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13 Oct 2021

How Packaging Optimization can Impact the Supply Chain

Packaging optimization in the supply chain refers to much more than presenting the consumer with a product in an attractive box or container. Packaging design influences the entire supply chain, playing an important role in controlling distribution, damage, and return costs.

Streamlined packaging solutions keep your product secure (and in the case of food and pharmaceuticals, fresh) while lowering packaging costs and increasing the efficiency of the end-to-end supply chain.

Functions of Packaging

The functions of packaging are varied, but all are designed to meet specific challenges to supply chain management. Packaging design considers marketing, ease of distribution, customer aesthetics, storage, and sustainability, among other factors.

Functions of packaging directly affecting the supply chain include protective, transport, sales, promotional, services, and guarantee, in addition to the added protective and organizational functions of tertiary packaging.

What is the Protective Function?

The protective function is a primary packaging concern: the package must protect the product from its surroundings (and in cases of potentially dangerous products, protect the environment from the container’s contents).

Primary protective packaging solutions ensure the product will survive handling during the transportation process without any loss to its value while also protecting against damage and theft. Tamper-resistance features for the pharmaceutical industry and food cartons are examples of this type of packaging.

What is the Storage Function?

Packaging materials and containers must be able to be stored efficiently, both prior to and after packaging. As packaging can take place in multiple locations, materials must be designed to meet a sometimes diverse set of storage requirements.

What is the Transport Function?

Proper packaging design allows for packaging to be moved, lifted, stowed, and stacked on pallets and in cargo units in a manner that makes maximum use of available transport space. By filling cargo units with little to no empty space, packaging makes the most cost-effective use of transportation options.

Package design also needs to consider Occupational Safety and Health Administration (OSHA) regulatory requirements for safe handling. Packaged products should be easy to move manually or designed with forklift or hand-truck use in mind, including labels identifying load-bearing lifting points.

What are the Sales and Promotional Functions?

The sales and promotional packaging functions are closely related. Packaging should promote sales with efficient, innovative, and attractive designs which entice customers into buying. At delivery, the first sight a client has of their purchase will be the outer packaging, and this should strive to delight. For luxury or high-end purchases, this is particularly important. These clients have spent a lot of money and expect the packaging to be as upmarket as the goods inside.

What is the Services Function?

Packaging provides consumers with important details about the product. Such details may include an ingredients list, instructions for use, recommended dosages, and any warnings required by regulatory requirements.

As part of a package-services function, the container may perform additional functions once contents are removed, such as acting as a storage container or by performing some other function related to the package contents.

What is the Guarantee Function?

Undamaged packages act as a manufacturer’s guarantee of the quality and consistency of packaged content. Tamper-resistant packaging, for instance, is an important guarantee of safety for pharmaceuticals and many food products.

Depending on the nature of your product, regulatory requirements may insist packaging include details such as content identification, composition, weight, quantity, and storage life. Deviations from these labels indicate the product’s packaging has been compromised in some way.

What are Tertiary Functions?

Tertiary packaging is additional packaging used to protect not only the product but also its primary, and sometimes secondary, packaging. It also has organizational functions, grouping multiple individually packaged products bound for a single destination together into one unit.

On the whole, more and more consumers are expecting environmentally responsible packaging — especially tertiary packaging, which uses more materials — so it must be environmentally friendly.

Paper, cardboard, glass, aluminum, and some plastic containers can all be recycled or repurposed, reducing the carbon footprint of not only the product but also the entire supply chain. A focus on reusable packaging materials often coincides with reductions in production costs, making it an important aspect of supply chain management.

Package Optimization

When you optimize packaging, you improve processes up and down the supply chain, resulting in a lower carbon footprint, cost savings, and an overall increase in efficiency. The packaging industry invests significant time and money to optimize containers, considering multiple variables, including costs, function, and physical constraints.

What is Package Optimization?

Package optimization takes a holistic view of packaging solutions, designing containers that use the least amount of packaging materials for the least amount of money while maintaining the necessary quality.

Optimizing a package may include closely examining the parameters of the package to reduce weight and aspect ratios to allow more units per pallet or replacing packaging materials with lighter recyclable ones.

What Does a Packaging Engineer Do?

The packaging industry employs packaging engineers to optimize cartons, containers, pallets, and cargo units. Packaging engineers specialize in the design and costs associated with packaging design.

What is Considered When Trying to Optimize Packaging?

