by the load space occupied or weight, whichever is greater. As a result, cartonization has become a crucial tool to keep shipping & surcharge costs under control.
A famous example of a company that has optimized its packing strategy is IKEA & their quote “We hate air.”
By introducing disassembled furniture in 2010, IKEA successfully eliminated a significant amount of unnecessary air and reduced their package size by 50%.
Benefits of Cartonization Implementation
Human-led decisions in packing are like playing Tetris only in 3D and with invisible constraints.
Cartonization is the Tetris of logistics where the 3D shapes are the high variety of boxes and SKUs and the invisible constraints are the carrier network rate structures and the wide range of surcharges.
This makes the impact of unoptimized packaging on costs even more noticeable.
Nevertheless, a unified solution like cartonization can effectively tackle the majority of these challenges and bring quick benefits to all shippers.
1. Reduced Shipping Costs
When the right-sized carton boxes are used, less air & void fill is packed and shipped resulting in smaller and optimal packages transported.
At the same time, avoid unexpected carrier DIM weight fees.
In the context of 3D cost-efficient cartonization, even greater savings can be achieved by taking into account carrier rate structures.
However, for retailers having to manage customer demands for “free” shipping, this takes the importance of cost-efficient packing to the next level.
With new regulations coming into play, which limit the empty space ratio to packaging in boxes shipped by online retailers throughout Europe, retailers face even greater pressure to optimize packaging practices.
2. Reduced Material Costs
Using appropriately sized carton boxes reduces the costs of packaging – both carton and void fill.
For some companies, this number can be a decrease of 5% while for larger ones it can go up to even 30%.
A survey of DS Smith shows that oversized cardboard boxes transport excess air, a phenomenon they refer to as ‘air-commerce’.
The company says that this results in over 169,291 tons of extra cardboard – at a reported cost of £39.4 million – as well as 410 million m2 of plastic tape and 80 million m3 of filler.
Efficient packing of orders also minimizes the risk of damage to the items during transit, which leads to the next point.
3. Improved customer satisfaction
People are starting to care more about the environment and how their actions affect it.
If you have a company with an environmentally friendly reputation, more customers will be willing to buy from you.
This way, customers push for corporate sustainability.
For our customers, smart cartonization increases the fill rate by at least 14% compared to manual or liquid cubing.
Such increases are extremely significant, especially given the fact that the average fill rates of e-tailers are typically somewhere between 40 and 50%.
Thoughts?
How much do you think these companies have overpaid not only on their shipping but also on their carton cost?
Want to see what impact it would bring to you? Grab your API key for Optioryx’s cartonization algorithm!
Learn more about the impact of packing on distribution center operations.