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About the Author

Mike Marlowe
Vice President, Operations
Kane Is Able, Inc.


Mike Marlowe is vice president of operations at Kane Is Able, Inc., a third-party logistics provider specializing in CPG product distribution. Mike oversees all KANE warehousing and transportation operations. He works primarily with CPG companies to design and implement more efficient distribution strategies.

Supply Chain Comment

By Mike Marlowe, Vice President, Operations, Kane Is Able, Inc.

September 27, 2012

Integrating Contract Packaging into Distribution Operations

Performing Final Packaging in the Distribution Center can Cut Combined
Warehousing, Packaging and Freight costs by 30 Percent

Specific consumer products look exactly the same when they roll off the manufacturing line. To satisfy retailer requirements, however, these identical products are wrapped, sealed, tied and packed in dozens, even hundreds, of different ways for presentation on the retail shelf. Consumer packaged goods (CPG) companies often outsource final packaging to outside contract packagers, adding a costly and time-consuming step between manufacturing and the distribution center.

CPG companies can streamline their supply chains by integrating final packaging into existing distribution operations and entrusting the function to the logistics professionals who manage warehousing and transportation. Doing so can reduce combined distribution, packaging and transportation costs by 30%, and can cut at least 7 days in order-to-delivery cycle time.

Marlowe Says:

It's only a matter of time before manufacturers of all sizes recognize integrated packaging and distribution as an opportunity to get products to market faster with greater flexibility and at a lower cost.
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Where Do the Savings Come From?

Combined packaging/distribution has become possible with the increasing sophistication of a select group of third-party logistics providers (3PLs), who have invested in the equipment and resources to take on complex packaging assignments. The savings from integrating these functions are driven primarily by these factors:


Lower freight costs. Typically, products ship out to the contract packager and then back to the DC for final distribution. These extra runs hike freights costs an estimated 38%.

Lower inventory carrying costs. CPG companies that use an outside contract packager add about 7 days to their distribution cycle and lose visibility of their product during this time. They deal with uncertain stock levels by adding inventory.

Reduced labor and equipment. Combined packaging/distribution operations allow for labor and rolling stock to be deployed where it’s most needed at any given time, across multiple functions.

Reduced damage. The more product is moved, the greater the potential for damage. Shipping product to and from an outside packager results in about 3% damage.

Are 3PLs Ready To Take On Contract Packaging?

Some are. Some aren’t. Moving a complex contract packaging operation to a distribution center is a big shift, from a “ship it” to a “make it” operating environment. That has significant implications for 3PL operations, and they need to make important changes. Enhanced 3PL requirements include:


Experienced packaging engineers, needed to design the packaging process and specify and modify the equipment required to automate and streamline operations.

A rigorous quality control process, to manage the greater risk inherent in a packaging environment. The financial downside of a missed shipment is minor compared to an improperly packaged product for a large retailer order, which could result in chargeback fines or even recalls.

Strict processes and KPI measurement tools to monitor and measure outside labor. Manufacturers want a variable cost structure for final packaging based on volume. 3PLs must be able to meet fluctuating demands using outside labor providers, while meeting all quality objectives.

Large CPG Companies Are Leading the Change

America’s largest CPG companies are recognizing the inefficiencies in the current process for product customization and are leveraging 3PL packaging capabilities to streamline their supply chains. Kimberly-Clark, for instance, has consolidated contract packaging and distribution operations into ten 3PL-operated mega-centers throughout the U.S. and Canada. This “service-in-the-DC” model cuts costs and increases speed to market by reducing supply chain touch points.

It’s only a matter of time before manufacturers of all sizes recognize integrated packaging and distribution as an opportunity to get products to market faster with greater flexibility and at a lower cost.

Kane is Able, Inc. ( is a third-party logistics provider that helps consumer packaged goods (CPG) companies warehouse and distribute goods. KANE has managed high-volume packaging operations since 1993.

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