The process considers the following factors:

  • cost reduction
  • physical parameters
  • packaging materials
  • environmental impact
  • packaging content

  • smart packaging solutions

  • damage and return-cost reduction
  • handling and transportation requirements
  • freight costs and pallet dimensions

Package optimization begins with a consideration of market function and how packages must increase sales while meeting customer demands. Box design, layout, ergonomics, and marketing content are determined at this stage.

Once the market function is established, packaging engineers will consider the type of packaging needed, based on the nature of the product. How easily can the product be damaged or contaminated? What features are needed to keep the contents safe?

The next stage is considering flow function — packaging solutions that improve distribution and handling. This stage requires an understanding of supply chain algorithms, packaging logistics, transportation, storage, unpacking, damage costs, and return handling.

Finally, packaging systems should work to reduce the container’s carbon footprint. This step includes minimizing packaging itself, reusing materials, and making package recycling a priority throughout the end-to-end supply chain.

How does Packaging Optimization Impact the Supply Chain?

Package design and optimization affect all aspects of the supply chain. An optimized package minimizes the constraints of package construction, packing, storing, and transportation. Reducing packaging’s carbon footprint with recycled and energy-efficient materials reduces energy consumption and materials costs, reducing overall expenses.

During transportation, optimized packages allow for more effective use of cargo units and easier distribution to stores and consumers. At the end of the supply chain, an optimized package offers information and value to the customer, improving brand recognition and encouraging future purchases.

What is Damage Cost vs. Return Cost?

The package design should reduce the risk of damage as much as possible — to not only the contents but also the container itself. While a dented corner on a box, unreadable labels, or cracks in a clamshell may not affect the quality of a package’s contents, damage to packaging almost always gives customers a negative impression. The actual damage cost to package contents is often outstripped by return costs, as customers and stores often refuse items in damaged packages.

Packaging’s Impact on the Supply Chain

Packaging solutions affect supply chain management in multiple ways, including freight costs, shipping visibility, and line utilization. Sustainable packaging, standardized boxes, and smart packages can all improve the flow and efficiency of the supply chain.

How do Packaging and Labeling Impact Shipping Visibility?

Smart packaging labels are increasingly used to improve shipping visibility. Older methods of confirming container contents, such as manual scans, paper-based lists, and visual confirmation of contents, are all susceptible to human error. Smart packaging labels make use of radio-frequency identification (RFID) tags to keep all stakeholders informed of shipping, transportation, and delivery updates automatically.

What Packaging Innovations have Streamlined the Supply Chain?

Some of the biggest innovations in packaging are designed to increase sustainability and reduce material costs. Zero-waste packaging, for instance, uses biodegradable materials made from bamboo, cassava, and other renewable resources to replace Styrofoam and plastic containers.

To assure customers they are receiving the freshest ingredients and pharmaceuticals, packages can now include “intelligent” pigments. These change color to show the freshness of the packaged product. This not only benefits customers but also alerts suppliers to problems and delays within the supply chain due to spoilage.

How Packaging Optimization can Reduce Freight Costs

Ultimately, freight costs are all about space: the more you can fit into shipping cases, the more efficient your transportation costs. The right packaging materials help reduce shipping costs, whether you’re shipping from your fulfillment center by truckload, rail, ocean, or air freight.

How does Packaging Influence Freight Costs?

While weight plays a role in transportation costs, it’s often a secondary consideration to space constraints. Shipping companies determine costs by calculating the dimensional weight of a pallet or truckload. Dimensional weight refers to the relationship between a package’s weight and the amount of room it takes up. A large package with a weight of seventy kilograms will cost more to ship than a more compact package of equivalent weight.

You can reduce shipping costs, then, by minimizing your package design. This will enable you to take advantage of cost-efficient transportation options such as LTL (Less-than-Truckload) by minimizing the space your shipment needs.

How does Packaging Influence Each Stage of the Supply Chain?

Reducing shipping costs requires a close examination of every step in the supply chain. Are your packages the right size for your shipping units? You’ll not only pay higher transportation costs if they’re not but also increase the risk of damage caused during transportation.

The actions of third-party logistics providers must be carefully considered. It only takes one lax fulfillment center to impair your supply chain, either by package mishandling, inaccurate product tracking, or excessive use of tertiary packaging.

At the beginning of the supply chain, consider the type of packaging materials used, how they’re stored, and how containers are constructed. Opting for the lightest, most compact packages possible without risking damage to the contents is a requirement if you’re looking at reducing shipping costs.

