Packaging can be classified by function into two main categories: industrial packaging and commercial packaging. This blog will discuss the impact of industrial packaging on logistics and transport costs in the context of the IKEA case.

The concept from modern logistics is that packaging is the end of production and the beginning of logistics. As the end of production, the last process, packaging marks the completion of production as the beginning of logistics, packaging has the ability to logistics after completion, and packaging should play a protective role for the product in the whole logistics process. Packaging throughout the entire logistics process, without suitable packaging, there is no modern logistics. At the same time, the development of modern logistics has put forward higher requirements for packaging, which has promoted the further development of packaging. Packaging, therefore, belongs to the logistics system, which is the new concept of modern logistics.

  As an important part of the logistics process, packaging affects almost all cost items in the supply chain. As a purely logistical process, industrial packaging influences to a large extent the costs of operating a logistics system. As the end point of production and the starting point of logistics, packaging requires a certain amount of human, material and financial resources. Most products can only enter circulation if they are packaged. It is estimated that the cost of packaging accounts for about 10% or even 50% of the cost of distribution.

 Global packaging consumption reached $980.4 billion in 2022. Therefore, packaging is very important to transport costs. Most companies use measures to reduce logistics costs, such as improving the accuracy of forecasts, lead times for procurement, inventory turnover, route planning for transport, negotiation strategies with suppliers, rational layout of warehouses, continuous optimization of personnel, coordination mechanisms with other departments such as sales and finance, etc. but if these savings can reach 5% it is a very significant achievement.

Logistics costs take up a large proportion of the cost of household products, but the ‘flat pack’ created by IKEA not only reduces transport costs by enabling the storage and transportation of goods in a single unit but also greatly improves the efficiency of loading and unloading in the logistics center on-site, making automated storage possible. One of the biggest benefits of IKEA’s ‘flat-pack’ is that it saves around 90% of the cost of transportation compared to traditional furniture merchants, which is one of the reasons why IKEA is so successful. This reflects the concept of “design for logistics”(DFL).

  The value of this concept is to reduce the cost and have a positive environmental impact. More importantly, it can improve the operation efficiency.

reference：

https://www.smithers.com/resources/2018/mar/global-packaging-consumption-to-reach-$980-4-bill

https://ikeamuseum.com/en/digital/the-story-of-ikea/flatpacks/

https://simplicable.com/new/design-for-logistics

https://www.fastcompany.com/3057837/the-man-behind-ikeas-world-conquering-flat-pack-design