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Small Cubes, Giant Savings

You can learn something new every day if you pay attention to the little things. In the case of shipping, logistics, and warehouse management, these small details could translate into big savings and major environmentally friendly efficiencies.

I realize I may be preaching to the choir with this topic, but I thought a conversation that started in another post last week about the advantages of “cubing optimization” was worth continuing. At the very least, I found it intriguing enough to want to pass along to the broader EBN community and request some brain-swapping commentary so I can learn more.

Cubing optimization, as far as I can tell (there is not as much information or as many case study examples out there as I initially expected), is a logistics approach involving automating the way boxes, packages, cargo, and pallets are measured and weighed. While the weight of a package — and mode of transportation — affects shipping prices, the package's dimensions (height, length, and width) also factor into the cost. As many of you know, there is often a noticeable price difference between the weight price and the dimensional price, and those differences feed straight up to the operating budget.

Besides giving companies additional insight into total landed costs calculations, logistics departments can use cubing's dimensional data to strategically evaluate shipping and transportation options, improve efforts to maximize truck or boat container loads, and assess full-load shipments vs. gasoline use. A host of other possible uses and benefits are outlined in a report from DC Velocity titled “10 ways to boost DC performance with cubing/weighing systems.”

I'm under the impression that some of this automated measurement software may already be embedded in warehouse management systems or that cubing system device manufacturers (such as Quantronix Inc.) provide software that can be integrated with WMS, ERP, or other business intelligence interfaces. Either way, what I find interesting is the significant impact accurate dimensional data could have on a company's spending, materials management strategy, and carbon footprint.

Short of having many high-tech examples to draw from (here are a couple from the grocery and publishing industries), I'll mention what EBN follower, Dave Sasson, shared in response to a post about green supply chain trends. There, I mentioned one of the key trends Gartner sees in an industry-wide push to better manage costs and green initiatives in the wake of sharp increases in oil, fuel, electricity, and gas prices. (See: 9 Key Trends in Green Supply Chain.)

Sasson shared the following improvements his company has witnessed as a result of using cubing optimization software, particularly in terms of fuel use:

    For the first 5 months on implementation [in 2007], compared to the same period in 2006, the results were 18,100 fewer trucks on the road. This added up to 909,000 fewer miles driven with 151,015 fewer gallons of diesel fuel consumed and a reduction of 3.4 million pounds of carbon dioxide. The cost savings were in the millions of dollars and continue to be a major positive impact to the business, not only in profits, but on their carbon footprint.

Wow! Bells went off in my head after reading this. First, if companies had a very precise way of knowing exactly how dimensions of packages influenced overall material management cost, they could refine their shipping practices, optimize load scenarios, and reduce spending. Going further (and maybe this is a leap), if this data were integrated with other important systems being used within the design, supply chain, and even marketing teams, companies could make more informed decisions early on in the product development stage; they could analyze alternative packaging possibilities, reconfigure postponement strategies, and maybe even become a greener supply chain partner via smarter shipment tracking and truer pricing data.

If you're interested in seeing how this works, here are a couple of videos. I'm not endorsing any of the products cited here, but offer them up as educational references.

I'm looking forward to hearing how the EBN community weighs in on this (pun intended). My gut tells me it's likely an understated part of the logistic process, but a practice that may warrant a second look. Is your company cubing? What have you learned? How are you using your shipping and cubing information to be a greener supply chain partner?

19 comments on “Small Cubes, Giant Savings

  1. Jay_Bond
    July 22, 2011

    I think that cubing has saved millions of dollars logistically and has helped out the environment by reducing fuel consumption and greenhouse gasses. Having worked for a large shipping company out of high school, I had firsthand knowledge of hand loading trucks and how to optimize all available space. Granted this was in the early 90's and this practice was mainly done by shipping companies. As word spread, this practice has taken off well. I have seen the new processes and I think many companies would benefit greatly by implementing this process.

  2. Tim Votapka
    July 22, 2011

    Impressive piece of technology that seems to have been designed based on what logistics and warehouse managers wanted and needed. It certainly addresses the mailing industry's shift toward “shape-based” rates.