What Innovations have had the Biggest Influence on Logistics?

Packaging logistics has become a discipline in and of itself, improving package designs, increasing material choices, and leading to the development of smart packaging. Also, real-time tracking has made it possible to follow a package from packing to delivery, alerting you to exceptions while allowing customers to check delivery progress online at any time.

For companies with multiple fulfillment centers and third-party logistics providers, assembling a supply chain control tower can be invaluable. A control tower oversees all aspects of the supply chain, automatically generating alerts on deliveries and exceptions while using machine learning to improve efficiency and reduce shipping costs.

Smart Packaging


Smart packaging systems use real-time tracking, active packaging sensors, and intelligent packaging to move packages through supply chains, increase consumer engagement, and ensure the freshness of food and other perishable items. Smart technology also helps locate missing items and reduces the risk of theft.

What is Smart Packaging?

Smart packaging is any form of packaging that offers extra benefits to the consumer, the supplier, or both. Such benefits could include chemical treatments to prolong food freshness, moisture control, or tracking devices.

Smart technology is made possible by the emergence of the Internet of Things (IoT), where items ranging from major appliances to address labels can send and receive information wirelessly. Smart packaging increases consumer engagement by enhancing the ways consumers can interact with packaging.

For example, they can monitor distant food shipments for freshness or track anticipated deliveries down the supply chain from any computer or smart device. As of 2018, the smart packaging market had a global value of $46.74 billion, with the 2018 Market Research Future Report estimating a compound annual growth rate of 5.16 percent through 2023.

What are the Benefits of Smart Packaging?

The most important aspect of smart packaging, at least as far as the supply chain is concerned, is traceability. Using RFID labels, packages can be located at any point in the end-to-end supply chain.

In material- and product-sensitive industries such as the pharmaceutical industry, traceability allows customers to detect products that did not originate with their manufacturers, that were redirected during transportation, or that were reintroduced to the supply chain after a theft. Smart tracking provides customers with the information they need to identify and intercept attempts to steal, duplicate, or tamper with their products.

does Smart Packaging Impact the Last Mile?

The last mile is typically the most inefficient part of a supply chain — delays and inefficiencies in the last mile have negative impacts on customer engagement. Thankfully, data intelligence from smart packaging is helping make the last mile more efficient and more secure.

Machine learning makes it possible to accurately predict when customers will be home, reducing security issues from “porch pirates,” while tracking alerts can inform employees the moment a delivery is made.

However, reducing inefficiencies and increasing security in the last mile at home in the US is one thing—achieving the same on a global level is entirely different and wholly more difficult. Internationally shipped goods in the last-mile stage of their journeys are at an increased risk to the following exceptions:

  • theft from pirates
  • exposure to poor weather and the elements during stopovers
  • loss from natural or man-made disaster in transit
  • loss from human error and mismanagement in transit across international and regional borders
  • loss from theft or human error and mismanagement in transit through regions seeing social or geopolitical upheaval or war

In complex international supply chains, smart packaging pairs well with a supply chain control tower to help improve the security of goods traversing international regions. Smart packaging can aggregate real-time tracking data for a control tower to interpret to guide exception management.

For example, based on data the smart packaging of a product in transit provides, a control tower can, in real-time, implement alterations to the product’s route to steer it clear of zones posing security risks.

How does Smart Packaging Impact the Future Cost and Quality of Delivered Goods?

Smart packaging systems are not cheap. In part, this is because the field has only recently started to develop. Once suppliers adopt smart technology en masse, costs will fall. The relative youth of smart technology also makes it difficult to make definitive statements on quality and cost efficiency — the technology hasn’t been around long enough to produce meaningful long-term data.

Sustainability is also an issue. Not all smart packaging components are recyclable, which puts the technology at odds with suppliers (and consumers) seeking to lower their carbon footprints. Sensors and circuits, for instance, especially the tiny sensors in smart packaging, are difficult to recycle.

That said, technology such as active packaging can help reduce the approximately fifty-seven million tons of food waste produced annually by the US food supply chain, so the recycling challenges of smart packaging can be offset by its ability to keep food fresh and moving down the supply chain. Packaging systems are part science, part art, and part economics. They’re essential to successful supply chain management, have the potential to reduce shipping costs, and play a large role in customer engagement. You can’t afford to ignore the effects packaging has on your business.