The IKEA Model – Packaging is Your Product

The IKEA Model – Packaging is Your Product

Are you giving your packaging enough thought? We’ll consider the example of IKEA, but first, let’s think about packaging generally and where the opportunities for growth are in your operation.

Think about your business model, products, and supply chain. From concept to customer, you are the expert, right?

But how much thought do you give to how your product is packaged and shipped?

Proper packaging optimization makes it possible to deliver products to your customer in the fastest, most reliable, and least expensive way — protecting not only your bottom line, but also enhancing your customer relationships along the way.

You can’t sell air. Why are you shipping it?

Optimized packaging is the simplest way to lower your total cost of supply chain, including materials, labor, transportation and sustainability (damages and returns).

As more carriers continue to move to dimensional pricing (volume-based) rather than weight, the wrong package size means you are paying to ship air.

IKEA – Proof That Packaging is Your Bottom Line

Efficient packaging is so important to eliminating costly waste that some companies like IKEA actually redesign their products to cut costs and optimize the product’s storage and shipping.

In 2015, for example, IKEA announced big growth plans aimed at increasing global revenue 74% by 2020. A significant part of that growth was to come from selling more products through its existing stores, which meant finding ways to cut prices and move more volume.

As an aside, we’ve all seen examples of really awful packaging from companies like Amazon. But don’t take that as an opportunity to continue with business as usual.

Amazon has made strides in revolutionizing the packaging optimization space, and that’s going to continue making it difficult on you and your profit margins — unless you bring in a partner that can effectively implement packaging optimization solutions.

Here’s where things get interesting…

To cut distribution costs, products like IKEA’s Ektorp sofa were actually redesigned to allow for flat packaging.

The results were incredible.

Flat packaging reduced pack size by 50% and meant 7,477 fewer trucks per year were needed to move the same number of products.

And because of reduced shipping and storage costs, IKEA was able to drop the price of the Ektorp sofa by 14% without cutting into profits.

The packaging for the IKEA Ektorp sofa, a model for savings in your company.

Any rational business owner or operations manager will ask how they can achieve similar savings. But implementing change can be intimidating.

How do you safely do what IKEA and other companies have already accomplished?

It’s Time to Rethink Your Packaging

With the expertise of our team and our leading PACKCHAIN technology, we create a holistic picture of your operation — where the opportunities and pitfalls are, and when the timing is right to maximize savings and reduce costs.

Then we help you put knowledge into action in ways that last.

There are a lot of companies that will come into the picture and make siloed improvements to your materials costs, your transportation costs, or your overall workflow.

They will breeze in, make changes, charge an exorbitant fee and leave without proving that they have saved you money.

And in most cases, they haven’t.

Many companies simply move the cost to a different part of your organization.

They may help you save on shipping by creating more box sizes, but then labor CPU and packaging spend suffers.

And did they track your actual shipping savings or account for additional costs for materials?

In the short term, these questions are overwhelming and the rational response is not to change at all. We understand.

That’s why we show you savings before you implement changes.

Then we stay with you after implementation to ensure the savings are real.

And if the savings aren’t real, our performance-based model means you never pay for results that don’t come to fruition.

Our proprietary technology, PACKCHAIN, allows our team to assess your entire operation and identify ways to maximize your bottom line — plain and simple.

Contact us today to find out how we can help you lower your total supply chain costs.

John is responsible for company efforts to drive value and differentiation in packaging for fulfillment, e-commerce, and manufacturing customers. He has 25 years of packaging leadership experience and has served at the helm of IQpack since early 2013.