  3. AnalyzeThis
    July 22, 2011

    I read through Dave Sasson's posts in the thread you linked to, but I'm interested in hearing more… maybe Dave could be convinced to write an article with further details? I'm very curious to know the specifics of his situation, the implementation challenges involved, etc.

    But again, very interesting stuff, and thanks for the videos… was very useful to see some of this tech in action. And this reminds me that maybe I need to get down to warehouse more than twice a month or so!

  4. Kunmi
    July 22, 2011

    I think this is an interesting piece of technology. We need to give it some time to gain ground. I also think it will be good for many companys.It will also save and reduce some spending cost. Depending on the ways we look at it , the overall effect of the material is what matters the most.

    Kunmi

  5. JADEN
    July 22, 2011

    Technology makes life easy day by day, this totally eliminate stress and time consumption in manual measurement, highly pain free process.  Technology is power.

  6. Ms. Daisy
    July 23, 2011

    Jennifer:

    Great post and good videos! The cubing optimization technology definitely adds to the efficiencies of the shipping companies. I am wondering if packaging companies are paying attention. I recently got a small item from staples in the mail that was packaged in a box 10x its size. It was not a brakable material and it needed no fillers. Maybe we can go greener with right sizing the shipments too.

  7. DataCrunch
    July 23, 2011

    Hi Jenn, Great article and thanks for bringing additional attention to cubing.  I have been designing and implementing cubing solutions for many years to a wide array of companies.  The results I have noticed are nothing more than spectacular.  Cubing, in my opinion, is still an untapped market and the new frontier in supply chain and logistics optimization.  The technology can definitely have an impact on the environment, but the benefits to the bottom line are what excite the corporations and the shareholders.  Either companies can sell more products at higher margins or they can apply cubing technologies to their manufacturing and distribution processes, which can have an almost immediate impact to profitability.      Cubing, especially cartonization is being looked at even more seriously and aggressively by companies recently due to the rise in e-tailers and online shopping due reduce shipping charges.

    Jenn is correct that there is not a lot of information available by companies on this.  There are several reasons for this, many companies have yet to implement any efficient, integrated cubing technologies, and the companies that have are reluctant to share their results to the outside world as it provides them with a major competitive advantage. 

    With that said, I can point you all to two articles which are available online about cubing or mentions cubing and actual savings due to its use:

    Cube Optimization Streamlines Package, Pallet Size to Reduce Costs

    This article highlights UPS’s use of cubing algorithms for one of its customers:

    “In one particular case, cube optimization was able to help a company save on oversize charges on its packages, save on container costs because it was able to put more packages in a container, and save on the amount of floor space in their warehouse because it was able to stack its product more efficiently. The bottom line savings for the company was nearly $11 per package . This is not an isolated occurrence, and more and more fulfillment personnel are catching on to the potential cost savings associated with cube optimization.”

    Diapers.com Rocks Online Retailing

    Without having to read the entire article (although it is an interesting read), by implementing cubing at the carton level, Diapers.com saves $1.00 per shipment, or 1% of their average order of $100.

     

  8. Anna Young
    July 23, 2011

    Jennifer,

    I realize this may be a stretch but when engineers are designing products I doubt they think about the final packaging processes. Your article, however, tells me the savings would be substantial if the idea behind cubing could be extended farther insight the design chain. Should engineers be concerned about packaging? They do reflect and take the issue of small form factor into consideration but packaging? Any thoughts?

  9. itguyphil
    July 23, 2011

    I do not think they should be 'concerned' with packaging but the 2 teams should have an open dialogue so that these ideas are known to the decision-makers.

  10. prabhakar_deosthali
    July 24, 2011

    In my opinion a product design cannot be controlled by how best it can be packaged. But once a product or product range is available the logistics dept can work on optimising the packaging and shipping to minimise on the number of trips to be made to deliver the products.

