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Reading Material - Week 2.1 - How IKEA Saves Millions Through Packaging Optimization
Reading Material - Week 2.1 - How IKEA Saves Millions Through Packaging Optimization
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At Chainalytics, we love the cost saving multiplier effect that small packaging changes have on bottom
lines, but things get really interesting when these optimizations are integrated with product design. IKEA
saves €1.2 million every year because company engineers figured out how to break its Ektorp sofa into
several different pieces, reducing its packaging size by 50%. This is a great example of how including the
supply chain perspective early in development processes can create huge benefits. The WSJ article
highlights that, [tweet_dis]“IKEA is increasingly designing things with packaging and manufacturing in mind
from the start.”[/tweet_dis] This touches on what we at Chainalytics call “Designed for Distribution”
(https://chainalytics.com/designed-for-distribution/) and is the direct result of including the supply chain
perspective early on in the development process. Another element of this “Designing for Distribution”
(https://chainalytics.com/designed-for-distribution/) concept is engineering both the product and the
packaging requirements to survive in transit. Damage during transport can wreak havoc on supply chain
costs and have detrimental service implications. An integrated engineering approach should be taken
during product development, considering both product hardness and the hazards it will encounter during
distribution to produce a satisfactory consumer experience on all fronts. For example, Chainalytics helped
3-D printing company Stratasys minimize shipping damages on its Mojo printer
(http://www.supplychainbrain.com/content/latest-content/single-article/article/packaging-focus-brought-
into-design-of-desktop-3d-printer/?
utm_source=Chainalytics&utm_medium=Chainalytics&utm_campaign=Chainalytics) by tweaking both the
product design and the packaging early on in the development process we were able to optimize the
shipping unit, reduce risk, and ensure customer satisfaction. Thus far there have been zero failures, zero
returns of Mojo (http://www.stratasys.com/3d-printers/idea-series/mojo).
Another intangible benefit of these efficiencies is sustainability. It can be challenging for many companies
to make a business case solely based on sustainability as a primary objective and actually gain traction.
While this may be the case, [tweet_dis]green and efficient supply chains aren’t mutually exclusive but
mutually dependent[/tweet_dis] as such, sustainability is almost always a positive net result of packaging
optimization (http://www.supplychainquarterly.com/departments/20140613-chain-reactions/?
utm_source=Chainalytics&utm_medium=Chainalytics&utm_campaign=Chainalytics). That same frozen
pizza box initiative that saved our client so much money, ALSO eliminated 100 tons of CO2 emissions and
saves nearly 3,000 trees each year.
One striking thing about the savings IKEA is realizing from its packaging optimization efforts is how they’ve
chosen to leverage them: IKEA passes the savings directly to the customer providing a competitive
advantage for themselves in the market. Reducing the size of Ektorp’s
(http://www.ikea.com/us/en/catalog/categories/series/07488/) packaging allowed the company to reduce
the purchase price by 14%. That makes great sense for a company that caters to cost sensitive consumers
that love great deals, but don’t want to sacrifice quality. Agnefjäll summed up the pursuit of efficiency nicely
by saying, [tweet_box]“We are engineering costs out of our value chain that don’t contribute
anything.”[/tweet_box] At Chainalytics, we couldn’t agree more. To learn more about how packaging can be
used to reduce inefficiencies, I am hosting a free webinar (http://www.scl.gatech.edu/news-
events/event.php?nid=407441) with the Georgia Institute of Technology on “Optimizing Packaging’s Impact
in the Supply Chain” (http://www.scl.gatech.edu/news-events/event.php?nid=407441) Wednesday, July 29
at 1:30pm EST. As bonus, webinar attendees will receive a discount code for a 2-day Packaging
Optimization (http://www.scl.gatech.edu/professional-education/on-campus-courses/course.php?
id=opisc) class September 1-2, 2015 on the same topic as part of Georgia Tech’s Supply Chain
Management certificate program (http://www.scl.gatech.edu/professional-education/certificates/).
Chainalytics’ combination of package engineering experience and wide-ranging supply chain expertise
delivers packaging optimized for your product, your bottom line, and the planet. Reach out to us
(https://www.chainalytics.com/contact-us/) and see how Chainalytics can simultaneously optimize your
packaging and your supply chain impact.
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