XPO Weighs in on Optimizing Packaging
This story appears in the Dec. 19 & 26 print edition of Transport Topics.
XPO Logistics and Sealed Air teamed up last month to announce a new product for shippers, a partnership that could reopen the discussion about how efficient packaging can boost profits for trucking companies, experts said.
StealthWrap, as the product is called, is touted as a protective layer put around the freight or parcel that shrinks and adheres to the dimensions of the product. Double boxing or overboxing, industry terms referring to putting items into a larger box than necessary and using bubble wrap, packing peanuts or other materials, is a business concern for trucking companies, industry analysts said.
“The more trucking companies can squeeze onto a trailer, the better it is for them. It could mean one less trailer they have to send across the country and one less driver to pay,” said Patrick McDavid, an instructor at the Michigan State University School of Packaging who spent 14 years at UPS Inc. “If you can reduce your transportation costs, that’s going to have a much bigger impact than charging extra for the space.”
Ashfaque Chowdhury, XPO Logistics president of supply chain for the Americas and Asia-Pacific, said proper packaging reduces insurance costs because items are less likely to be damaged in transit and trucking companies can generate higher revenues per ton.
“Let’s say you had a 15% improvement in the density by eliminating extra air, it’s that much more volume that can fit in the same truck in the same run. That is an improvement in profitability for the trucking company,” he said.
For example, a carrier might charge one inefficient shipper $200 to ship a pallet holding 10 monitors. But if two shippers could be more efficient, then the less-than-truckload company could fit two pallets in the same space and charge $120 each, according to Satish Jindel, CEO of SJ Consulting Group.
“So each shipper saves $80, and I get two pallets in the same space and earn $40 more than before. It’s a win for everyone,” he said.
Top LTL and parcel carriers charge the higher of the actual weight and the dimensional weight price, so packing peanuts, shrink wrap or bubble wrap increases the price unnecessarily, said Jack Ampuja, president of Supply Chain Optimizers and executive director of Niagara University’s Center for Supply Chain Excellence.
“The typical e-commerce company averages about 60% cube [box] utilization. If you turn that around, 40% of what they’re paying is filler and air. We’ve seen multibillion-dollar companies shipping more than 50% filler and air in a year, which is horribly inefficient and a complete waste of money,” he said.
Ampuja also pointed out that third-party logistics companies that own or operate warehouses can gain from efficient packaging because they can store more shipments in the space.
XPO Logistics ranks No. 3 on the Transport Topics Top 100 list of the largest U.S. and Canadian for-hire carriers, No. 2 on the Top 50 list of the largest logistics companies in North America and No. 2 among warehousing firms.
“With one company making a move like this, it’ll get the other 3PLs thinking,” Ampuja said, referring to third-party logistics companies. “Customers are going ask, ‘XPO is doing this; what are you doing?’ And they can’t stand up and say they’re doing nothing.”
