Good packaging is crucial to meeting SLAs, as it directly affects delivery time, quality and customer satisfaction. Poorly packaged products lead to damage and DOAs, resulting in fines and reputational damage. By organising packaging smartly, you reduce risks and increase reliability towards customers.
Summary of this article
As a manufacturer of components, spare parts or finished products, you have made agreements with your customers. Especially when it is a large, important customer for your company, fulfilling those agreements is crucial. Not doing so can damage your image, increase your costs and even cause your customer to file a claim against you.
Of course, we don't have to explain this to you. You and your colleagues are fully aware of the so-called Service Level Agreements made with your customers. What we can do for you is think with you about how to comply with these SLAs. This may not be the first thought that comes to mind, but the packaging of your components or products often plays an important role in this.
Some SLAs are concise, while others are highly detailed and comprehensive. If you fail to comply with them as a manufacturer, there may be consequences. A complete and clearly defined SLA includes Key Performance Indicators (KPIs). These specify exactly how your performance as a supplier will be assessed. These KPIs may relate to product quality, costs, availability, delivery times, complaint handling, response times, reporting, service provision and any penalties imposed when agreements are not met, such as a penalty clause.
One possible reason for failing to meet an SLA is damage. I previously wrote a blog about Dead on Arrivals, commonly abbreviated as DOAs. Many companies still have very little insight into the full costs involved.
These costs are not limited to return transport and replacing the component or product. Have you ever considered which activities and departments are set in motion when a customer reports a DOA?
These may include:
This is known as Activity-Based Costing, with the DOA acting as the cost driver. It is therefore easy to see that the impact of a DOA may extend much further than you previously realised.
Image damage is often a hidden consequence of DOAs. This is because there are no direct (or indirect) costs associated with them. Suppose your customer’s machine breaks down. This is already causing him considerable frustration and high costs (and lost sales). In short; he is not happy. He orders a component from you, but it arrives damaged on site. The machine still doesn’t work or a little while later it once again halts the production process. You can imagine that this does not exactly reflect positively on you as a supplier. Of course, this also depends on how (quickly) you subsequently resolve the complaint, but chances are your customer will knock on your competitor’s door next time.
That good packaging helps prevent damage should go without saying. As many as 30% of DOAs can be traced back to logistical causes. The product is ready, a quick search for a box, some filling material and it can be transported. That is not always enough. When my colleagues at Faes and I are approached to develop new packaging, we look very closely at the properties of the product, the uses and the process. Because developing packaging that protects well is a matter of course for us, but often there is much more to be gained!
For example, how can we ensure that you always have the right packaging available, so that your delivery time agreed in the SLA is not exceeded due to the lack of the right packaging? Would return packaging perhaps be an option? And how would return logistics be organized? This is just one example of how not only physical packaging, but also attention to the packaging process is important. As packaging experts, we guide you through this from A to Z.
A damaged product is often immediately visible. The actual cause is not always as obvious. Damage may be caused by shocks and vibrations during transport, but also by incorrect fixation, repacking, unsuitable storage conditions or unclear instructions for unpacking and installation.
That is why, at Faes, we do not only look at the case, crate or box. We assess how vulnerable the product is, the conditions it encounters throughout the logistics process and the actions performed by employees, carriers and end users. We also consider the agreements set out in your SLA. Packaging should not only prevent damage, but also contribute to reliable delivery and predictable availability.
Based on the risk analysis, our engineers determine what level of protection the product actually requires. We translate the findings into a packaging design, clear specifications and practical packaging instructions. Where necessary, we test the solution so that you know in advance whether the packaging can withstand the conditions it may encounter during storage and transport.
Better packaging does not automatically have to be heavier or more expensive. The solution may also lie in improved product fixation, fewer packaging variants or a process that employees can carry out consistently every time.
Research involving three high-tech OEMs shows that standardisation within the packaging process can make a real difference. In one of the cases studied, the number of packaging variants was reduced from approximately 600 to 25, while packaging information was made more accessible to the logistics parties involved. During the same period, the proportion of registered logistics-related DOAs fell from 0.46 to 0.22 per cent.
The consequences of a DOA are also not limited to the damaged product itself. A replacement part may need to be delivered urgently, a service engineer may have to return to the site and additional inventory may be required to maintain availability. This directly affects response times, availability and other performance levels defined in an SLA.
At Faes, we bring packaging development, engineering, production and assembly together. This means the process does not end with a theoretical design. Instead, it results in a solution that can be applied consistently in practice. In this way, packaging becomes a controlled part of your logistics process and of meeting the commitments set out in your SLA.
Of course, we would love to have a conversation with you to see where your opportunities, threats and logistical challenges lie. Leave your reaction or question in the form below or contact us directly.
Thijs Canjels is Business Innovation Manager at Faes and specializes in packaging management and supply chain optimization. In his blogs, he shares insights on efficiency improvements, cost savings and the strategic role of packaging in modern supply chains.
More articles by Thijs CanjelsGood packaging doesn’t just happen by chance. Using a tried-and-tested approach, our specialists guide you step by step from the initial idea to the finished product.
