Packaging is not just packaging （II）

At the end of the previous blog I mentioned the concept of DFL (design for logistics), which is very friendly to shipping and storage， because IKEA takes into account the cost reduction of shipping and storage in the design phase of the product, thus optimizing the overall product cost and making the company’s products more competitive.

  But the benefits of IKEA’s flat product design are not only in the reduced shipping costs but also in its modularity, as the product is divided into different parts, so that the customer can replace the damaged part at any time. This reflects the three characteristics of IKEA furniture: standardization of materials, generalization of components, and modulation of products. These economic benefits are demonstrated in the manufacturing and design stages. This leads to another important concept — DFM (Design for manufacturing). Other subsets include DFT (Design for Test), DFA (Design for Assembly), DFS (Design for Standards), and DFC (Design for Cost). IKEA is the best example of successful use of DFM.

IKEA takes into account the issue of reducing manufacturing costs at the product design stage, such as using modular product design and parallel manufacturing processes to shorten the production cycle significantly; its generic component design greatly simplifies the complexity of forecasting and inventory turnover; and its standardized material design greatly reduces procurement costs and the complexity of production.

   This indicates that in the modern era where online shopping is trendy, it is crucial to take into account transportation issues and production issues in the product design stage to reduce the cost of logistics, manufacturing and other supply chain links. Therefore, the supply chain needs to establish a suitable synergy mechanism with product design to form a benign mutual development.

Reference:

Design for Manufacturing Guidelines: Concept to Product

https://www.wevolver.com/article/design-for-manufacturing-dfm-the-ultimate-guide-to-streamlining-product-development-and-reducing-costs

https://www.cadlog.es/design-for-manufacturing-dfm/

Packaging is not just packaging （Ⅰ）

Packaging can be classified by function into two main categories: industrial packaging and commercial packaging. This blog will discuss the impact of industrial packaging on logistics and transport costs in the context of the IKEA case.

The concept from modern logistics is that packaging is the end of production and the beginning of logistics. As the end of production, the last process, packaging marks the completion of production as the beginning of logistics, packaging has the ability to logistics after completion, and packaging should play a protective role for the product in the whole logistics process. Packaging throughout the entire logistics process, without suitable packaging, there is no modern logistics. At the same time, the development of modern logistics has put forward higher requirements for packaging, which has promoted the further development of packaging. Packaging, therefore, belongs to the logistics system, which is the new concept of modern logistics.

  As an important part of the logistics process, packaging affects almost all cost items in the supply chain. As a purely logistical process, industrial packaging influences to a large extent the costs of operating a logistics system. As the end point of production and the starting point of logistics, packaging requires a certain amount of human, material and financial resources. Most products can only enter circulation if they are packaged. It is estimated that the cost of packaging accounts for about 10% or even 50% of the cost of distribution.

 Global packaging consumption reached $980.4 billion in 2022. Therefore, packaging is very important to transport costs. Most companies use measures to reduce logistics costs, such as improving the accuracy of forecasts, lead times for procurement, inventory turnover, route planning for transport, negotiation strategies with suppliers, rational layout of warehouses, continuous optimization of personnel, coordination mechanisms with other departments such as sales and finance, etc. but if these savings can reach 5% it is a very significant achievement.

Logistics costs take up a large proportion of the cost of household products, but the ‘flat pack’ created by IKEA not only reduces transport costs by enabling the storage and transportation of goods in a single unit but also greatly improves the efficiency of loading and unloading in the logistics center on-site, making automated storage possible. One of the biggest benefits of IKEA’s ‘flat-pack’ is that it saves around 90% of the cost of transportation compared to traditional furniture merchants, which is one of the reasons why IKEA is so successful. This reflects the concept of “design for logistics”(DFL).

  The value of this concept is to reduce the cost and have a positive environmental impact. More importantly, it can improve the operation efficiency.

reference：

https://www.smithers.com/resources/2018/mar/global-packaging-consumption-to-reach-$980-4-bill

https://ikeamuseum.com/en/digital/the-story-of-ikea/flatpacks/

https://simplicable.com/new/design-for-logistics

https://www.fastcompany.com/3057837/the-man-behind-ikeas-world-conquering-flat-pack-design

The supply chain in the future

After the coronavirus, every aspect of the supply chain has changed. This article outlines the future of the supply chain in terms of current supply chain trends and the latest technologies.

Localization

After the coronavirus, the global supply chain will be more flexible. Before the coronavirus, a large part of the production factories were concentrated in China, while in recent years, more and more factories have shifted to Vietnam, India, and Mexico.

