What is the Packaging Replenishment Cycle?
When it comes to supply chain management (SCM) for consumer goods brands, purchasing agents or buyers must order the right amount of packaging to meet demand while keeping costs low — a delicate and challenging balance. Order too much and you will have to manage warehoused inventory (which may become obsolete), order too little or too infrequently and you may delay product restocks reaching store shelves in time. This is why the packaging replenishment cycle is one of the most critical considerations in the supply chain.
A replenishment cycle refers to the rate at which buyers repurchase stock. In today’s complex marketplace, establishing a healthy packaging replenishment cycle can be difficult for many buyers. The reality is that there are many factors outside of a buyer’s control that can affect their ability to procure packaging — with speed, efficiency, and cost in mind.
Here are three examples of packaging inventory-related problems that buyers may face:
Varying Supplier Lead Times
One of the main challenges for buyers is managing supplier lead times. Every supplier has a different lead time, which can affect the packaging replenishment cycle. Even the most reliable vendors can experience unpredictable disruptions in delivery from causes such as weather, raw material shortages, labor strikes, and more.
Fewer suppliers often means fewer headaches. By consolidating their number of suppliers, brands can simplify the supply chain process, increase buying power, and reduce the amount of work required to manage differing lead times. Partnering with a regionally-based packaging provider, as opposed to an overseas supplier, offers advantages when it comes to shortening lead times, streamlining logistics, and improving communication.
A packaging stockout occurs when a brand doesn’t have enough inventory available to meet demand. Stockouts can happen for several reasons, including inaccurate demand forecasting, an ineffective inventory management system, and supplier delays.
If the packaging inventory runs out before the next replenishment cycle, the brand may be unable to fulfill orders as quickly as they need, likely causing the product to go out-of-stock in stores or online temporarily. If a product goes out-of-stock, consumers are likely to purchase from a competitor or not buy anything at all. It’s no surprise that packaging stockouts can diminish brand loyalty, damage distributor or retailer relationships, and result in a loss of sales.
Investing in the latest SCM software, automated tools, and technologies can help brands minimize the risk of packaging stockouts.
For many buyers, it can be tempting to purchase large order volumes of packaging to reach a target price-per-unit or beat a price increase. However, “the more, the merrier” doesn’t apply in this case. This buying approach simply moves or hides the total cost of the excess packaging inventory sitting in storage.
Having overstock packaging ties up working capital and takes up valuable warehouse real estate. If left unused, overstock packaging may become obsolete and end up in the recycle or landfill as wasted cash. This problem is further compounded due to the trend of shrinking product lifecycles. Since brands are cycling products in and out of the marketplace at a faster rate than ever before, packaging can become obsolete even before the product reaches retail shelves.
Given the nature of shortened product lifecycles, it’s beneficial to explore solutions that mitigate the risk of overstock packaging. Leading brands are seeking new solutions that allow them to order packaging in varying quantities and on more flexible timelines.
Why is a Shorter Replenishment Cycle Better?
Considering the packaging inventory-related problems that buyers may deal with, having a shorter replenishment cycle helps to prevent such issues from occurring.
A shorter replenishment cycle means that buyers can order smaller volumes of packaging at a more constant rate, with the opportunity to adjust the quantity and frequency based on current sales data rather than long-term projections which may prove to be inaccurate.
This buying approach creates a more agile supply chain by reducing lead times, increasing speed-to-market, and cutting down on warehousing costs. With a shorter replenishment cycle, packaging buyers can focus their resources on managing the procurement process more effectively, thereby further optimizing the supply chain.
How Does Digital Print and Finishing Support Packaging Replenishment?
Digital print production helps brands shorten their packaging replenishment cycles and increase overall supply chain efficiencies. Because of its print-on-demand nature and reduced number of manufacturing steps, digital supports lower minimum order quantities and shorter lead times than litho lamination and flexo print. As a result, brands can order smaller volumes more often.
This just-in-time strategy significantly reduces the amount of packaging sitting in storage, along with the cost and labor associated with inventory management. Order volumes can be more closely tied to real-time sales data, providing brands with more accuracy and less waste.
It’s worth noting that today’s digital print presses can now compete price and speed-wise with conventional print when it comes to high-volume orders. Advancing digital technologies are pushing the “crossover point” at which conventional print becomes more cost-effective than digital further out with each passing year.
Along with a more optimized supply chain, having a shorter replenishment cycle powered by digital allows brands to better connect with consumers. Without the need for print plates, brands can regularly update their packaging with each reorder to incorporate more relevant on-pack messaging. This gives them the opportunity to align their packaging strategy with seasonal campaigns, marketing promotions, and changing consumer trends — a task that was once time-consuming and costly with conventional print.
Get a Consultation with Your Pacific Northwest Packaging Supply Chain Partner
Establishing and maintaining a healthy packaging replenishment cycle requires extensive knowledge, industry training, and the support of an experienced Packaging Advisor. Working with a supply partner like The BoxMaker offers benefits for effective inventory management, increased supply chain efficiencies and ultimately, cost-savings to benefit your bottom line.