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A Packsize White Paper The Evolution of On Demand Packaging

Taking the Corrugated Market from a Producerto Customer-Driven Model

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March 2012

A Packsize White Paper

Taking the Corrugated Market from a Producer- to Customer-Driven Model

The Evolution of On Demand Packaging

Introduction

It was during the Industrial Revolution that the desire to satisfy consumer demand for conveniently packaged breakfast cereals helped prove the corrugated box as a viable shipping material. Wheatena creator George H. Hoyt was the first to sell his cereal in boxes to offer a convenient, sanitary alternative to scooping his wheat product from barrels. Fast forward more than 100 years, and the corrugated material used today has gained mass adoption as the only rigid multi-purpose shipping container to offer an infinite range of box sizes and shapes. Although easily recognizable, there are many corrugated box types now available, each with varying degrees of thickness and offering different sized fluting between two smooth sheets, or liners. While consumerism and the resulting 20th century discoveries are viewed by many as bad for the planet, corrugated has proven itself an extremely durable, versatile, economical, lightweight, and ecological material used for custom-manufactured shipping containers, packaging, and point-of-purchase displays. The shift to cleaner goods and production technologies, safer manufacturing methods, and smarter resource use are today driving improvements that will shape the future direction of the corrugated market for years to come.

The Decentralization of the Corrugated Industry During the mid-20th century, box demand was such that rolls of paper were converted into large volume runs of similarly sized corrugated boxes at energy-intensive raw material mills. The manufacturers would then order large quantities of boxes and treat them as inventory to store and ship their consumer goods. While box production equipment has improved over the years to offer greater flexibility, for the most part, the corrugated market has relied on this high-volume, producer-driven box production model to satisfy the supply chain across industries. However, over the past 20 years, there has been a sea change among production operations. Many manufacturers have adopted the lean principles outlined through Taiichi Ohnos creation of the famous Toyota Production System (TPS) to address their logistics and transportation challenges. As such, operational and board room discussions have resulted in the realization that the traditional corrugated producer-driven model simply defies several of the wastes first outlined by Ohno and expanded upon in the second edition of the lean manufacturing tome, Lean Thinking, including: Overproduction; Delay/Waiting; Transportation/Conveyance; Motion; Over-processing; and primarily, Inventory, defined as any raw material, work-in-process, or finished goods that exceed what is required to meet customer needs just in time and to maintain process stability. As important as these principles became, lean created a conundrum for the corrugated industry because it wreaked havoc with the traditional scale economies the paper industry was modeled on. As the manufacturing customer become leaner, order size decreased, order velocity increased, quality standards tightened, lead times shrank, and the corrugated converter felt the pinch. To adjust, the corrugated industry entered a just in time era. Instead of addressing packaging at the production system level, box inventory was warehoused and distributed to the customer by a middleman who inventoried and sold large quantities of similarly sized corrugated boxes to satisfy customer production flows. However, those dependent on packaging suppliers deal with a whole new level of ordering complexities and logistics. Issues of price and

lean creates a conundrum for corrugated industry

volume negotiation, overages and stock-outs, setup time, and product protection further complicate and add cost to an already complex supply chain process. An alternative practice introduced in the European marketplace during the same period involved the shifting of the corrugated value chain closer to the customer by creating a mini-converting plant or a focused factory. However, the downside of this model was that the production of one box size on the customer floor did little to address issues relating to packaging inventory and motion (labor). The traditional or focused factory models are today unable to adapt to the single-piece product flow requirements that many industries now require and customers are demanding. While corrugated demand remains high, runaway growth in consumption and an explosion in new products and services (such as online commerce and fulfillment), outpaces the corrugated industrys ability and functionality in exponential terms. Corrugated as a Renewable Resource Despite the packaging process complexities that have intensified over time, the corrugated box retains a preferred status ecologically speaking, and remains today an environmentally preferable method for product delivery. According to the first-ever U.S. corrugated life cycle assessment study conducted by The Corrugated Packaging Alliance (CPA) in 2010, corrugated products are currently the single most recycled packaging material. Frequently manufactured using high percentages of secondary fiber (including old corrugated containers, kraft, and old newspapers), the use of corrugated diverts these materials from the municipal solid waste stream. The CPA notes separately that in 2010, 31.7 million tons of corrugated were recovered and recycled in the United States, representing 85.1 percent of all containerboard produced in the same year. From a sourcing standpoint, when sustainably managed, as much of todays U.S. forests are with reforestation practiced in most areas, trees are a choice renewable resource. Due to its eco-friendly nature, the

corrugated products are currently the single most recycled packaging material

fibrous wood pulp used in corrugated material can be recycled up to seven times, giving the material an 80 percent recovery rate. Lean Principles Deliver an Alternative Over time and due to tremendous advances in converting system technologies and machinery, right-sizing the packaging production process has evolved into an industry of its own: On Demand Packaging. Pioneered by Packsize International LLC, the supply chain entirely changes to become more flexible, lean, and sustainable with the box manufactured at the pack stage of the customers packaging process. With On Demand Packaging, a technology-enabled corrugated box production process becomes part of the material flow. The pick list that conventionally helps find the box is used to make the box, in less time and with unlimited options for quantity, size, and style. Stock-outs and obsolete inventory is zero since any box is available anytime and boxes can be made hours or minutes before they are needed. With On Demand Packaging, the supply chain becomes: more flexible by moving the making of boxes away from large buildings and premium-priced suppliers to allow for an infinite number of box sizes to be made on the pack line, eliminating all corrugated ordering and inventory issues; more lean by addressing the wasteful TPS principles outlined by Ohno. By optimizing order size, material requirements, and packaging throughput, On Demand Packaging drives broad inventory management results by quickly responding to varying product size and shipping challenges; and, more sustainable by furthering the practical use of the most environmentally sensible packaging material available today. By more intelligently managing corrugated material, suppliers can save up to 30 percent in raw material costs, avoid petroleum-based fillers altogether, protect against product damage, and reduce their packagings overall environmental impact on the planet.

Packsize International LLC is the worlds leading provider of lean packaging systems for businesses with complex corrugated packaging needs. Packsize delivers an alternative to the existing corrugated supply chain with On Demand Packaging, which eliminates the need for large inventories of pre-ordered cardboard boxes, reducing the packaging footprint, and trimming work content required for boxing and shipping. Every Packsize system ever built is still in use today and no customer has ever made the decision to go back to buying boxes conventionally. For more information about Packsize International LLC and its products, contact Brandon Brooks, VP of Marketing, at brandon.brooks@packsize.com or call 801.944.4814 ext 141. Visit the Web site: www.packsize.com

2012 Packsize is a registered trademark and On Demand Packaging is a trademark of Packsize International LLC in the United States and other countries. All other brand and product names are trademarks or registered trademarks of their respective companies.