How to Keep Packaging from Becoming the Weak Link in Supply Chain Digitalization

Digitalization is transforming the supply chain by eliminating inefficiencies, improving customer service and lowering costs.

While the TMS and WMS serve as the engines for digitalization in transportation and warehousing respectively, a host of complementary software, analytics tools and automation systems are being employed to enhance digitalization within these operations.

However, the value of digitalization is only fully realized when operations across the supply chain are both digitalized and integrated to enable end-to-end visibility and predictive forecasting. According to management consulting firm McKinsey, companies that aggressively digitalize their supply chains can boost annual earnings growth by 3.2% and annual revenue growth by 2.3%—numbers that will catch the attention of any business executive.

Yet, while many organizations are continuing to invest in warehousing and transportation digitalization, fewer are making similar investments in packaging. That disparity can create a digital divide that not only reduces packaging efficiency, but also creates a weak link in supply chain digitalization.

Changing the Packaging Mindset

The first step in strengthening this weak link is changing the packaging mindset. Historically, packaging was viewed as something of a secondary operation within supply chain management and outsourced to off-site third-party packers who were largely disconnected from other supply chain operations.

Today, many organizations have moved packaging operations into the warehouse to eliminate the unnecessary time and costs of shipping products to and from dedicated packaging operations. They are also increasingly recognizing the strategic value of packaging in enhancing customer service and responding to changing market demands.

However, simply co-locating packaging with warehousing does not by itself put packaging operations on equal footing with warehousing and transportation in terms of digitalization. Supply chain managers need to think about packaging digitalization in the same way they already think about digitalization in transportation and warehousing.

The Engine for Packaging Digitalization

Similar to the role the warehouse management system (WMS) and transportation management system (TMS) play in warehousing and transportation, a dedicated packaging software platform is the engine for packaging digitalization.

A packaging software platform must, of course, support the unique workflows encountered in packaging operations, managing the entire process and providing full tracking from initiation to completion. It should also provide detailed reporting on the efficiency and productivity of the operation.

An additional feature that supports digitalization is material resource planning (MRP) capabilities. When packaging software with MRP capabilities is integrated with the WMS, the critical process of demand planning becomes substantially more efficient and effective.

Finished goods forecasts from the WMS can be automatically loaded into the packaging system, which then generates detailed bills of material for each finished good. By having visibility into future demand, the economies of scale represented by the aggregate demand can be leveraged to achieve bulk pricing while material deliveries are scheduled to arrive on site as needed to minimize material storage requirements.

In addition, when the packaging system is communicating with the WMS, product inventory can be managed more efficiently and the impact of peaks in the packaging operation on warehouse inventory can be planned for and minimized.

Achieving End-to-End Visibility

Beyond software integration, there is an opportunity to consolidate relevant data from the packaging management system with data from other supply chain operations to achieve a holistic view of supply chain performance and product movements.

At DHL Supply Chain, we accomplish this through our MySupplyChain platform. MySupplyChain…

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