Packaging supplier consolidation – 11 crucial considerations

You have a problem with your packaging.

You’ve identified the issues it is causing your business. Whether that is too high a volume of product returns through transit damage, inefficient packaging processes or overall poor quality.

Maybe the cost is the main issue – you are just paying too much.

So you know what you need to do, but where to start? These questions can be particularly challenging when the issues of your packaging are spread across multiple suppliers.

By purchasing different materials, packaging products and sundries from a number of sources, any changes you want to implement to resolve your difficulties struggle to gain traction. Nothing seems to make that much difference.

This could be a sign that you need to look at supplier consolidation – or single sourcing – for your packaging supply.

Purchasing packaging products from a wide range of different suppliers is actually a very common scenario.

For example, an expert in corrugated packaging may not be able to supply the foam end caps or inserts that you need for shipping your items. So you buy them from somewhere else.

Then you need handling supplies. Maybe Correx® totes or moulded plastic containers. These come from another source.

Let’s say you start producing a new line with sophisticated electronics in, so require some static protection. International sales mean exporting via sea freight – so now you have a need for VCI rust inhibitors.

Plus you still need all of your packaging sundries – tapes, labels, void fill etc.

Without realising it, you have set up a fairly complicated supply chain.

In essence, the process of supplier consolidation is to streamline your procurement processes, enabling more efficient buying and cost advantages.

Instead of sourcing related products from a wide range of sources, your business uses only a few – or ideally a single source – supplier.

Consolidation of your supplier base in this manner can prove to have a number of significant benefits for your business.

It is easy to forget that developing supplier partnerships can be costly and distracting and that they can take time away from focusing on the core elements of your business.

So, by taking the time initially to get supplier consolidation right, it can have an ongoing, positive effect on your business.

There are numerous potential benefits of moving to a single source supply agreement. Saying that, there are some common pitfalls that need to be identified and considered, in order to make sure you get the most out of any consolidation process.

As such, the main advantages and considerations of a consolidated packaging supply are as follows:

• Reduced costs
• Soft as well as hard costs
• Product capability
• Quality improvement
• Control / visibility
• Increased service / support
• Holistic view of processes
• Forecasting and stock management
• Financial performance
• Supplier inflexibility
• Vendor lock in

Continue reading below to see how this could impact your business.

Perhaps the most obvious benefit of consolidating suppliers, particularly for packaging, is that of reduced costs.

By dealing with less or even a single supplier, the billing process is clearer, purchasing control and visibility is improved and even order tracking is simplified.

This means that, by using a single source packaging supplier, you can reduce costs through economies of scale. In essence, by purchasing more from a single supplier, you can realise volume discounts and often see preferential rates too.

As mentioned above, you can often see the direct costs to your business falling through a stronger negotiating position, better relationship and simply by ordering higher volumes.

However, the more intangible costs must also be considered too.

A consolidated supply base allows for reduced administration, fewer POs and enables you or your buying team to focus on other aspects of the business.

In fact, the Chartered Institute of Procurement and Supply (CIPS) calculated that the average cost of submitting a Purchase Order is £50. Each time! This took into account the management of orders, invoices, utility and staff costs.

Similarly to the soft costs associated with managing multiple packaging suppliers, one way in which inefficiencies can manifest themselves in your supply chain is through lack of visibility and control.

This is particularly true of your costs when trying to monitor expenditure to multiple suppliers.

A single source packaging supplier should be able to help monitor these costs, product usage, and how to manage this across your entire business.

Just doing this can quickly highlight wasted spend and inefficient processes.

By using a single packaging supplier, it is likely that you will be able to drive an improvement in packaging quality too.

The most common way this is achieved is the compatibility between different items.

For example, buying cardboard boxes and foam inserts from 2 different sources may have compromised the compatibility and fit of each item when used together.

By manufacturing all items together, it allows for perfectly tailored items that work seamlessly with each other. This, in turn, enhances the overall quality of your packaging.

If you are using multiple packaging suppliers, it can sometimes seem you are spreading yourself too thinly.

You have less well-developed relationships with each supplier, and the incentive or motivation to improve this is less due to the smaller value of orders being placed with each.

The opposite is true of a consolidated supplier.

You will find the relationship is easier to develop, and that your chosen supplier is likely to be more responsive as they will likely view your account as more strategic to them.

Either way, this is a win-win situation.