Image damage, high costs and claims - what does your product packaging have to do with this?
As a manufacturer of components, spare parts or finished products, you have made agreements with your customers. Especially when it is a large, important customer for your company, fulfilling those agreements is crucial. Not doing so can damage your image, increase your costs and even cause your customer to file a claim against you.
Of course, we don’t have to explain this to you. You and your colleagues are fully aware of the so-called Service Level Agreements made with your customers. What we can do for you is think with you about how to comply with these SLAs. This may not be the first thought that comes to mind, but the packaging of your components or products often plays an important role in this.
What’s in a Service Level Agreement?
There are concise SLAs, but also very extensive and detailed ones. If you do not comply with these as a producer, there can be consequences. A complete, clear SLA includes Key Performance Indicators (KPIs). These clearly show what you as a supplier will be judged on. These KPIs can include product quality, costs, availability, delivery times, complaint handling, response times, reporting, service provision and possible sanctions when agreements are not met (a penalty clause, for example).
The (hidden) impact of damage (DOAs)
One possible cause of SLA failure is damage. I previously wrote a blog about Defects On Arrival; DOAs for short. Still many companies have little insight into the costs this entails. After all, these do not consist only of the (return) transportation costs and the cost of replacing the component or product. Have you ever thought about all the activities and departments that need to be set in motion when a customer reports a DOA?
Consider:
- (Field service) engineering.
- Logistics and production.
- Sales, customer support and administration.
- Management.
- External suppliers and transportation companies.
This is called Activity Based Costing, with the DOA as the “cost driver. So you can imagine that the impact of a DOA goes much further than you may have suspected up to now.
Image damage from DOAs
Image damage is often a hidden consequence of DOAs. This is because there are no direct (or indirect) costs associated with them. Suppose your customer’s machine breaks down. This is already causing him considerable frustration and high costs (and lost sales). In short; he is not happy. He orders a component from you, but it arrives damaged on site. The machine still doesn’t work or a little while later it once again halts the production process. You can imagine that this does not exactly reflect positively on you as a supplier. Of course, this also depends on how (quickly) you subsequently resolve the complaint, but chances are your customer will knock on your competitor’s door next time.
Packaging and wrapping as solutions to DOAs and non-fulfillment of SLAs
That good packaging helps prevent damage should go without saying. As many as 30% of DOAs can be traced back to logistical causes. The product is ready, a quick search for a box, some filling material and it can be transported. That is not always enough. When my colleagues at Faes and I are approached to develop new packaging, we look very closely at the properties of the product, the uses and the process. Because developing packaging that protects well is a matter of course for us, but often there is much more to be gained!
For example, how can we ensure that you always have the right packaging available, so that your delivery time agreed in the SLA is not exceeded due to the lack of the right packaging? Would return packaging perhaps be an option? And how would return logistics be organized? This is just one example of how not only physical packaging, but also attention to the packaging process is important. As packaging experts, we guide you through this from A to Z.
Want to improve your profits and image too?
Of course, we would love to have a conversation with you to see where your opportunities, threats and logistical challenges lie. Leave your reaction or question in the form below or contact us directly.