First, establishing different factories in different regions can share the risk and ensure the diversification of supply. When one of the regions cannot supply properly, other regions can increase the production volume to supplement the gap. Secondly, localization does not mean that the supply chain is built locally but is built in regions that can be controlled and respond to demand in a shorter time. Data shows that in 2021, U.S. manufacturers purchased chemicals, production and construction materials and other goods from Mexico suppliers are six times more than in 2020.

Green Supply

As people become more and more concerned about environmental changes, the concept of sustainable development is increasingly applied in the supply chain, which is reflected in the low-carbon transportation process, reduce waste in the production process, which must be mentioned is the concept of lean supply chain, lean supply chain is originated from the Japanese Toyota Motor Corporation just-in-time production of a supply chain management ideas, from the concept of lean production metamorphosis, Lean production is the application of lean thinking in supply chain management. Its core is the pursuit of eliminating all waste, including inventory, and creating as much value as possible with as few resources as possible. Eliminating waste not only helps reduce the pressures faced by manufacturers under current social and economic conditions, but also makes the process more efficient and saves businesses money in the long run.

The other side of the green is also reflected in the use of CSR (Citizen Social Responsbility) and ESG (Environmental, Social, and Governance) concepts, both of which guide companies in the direction of sustainable development. More and more companies are taking these two metrics into consideration seriously

AI Decision

CHATGPT is very popular this year and people are amazed that it gives what can be called the perfect answer to our problems. If this technology is applied in the future supply chain, it can effectively avoid the negative effects of human factors and because they are self-learning, they can learn to solve the problems they may face in the presence of increasingly complex situations.

Since they are guided by data for decision-making, AI can automatically analyze the flow of data from IoT sensors and continuously suggest maintenance activities or route and inventory optimization decisions. While improving efficiency, big data can also be used to find low-cost solutions. A construction company called DIGIBUILD is currently saving fifty percent of the cost of a project by applying CHATGPT.

Reference:

https://www.mckinsey.com/capabilities/operations/our-insights/to-regionalize-or-not-optimizing-north-american-supply-chains

How Manufacturers Can Optimize their Supply Chain Workforce

https://www.globalcitizen.org/en/content/environmental-social-governance-what-is-esg/

https://supplychaindigital.com/digital-supply-chain/how-can-chatgpt-help-supply-chains

https://www.foxbusiness.com/technology/ai-disrupt-construction-industry

Why can Getir deliver within 10 minutes

The last mile food and grocery delivery industry is growing rapidly as the shift from brick-and-mortar shops to online shops occurs. Last-mile delivery is no longer just about getting goods from the warehouse to the consumer; it is about meeting the needs and experiences of the customer. Over the past few years, customer behaviour and expectations have changed and so has the way last mile delivery companies operate. Companies focus on building long-term, interactive customer relationships and meeting their needs.

Getir is arguably one of the most successful companies in developing the ‘last mile’. The company Getir (which means “Bring” in English) – can deliver to your door in around 10 minutes. The program has been a huge success, raising €840 million since it was launched in Istanbul in 2015. The founder says his deliveries are probably faster than if you were to shop in a physical shop. Fast is their best feature “We offer the most fundamental thing that every person on the planet needs: time”.

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Having their own algorithm

“70% technology, 20% retail and 10% logistics” is how they position themselves. A spokesperson for Getir says: “We are a technology company, not a technical support company, so we can use our own infrastructure to control the planning, retail chain, logistics and inventory management processes.” In this respect, Getir is a centralized entity: it owns its own stock, cars and warehouses. The team spent eight months jointly developing its own geographic information system (GIS) mapping technology. Getir then integrated data on demographics and consumer behaviour, pairing it with the GIS system in order to optimize the deployment of drivers and warehouse locations. This has a direct impact on its delivery times.

Operation model

  Margins are also improved as Getir does not own the supermarkets’ warehouses. This allows the company to avoid typical owner/operator costs. Getir currently works with various direct suppliers and wholesalers, with a shop receiving around three to four deliveries a day. It plans to consolidate deliveries more over time. Getir has real-time visibility of each shop’s stock; items are scanned as they are sold and each order is tracked online. This ensures that his stock is updated in real-time.

Picking speed

  In the UK, an alarm sounds in-store whenever a customer orders on the Getir app. Once the order is accepted by the picker on the handheld device, the timer starts. Picking speed is a key performance indicator that determines remuneration. If pickers meet performance indicators such as fast picking, low numbers of damaged or missing items and high customer ratings, they can earn up to £3 more per hour. If it’s a few items, the employee will do it in less than seven seconds. If there are 10 items, it takes approximately 45 seconds.

Now the company has been financing subsidies for users to use the software and users are growing all the time. Convenience can be addictive, but will customers pay for real shipping costs when there is no subsidy?

Reference:

https://sifted.eu/articles/inside-dark-store/

https://restofworld.org/2020/turkey-getir-grocery-delivery/