dynamics of packaging sourcing - iopp · packaging’s role in bid process ... review responses ....
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Maryann Jashinske Package Engineering Solutions LLC
Dynamics of Packaging Sourcing
Agenda Introduction Recommended Steps in Bid Process Packaging’s Role in Bid Process Preliminary Strategies Data Gathering Selecting items to bid Developing details Select vendors to quote Evaluate responses Re-evaluate strategies Negotiation and selection Award business
Summary Questions
Recommended Steps in Bid Process 1. Conduct preliminary evaluation of purchasing strategies 2. Gather your purchasing data 3. Select items for the RFQ 4. Provide details for selected items 5. Identify vendors to quote 6. Review responses 7. Re-evaluate strategies 8. Negotiate 9. Award business
Intro When the purchasing department calls….
Ideal situation: all specs up to date and in place all packages consolidated, right-sized, properly specified purchasing can proceed with current info
Typical Situation: Specs not up to date; packages not right-sized Timing constraint Resource constraint
Packaging’s Role Help select the best option(s) for your business Work as a team Provide input up front and during negotiations Confirm need for special requirements Understand the alternatives Optimize the packaging where possible Confirm apples to apples comparisons Evaluate the whole packaging process Outline the cost differences and trade-offs Don’t forget the intangibles
Stay involved
Step 1: Preliminary Strategies
Direct vs indirect purchase Manufacturers typically lowest component cost Higher min runs Full lead time May not inventory
Distributors Reduced minimum run (tie-in) Reduced lead time Reduced working capital may offset higher part cost May provide value add
Distributor
Manufacturer
02
4
Minimum run
Lead time
ComponentCost
Step 1: Preliminary Strategies Secondary operations: Inventory, Kitting, Assembly, Decorating Vertical integration; In-house Capability
The longer you can delay differentiation… o the more flexible your production schedule o the fewer items you need to inventory
Production line down time may increase with this strategy
Direct Manufacturer capabilities (value add) Third party (value add) Additional handling, freight and lead time May inventory or pack and ship to order
Step 1: Preliminary Strategies Domestic sourcing vs import Lead times Back-up plan if quality or shipping issue
Single sourcing – or not Risk vs reward
Step 2: Data gathering What do we buy? How many? How often? Where does it ship to? Are there any special requirements? Are there “intangibles” desired?
Intangibles Customer service Quick turn-around Technical expertise Design capability New/different technology Systems integration
Develop a measuring tool for intangibles if possible
Step 3: Selecting items for RFQ Use 80/20 rule to select high volume items Add some low volume items for comparison Identify any special requirements Can we consolidate? Time constraint Help narrow down the list – ideally no more than 20 items points you in a direction… or two
Step 4: Gather details for bid Develop/review specifications
Quality requirements vs desires Regulatory requirements Does the item currently work with your equipment? Is the item over- or under-specified?
Include special requirements lead time/inventory/shipment needs Specify packing/shipping requirements Freight costs – who will pay?
Set material indices - Purchasing which ones? Select a date for comparison index
Provide Pictures
General cost factors to consider Up front – planning: Minimum run sizes “ganging” runs Ordering practices (can your company ID the opportunities?) Inventory control
Inventory costs – working capital Lead times Forecast changes Inbound freight costs Delivery; reliability
General cost factors to consider During production: Equipment Downtime Equipment changeover time Labor needed to run QC time – incoming and outgoing Scrap factors Inbound packaging needs – labor vs part price Contract packagers
General cost factors to consider After production: Shipping environment Special Handling requirements Shipping damage Returns/complaints related to packaging Leaks (clean-up cost) Customer disposal concerns
General cost factors • Can these items be assigned a dollar value? • Consider using a rating system
Packaging Cost Factors
Package Component Cost Factors - General Special colors or textures Special materials; recycled content Component weight Non-standard performance testing Tight dimensional tolerances (ID) Packaging equipment needs Exterior or interior treatment Number of shapes/sizes Custom vs stock – availability of tooling Cavitation of tooling – capital vs part price Equipment utilized for production of parts/capacity Decorating at manufacturer Packing requirements (tray vs box) Freight
Packaging Cost Factors by Type Bottles Window stripes Non-standard finish
Caps Lining materials Unscrewed vs stripped threads
Film/pouches Layout/scrap factor # of colors Print quality – gravure vs flexo Special fitments or laminations; barrier needs
Packaging Cost Factors by Type Blisters/thermoforms/vacuum packs Layout scrap factor Special design requirements (perfing, sealing)
Folding Carton/Corrugated Special board (ECT vs Mullen, Kemi vs mottled white, SBS vs clay) Recycled content Print quality needed, # of colors Package design -regular RSC vs diecut Special manufacturer’s joint
Packaging Cost Factors by Type Industrial Packaging Reconditioned vs new Special fitments and gaskets Special linings Decoration Packing Freight
Tertiary Package Component Cost Factors
Pallets Non-standard designs Material Scrap factors based on lumber sizes Reconditioned vs new Moisture content Treatment requirements Leasing options/returnables Customer requirements
Stretchwrap/strapping/blocking and bracing materials/Tape Yield (prestretch, gear settings) How much is needed to secure load? Regulatory requirements Customer requirements
Decorating Cost Factors Direct print to component at supplier – in-line Inventory all items
Decorate at package supplier - secondary operation double handling
Decorate at third party Multiple handling and freight Lead times
Decorate off-line, in-house Decorate on-line Delays differentiation, minimizes inventory Consider equipment downtime
Recommend separating on bid
Step 5: Select vendors to quote
Step 5: Select vendors to quote It’s not all about price – objective is to get all three Right, Quick and Cheap
Get technical and non-technical input Survey various departments
Identify types of suppliers/mfg processes Niche vendors (fast lead times, low min runs) Additional capabilities (decorating, assembly, technical, design,
innovation) Include distributors Stock items vs custom items
Choose a variety of suppliers for cost comparison Include current supplier
Step 6: Evaluate responses Provide adequate time for responses Make apples to apples comparisons Answer questions Re-advise all vendors of new/additional info
Some suppliers will quote only some items Compare high vs low volume costs Check capacity, ability to handle surges
Ask for more info, if needed Evaluate alternative offerings Include intangible ratings and general cost factors
Step 7: Re-evaluate strategies What is best for your company, for the majority of items? What works for you? May vary by item
Single sourcing vs multi-sourcing Outline the cost differences for special items; confirm need internal negotiation Alternate offerings
Assign value to intangibles if possible Adjust bid if necessary Look at the Total Cost Opportunity Does it change the original strategies?
Step 8: Negotiate Internal and external negotiations Exclusivity/ownership of tools Rebate/prebate opportunities Long term contract Volume
Credit incentives Capital Expense
Inventory Return of defective or used packaging prepurchase of pallets or boxes Partnering opportunities with major suppliers Other
Step 9: Award Business What is the implementation cost/timing to change suppliers? Are the right resources available?
Who owns the tooling? can it be moved?
will it work on other equipment?
Is there a capital expenditure to move?
What is the impact on the current business if not awarded to current supplier?
What about the other 80% of items? How do you maximize profit vs risk; cost vs value?
Summary Provide input up front and during negotiations Confirm need for special requirements Make apples to apples comparisons Review, revise, ask again Understand the alternatives Involve other departments for input Outline the cost differences and trade-offs for business Don’t forget the intangibles Select the best option for your business
Questions?
Contact Info
Maryann Jashinske, CPP Consulting Engineer 770-815-6221 Cell 770-544-7219 Office
Packaging and Supply Chain Optimization
maryann@packageengineeringsolutions.com
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