     

    in the  motorcycle company for which I was handling the IT systems ,  we had developed a software package to be used by the logistics dept. Based upon the orders to be despatched to various delares ona given day, this software would calculate the transport vehicle to be used ( small truck, medium size truck or a container ) and also fit the maximum possible mix of the vehicles to be despatched. It also decided from which depot the shipment would be made to have shortest shipping distance and also the route to be taken to deliver the vehicles to multiple dealers in a single trip .

     

    I guess similar tools are being used in most of the manufacturing and distribution companies to optimise on their shipping and forwarding costs.

  11. Jennifer Baljko
    July 25, 2011

     I agree with @DennisQ  – @Dave Sasson it seems like you have a wealth of knowledge on this topic and lots of hands-on experience.  Likewise, it would be interesting to hear more about your company's trials, errors, and successes, and get a sense of what steps other companies can take to reap similar benefits. If that's something you're interested in or if you're in a position to disclose more details, I can ask Bolaji what he thinks about a case study or profile kind of piece (If you want to talk about this offline email me at jenn [at] jenniferbaljko.com)

    @Anna young  – as to you question about whether design engineers should be concerned with packaging, I'm leaning towards @pocharle's idea of the teams having an open dialogue so that decision-makers address issues early on. Although @prabhakar_deosthali's idea that “product design cannot be controlled by how best it can be packaged,” why shouldn't design engineers develop a sense of total landed cost. Of course, they need freedom to create the next best thing, but costs is a companywide issue, not just something for the logistics team to think about at the end of the process. Also, if logistics folks know what design engineers are working on, they can start planning their creative problem-solving early on, too.

     @prabhakar_deosthali – sounds like cool and useful software your team developed.

  12. Houngbo_Hospice
    July 25, 2011

    “I guess similar tools are being used in most of the manufacturing and distribution companies to optimise on their shipping and forwarding costs”

     @prabhakar_deosthali,

    There are delivery route optimazation software such as TourSolver that help to optimize transport logistics. It is has been reported that such software can “reduce the cost of routes by 15% and improve productivity!”. I think that such software can be used together with the cubing optimization described by Jeniffer as well.

  13. DataCrunch
    July 25, 2011

    Hi Jenn, Thanks for the offer and I will definitely look into it as well.  I believe that this is a great supply chain topic which doesn’t get the attention it should.

  14. mario8a
    July 25, 2011

    Wow, Excellent article, and Yes today I learned something new, Even I'm directly involved with packaging techniques for our products never consider  dimensional price vs weight price…. very good article and great educational videos.

    Thanks

  15. electronics862
    July 27, 2011

    Thanks for the post Jennifer. It's important to optimise the packaging cost in reducing the whole product cost.  As prabhakar said there is also a better usage of transportation needed to optimise the cost. 

  16. stochastic excursion
    July 27, 2011

    It's interesting that the same approach used to optimize shipping is used to fit features on microchips and data on hard drives.  A company can put itself ahead of the game that can use the same algorithm for its shipping and logistics as is designed for its products.

  17. mario8a
    July 28, 2011

    Hello prabhakar_deosthali

    The software developed on your motorcycle company, maximize profit based on cost reduction of fuel or more packages shipped in less trips? both ?

    we developed software that required high level of maintainance, we implemented something we called JIKARI ( Just in Time, Kanban, Raw Inventory) basically we were working on the philosophy of “we sell one product we build one product”  and our time delivery instead of being affected was improved from 36 Hrs to 18 Hrs.

    regards

  18. Jennifer Baljko
    July 28, 2011

    mario8a – wow… congrats on the sw development. great improvements

  19. Ms. Daisy
    July 31, 2011

    Jennifer:

    Great post and good follow up on all the topic ideas.  @Pocharle's systems approach to controlling cost is excellent an idea. Each product should be viewed and discussed by every subsystem in the manufacturing organization. It is this inter-relatedness and inter-dependence of each segment (subsystem) of the organization  that truely can minimize cost and maximize profit in the manufacturing of a product. 

    Both design engineers, and the logistics team must work on the product from concept to finished product, planning, and problem-solving, including the total landed cost of the product.   

     

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