Driving Raw Material and Packaging Material Productivity Excellence

SUMMARY

As energy and commodity costs continue to rise, manufacturing companies have looked to their supply chains to find additional means to reduce raw material and packaging material costs. Most companies already have picked the low-hanging fruit in supply chain savings through economies of scale, consolidating source materials and other measures. This study seeks to understand how leading manufacturing companies achieve productivity gains through system approaches and innovations that reduce raw material and packaging material costs.

Driving Raw Material and Packaging Material Productivity Excellence provides extensive data and insight from 17 leading manufacturing companies.

These companies and thousands of others are being challenged daily to find more effective ways to produce low cost, high quality goods for consumers. As they look for ways to compete in a tightening marketplace, many companies still see operational processes as an area they must evaluate for more tangible returns.

Through quantitative surveys and in-depth interviews with packaging and procurement leaders at top manufacturing companies, the Best Practices, LLC research team sought to identify the proven best practices and tactical innovations these companies are utilizing to reduce raw material and packaging material costs.

Best Practices LLC analysts identified several key elements that provide greater insight into developing high-performance in the areas of raw material and packaging material productivity.

Some key findings include:

• Leveraging supplier relationships emerged as one of the most important new ways to achieve productivity goals.
  • Best-in-class companies use two approaches depending on the situation: collaboration with preferred suppliers and competitive supplier selection.

Transferable technology innovations from other industries are the primary source of new technology to be leveraged for improving productivity. Leading companies monitor packaging breakthroughs outside their own sector and evaluate them for transferability to their own environments and needs.

TABLE OF CONTENTS

STUDY OVERVIEW

• Study Objective
• Key Findings and Insights
• Benchmark Class Profile
  • Figure S.1-Benchmark Partner Companies

CURRENT PACKAGING PRODUCTIVITY BENCHMARKS

• Defining Productivity
  • Figure 1.1-Factors Included in Definition of Productivity
• Cost Metric: Material Costs
  • Figure 1.2-Raw Material and Packaging Costs as Percentage of Total Revenue
• Cost Metric: Average Savings
  • Figure 1.3-Average Percentage Annual Savings in COGS
• Distribution of Total Savings
  • Figure 1.4-Distribution of Total Savings in COGS
• Delivering Productivity Goals
  • Figure 1.5-Who has Responsibility for Delivering Productivity Goals
• Measuring Productivity
  • Figure 1.6-How Manufacturing Companies Measure Productivity
• Achieving Productivity Targets
  • Figure 1.7-Activities to Achieve Productivity Targets
• Research and Development Resource Deployment
  • Figure 1.8-How R&D Resources are deployed to Achieve Productivity Targets
• Research and Development Resource Allocation
  • Figure 1.9-How Manufacturing Companies Allocate R&D Resources

LEVERAGING SUPPLIER RELATIONSHIPS

• Introduction
• Preferred Supplier Collaboration
• Utilizing Suppliers' Insight
• Leveraging Supplier Competition

BALANCING SHORT-TERM AND LONG-TERM PRODUCTIVITY DEMANDS

• Hedging Against Cost Fluctuation
  • Figure 3.1-Methods to Hedge against the Fluctuation of Costs of Materials, Transportation and Other Input Factors that Impact Raw Material and Packaging
• Buyer vs. Supplier Hedging
  • Figure 3.2-Pros and Cons of Buyer and Supplier Hedging
• Short-Term Approaches
  • Figure 3.3-Proactive Approaches to Anticipate Price Fluctuations
  • Long-Term Approaches
• Figure 3.4-Approaches for High and Low Value Products

MAXIMIZING INTERNAL RELATIONSHIPS

• Driving Productivity
  • Figure 4.1-Responsibility for Driving Productivity
  • Figure 4.2-Primary Drivers of Raw Material and Packaging Productivity
• Driving Productivity Innovations
  • Figure 4.3-Productivity Innovation Web of Cooperation
• Centralized Reporting Lines
  • Figure 4.4-Centralized Packaging Organization Structure
• Key Internal Relationships
• Sharing Best Practices
  • Figure 4.5-Sharing and Replicating Best Practices

UTILIZING TECHNOLOGICAL INNOVATION

• Role of Technological Innovation
  • Figure 5.1-Importance of New Technology to Raw and Packaging Material Cost Reduction
• Sources for New Technology
• Transferable Technology
  • Figure 5.2-Application of Transferable Technology
• Key Industry Trend: Sustainability