How to save money in European warehousing, fulfillment & logistics
After 25 years in international and European logistics, my general impression is that many inner cartons, master cartons and pallet configurations are still being developed without taking into account ANY of the logistics aspects. Not sure why, but from conversations with clients I have learned sales and marketing disciplines seem to be dominant in packaging engineering processes.
Sure, a product packaging needs to be attractive to buyers from a marketing and sales perspective. No doubt about it. Inner and master cartons need to protect the product from damages and prevent contamination. But an OPTIMAL packaging or pallet configuration also aims to achieve the lowest possible logistics costs per product throughout the entire supply chain.
Paying more attention to packaging means spending less money in your international supply chains: at KWL European warehousing & logistics we have helped international clients to save 5% to 15% on their annual European supply chain costs.
Focus on the most decisive supply chain components
As a result of globalization, supply chains have become lengthy. Many products for the European (and other markets) are being manufactured in Asia. From Asia products are shipped by air, ocean or rail to European logistic distribution centers for final delivery. As we have seen before, direct shipping is NOT a long term winning strategy for building a successful business in Europe.
In general, total logistics costs increase when supply chains become longer or more complex. A typical (European) supply chain contains following components:
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Shipping from manufacturing location to outbound ocean- or airport
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Port to port shipping (by air or ocean)
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Trucking from inbound container/ airport to European distribution center
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Receipt, unloading & storage at the European distribution center
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Sales order receipt/fulfillment at the European distribution center
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Final distribution from the European distribution center to customers (B2B or B2C)
If packaging is inefficient from a dimensional/volume/weight perspective, it will have a negative impact on all individual elements of your international supply chain.
But watch out: some elements will weigh in way more than others. It is thus important to investigate which 2 or 3 elements are decisive from a logistics cost perspective: trucking, storage, port to port shipping by air/ocean or the final delivery to customers? Often port-to-port shipping and customer deliveries absorb most costs in international supply chains.
Why buy a car and not using the backseat
The inner cube capacity of a 40’ high cube ocean container is approx. 76 m3 or 2,684 cubic feet. If too much ‘air’ is shipped, packaging configurations are probably subject to improvement. Utilizing less than 65m3 in a ’40 high cube container already raises eyebrows. Why? Because there’s still plenty of space left you’ve paid for; it’s like buying a car and not using the backseat at all! Below an example:
The current port-to-port shipping rate for a 40’ HC container from Shanghai/China to Rotterdam/Holland is approx. $ 1.100. When shipping 500 products in 100 master cartons as a full container, the port-to-port shipping costs per product are $ 2.20.
Stuffing 625 products in 125 master cartons in the same container lowers the shipping costs per product to $ 1.76. A 20% saving per item! And much better for the environment as you will need fewer containers to ship the same volume. And the more you ship, the more you will save. Are your packaging and pallet configurations optimal for ocean containers?
In airfreight, the savings per product item can be even higher as airfreight is much more expensive then ocean freight. And of course: cube optimization also works for truck or rail deliveries.
European pallet dimensions in European warehousing & distribution
US pallet dimensions are not equal to European pallet dimensions. In Europe most used pallets are so-called Block pallets and Euro pallets:
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Block pallets 100 x 120 cm (length x width)
Maximum weight p/block pallet: approx. 900 Kilograms
Maximum height: approx. 180 - 200 cm in national distribution/intra-European: 250-295 cm
Maximum storage height: no limits for floor-storage but in racks 160 to 220 cm
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Euro pallets 120 x 80 cm (length x width)
Maximum weight p/euro pallet: approx. 750 Kilograms
Maximum height: approx. 180 - 200 cm in national distribution/intra-European: 250-295 cm
Maximum storage height: no limits for floor-storage but in racks 160 to 220 cm
As a result most European storage facilities, material handling equipment, trucks, and parcel and pallet distribution networks are built for Euro pallet or block pallet dims. Going outside these European pallet dimensions is more expensive and inefficient.
Are your US carton dims/weights optimal for repacking and stacking on European block- or Euro pallets? Or does this result in inefficient and damage sensitive European pallet configurations? Also here prevention might be better, more effective and cheaper than cure.
Be more efficient in European distribution of parcels
Opposed to the US, Europe offers a ‘jungle’ of national, global and European parcel services. There’s a great variety of operators, services and delivery options available for documents, small pack, large and oversized parcels. Also here packaging can have a big impact on your European parcel distribution costs. KWL offers a wide range of European B2B and B2C distribution services.
Some European parcel providers charge by (payable) weight or (payable) volume. Others simply charge a lump sum price per parcel. Or weight class. This may or may not include discounts for multi-parcel shipments, fuel surcharges or additional costs for B2C home deliveries.
Many European parcel services have standardized their (sorting) operations including minimum and maximum dims/weight limitations for individual parcels. But like pricing and delivery times, these limitations are different per parcel provider. Below a comparison between 2 major European parcel providers:
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European Parcel Service A
Maximum weight p/parcel: 32 Kilograms
Maximum girth: 300 cm (1 x L + 2 x H + 2 x W)
Maximum length: 200 cm
Maximum width: 80 cm
Maximum height: 60 cm
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European Parcel Service B
Maximum weight p/parcel: 31.5 Kilograms
Maximum girth: 300 cm (1 x L + 2 x H + 2 x W)
Maximum length: 175 cm
Exceeding these specifications will result in surcharges. But for multi-parcel sales orders there might even be an opportunity to reduce the parcel distribution costs by using over boxes.
Limitations/opportunities offered by European parcel providers and pallet distribution networks are important reasons to review your packaging and European distribution strategy prior to start exporting your products to Europe.
Print-to-Fit. The future in master packaging?
A number of Dutch and European E-tailers already use automated fit-to-size packing machines as an alternative to standard prefabricated cartons and boxes. With this innovative machine, products are packed in a fit-to-size carton. No more air or waste of packaging material! It’s also faster, cheaper and better for the environment.
We believe such packing innovations will support global sellers to sell easier and more efficient in local markets. Let us know what you think; we really love to hear your opinion!
Grow your business in Europe
KWL European warehousing & logistics enables international companies to grow their business in Europe. With us, selling in Europe becomes easier, safer and more profitable.
Author: Louis Coenders
Date: 2nd of August 2016