Rising transport and energy costs: A vital strategy that will reduce the TCO of your logistics packaging and strengthen your supply chain

How to reduce the TCO of your logistics packaging?

How to reduce the TCO (Total Cost of Ownership) of your logistics packaging in a state of ever-increasing prices of fuels and raw materials? Another huge problem facing manufacturing companies today is how to increase their logistics resilience without weakening competitiveness. The Covid-19 pandemic and sanctions against Russia (the falling of the new Iron Curtain) – these two challenges even separately bear the impact of the global economic crisis. And in combination, they create a situation for the logistics of European companies, which can only be described as: a battle for survival.

What are the biggest challenges for companies’ logistics and supply chains?

• Supply chain disruptions caused by the pandemic and sanctions against Moscow.

Supply chain disruptions caused by the pandemic have not yet been fully overcome. And there is another, even greater threat. The supply chain disruptions caused by the lowering of the new Iron Curtain for Russia and its closest allies are only just beginning. Russia is a huge market and a huge country. Drastic measures have stopped entire businesses. Supply chains built for years were destroyed. At the same time, connections to the east of Russia due to the closed land, sea and air borders will make the logistics of this region of the world incredibly expensive. Russia extends into 11 time zones. How to avoid such an obstacle? Any increase in the cost of logistics leads to an increase in the cost of the end product. Which reduces the competitiveness of companies and leads to bankruptcies.

• Rising prices of natural gas, oil and electricity; rising prices of raw materials fundamental to logistics, such as: metals, wood, cardboard, etc.

Fluctuations in the prices of fuels and raw materials significantly increase the TCO (total cost of ownership) of logistics packaging.

Europe’s energy dependence on Russian gas, oil and nuclear fuel is enormous. Any other alternative, its demand and payment – will be extremely expensive for European companies and especially for heavy industry. Just for reference: 60% of the powerful German industry depends on Russian gas. And economies such as Finland, Bulgaria, Italy, Estonia, Hungary, Austria, Switzerland and others cover more than 75% of their natural gas needs from Russia.

But Russia is rich not only in oil and gas. The country is in the TOP 15 of the richest countries in the world in terms of metals and minerals. In the same prestigious group is… Ukraine. Russia holds a large part of the market of Iron ore, Potash, Platinum (PGM), Gold, Nickel, Copper. Russian Federation ranks 5th among the largest timber-exporting countries. Due to the sanctions, the price of all these raw materials jumped dramatically. What does this mean for logistics? Plastic, metal, cardboard and wooden pallet boxes have become more expensive. As well as logistics products made from the cited raw materials.

Crisis logistics strategy that will reduce the TCO of your logistics packaging (based on 3 main pillars)

1. Use of customized packaging to optimize space in vehicles and warehouses to reduce fuel costs

А) custom-made and foldable pallet boxes

How useful can folding pallet boxes be? If you sent 4 trucks with goods in foldable pallet boxes to a certain destination, you will need only one to return the empty boxes on the way back. According to studies, collapsible pallet boxes reduce empty containers’ storage and return transport volume by up to 85%. Or it means saved fuel costs during transportation and 3 free trucks for other tasks. Optimizing your warehouse space with this logistics product will save you time, effort and resources.

B) Returnable packaging: the best solution for short and medium distances

Returnable packaging is the main asset of packaging pooling. There is no alternative to investing in reusable logistics products in this crisis situation. Plastic pallet boxes are designed for long-term use. They are extremely strong and durable. Period of use: from 3 to 20 years (or between 100 and 500 rotations). Folding racks and folding pallet boxes will help you optimize your storage space. They will bring the necessary order and security to the work process.

C) How to turn one-way cardboard boxes into reusable ones

Sometimes ingenious solutions are quite simple. Some companies repeatedly use their cardboard pallet boxes, but do so in an opportunistic way that endangers the security of their cargo. We can help you do it right. We have already published an article on this topic in our blog. You can read it HERE.

2. Renting packaging – financial relief in times of disruption and crisis

We live in a critical time for business. Literally in one day, changes in prices of fuel or some vital raw material for your business could lead to the bankruptcy of your company. Secure investments only a month ago suddenly turn out to be a huge mistake. Currently, any major investment in the purchase of logistics equipment can be an unbearable financial burden. Especially if it is a short-term project. Therefore, renting a package for a certain period of time or for a certain project can be a game changing solution for your business. This will keep your capital budget intact and gain production rewards. The rental fees can then be categorized as operating costs, and you save funds for other projects and investments.

Long-distance deliveries across one or more state borders pose a serious risk in the current crisis situation. But the contracts must be fulfilled. Rental of packaging will eliminate possible delays in production or the supply chain in case of short-term projects. This will allow you to make the most efficient use of available storage space.

3. Packaging pooling; merging deliveries and better management of logistics resources to reduce costs

One way to reduce the TCO is packaging pooling. What means “Packaging pooling”? This is to ensure the continuousness of the logistics process and the supply chain. The ways to achieve this are multiple uses of circulating carriers and the proper use of available logistics tools. Good management of this whole process is crucial. Both reusable packaging and one-way packaging have a role to play with ensuring the continuity of this process. Distance and ensuring absolute end-to-end clarity in deliveries are the main factors in the equation that you need to pay attention to. Combined deliveries will guarantee you the necessary sustainability of the logistics process. Depending on the distance you need to deliver your cargo, you can use one of two types of packaging: returnable or one-way. Returnable for nearby destinations. One-way packaging for overseas.

Packaging pooling includes services such as repair and maintenance of reusable and one-way carriers. Packaging pooling provides the storage of these carriers in multiple locations. Zamko has many bases and warehouses all over Europe that you can use for your purposes. We can provide you with transport to anywhere in the EU. Our experts are entirely at your disposal to provide you with the services you need or just to advise you on the best solution for your company.

References:

1. https://www.businessinsider.com/15-resource-rich-countries-2010-4

2. https://www.statista.com/statistics/1201743/russian-gas-dependence-in-europe-by-country/

3. https://rotom.co.uk/articles/post/how-do-power-outages-affect-supply-chains