A Dutch Lesson on Trading, Packaging and Logistics

My last posting covered a key logistics cost driver, airfreight, and how packaging design and selection can unlock savings in a cold chain supply. I was happy that some readers reached out to me to learn more about the difference between the gross and dimensional weights and unlocking savings. This feedback has motivated me to dedicate this posting to packaging and design for logistics in the pharma/biotech industry. In 2002, I had the opportunity to visit a Rijksmuseum exhibition in Amsterdam about the Dutch East India Company. The exhibit "VOC 400 Jaar" displayed the VOC (Verenigde Oost-Indische Compagnie) history and the golden age of the Netherlands. I was not familiar with the VOC so I took the opportunity to learn more about the history of the country that was hosting me as an expat. As I browsed the exhibition galleries, I was fascinated to learn about the packaging and cargo ship developments made by the VOC to support its global trading. I felt that the exhibition was put together from the perspective of packaging engineers or logisticians and not by historians. learned that before the VOC, Spain and Portugal dominated the global trading in the sixteenth century and built larger ships to accommodate the increased trading volume. However, the larger ships were harder to maneuver and therefore were less seaworthy because they were more likely to perish in the event of bad weather or attacks. To fence off competition (i.e. piracy) and protect the newly found wealth, these ships carried more men, canons and ammunition. These safety measures did not reduce the shipwrecks and losses of men and cargo was treated as a trading cost. I called this sixteenth trading scenario designing from the inside out because the design mostly focused on making the vessels bigger. In the biotech/pharma industry generally speaking shipping containers are designed from the inside out and use the traditional 48"x 40" (1.2 m x 1.0 m) pallet size as the primary payload design constraint. In other words, the shipping container is assembled around the 48" x 40" payload by adding refrigerated and frozen cooling elements to insulate the bottom, side and top walls. One can picture this "from the inside out" assembly as a putting together a Matryoshka or Russian nesting doll where one starts with the smallest and finish with the largest size doll. These shipping containers often increase thermal performance to reduce temperature excursions of the product by adding more cooling elements and insulation. Like the cannons and ammunition, the drawback is that the container becomes bigger and heavier and therefore is less attractive to the carriers because it takes more cargo space in the vessel (i.e. aircraft) and/or may not provide the best fit. The design from the inside out appeals to the warehousing operations because it reduces labor and assembly time but may not be optimized to support the airfreight logistics. I also learned that by the end of sixteenth century, shortly before entering in the Eastern trade, the Dutch shipyards specialized in the construction of smaller but more seaworthy vessels. One of these vessels was the "Fluyt" which became the most successful cargo ship of its time. The Fluyt had a long but shallow hull and a round stern that gave the Dutch ships a much larger cargo capacity than contemporary ships of similar size. The Fluyt success was derived from its pear-shaped hull cross section, narrowness of the main deck level, and the considerable broadening out down to the waterline. This Dutch ship design considerably reduced costs and risks in trading because at that time, taxes on merchant ships were based on the area of the main deck and the pear-shape reduced the main deck area while maximizing cargo space. In addition, the Fluyt’s hull design with a low center of gravity gave it more stability under bad weather, and the use of pine instead of oak (except in the hull) made it an exceptionally light vessel of large cargo capacity. The Fluyt was fit for the long VOC trading voyages reducing the risk of the product lost due to ship wreckage. The VOC also turned its attention to the safety of the waterways. By making trading agreements with its partners, it eliminated the need for the heavy canons, extra men and ammunition making the vessels even friendlier to the valuable cargo, reducing wind resistance and increasing the sailing quality. The Dutch effort was also extended to packaging standardization to maximize the cargo space utilization in the vessel. The VOC packaging dimensions were changed to maximize the fit in the new ships. So successful was the Fluyt, that Holland supplied this cargo vessel to the other European merchant empires of France, England, Denmark, Sweden, Spain, Hamburg and Ostend. This innovative 17th century approach is perhaps one of the first design-for-logistics examples where the shipping containers (packaging) were built from the outside in using the vessel dimensions as constraints. Drawing a parallel to the biotech/pharma industry today, we find some shipping containers that have been developed using the aircraft standard ULD (Unit Load Device) dimensions as a design constraint. Aircraft ULD pallets (e.g. LD7) and containers (e.g. LD3) are used to bundle cargo to allow for faster aircraft loading and unloading operations and the ULD dimensions are standardized throughout the airlines industry. Today the new aircraft design is driven by the need of more fuel efficient aircrafts but they still use the ULD standard dimensions. The most popular ULD pallets (a.k.a. cookie sheets) are PMC (96"x125") and PAG (88"x125") while the most popular ULD container (a.k.a. cans) is LD3. Aircraft pallet capacity is measured by number of PMC (96" Ø 125") that can be stored in the cargo area. Aircraft loads may include pallets, containers, or a mix, depending on requirements. Shipping containers that match the external dimensions to the ULD dimensions followed the design approach I called "from-the-outside-in" because the insulation walls, cooling elements and pallet base must be built inwards rendering a payload that may not match the 48"x40" dimensions therefore the warehouse packing operations require manual assembly to prepare the load configuration by moving the product cases from one pallet (48"x40") to another. Aligning the external shipping container dimensions to the ULD dimensions maximize aircraft cargo load and it clearly is a different approach. This "from-the-outside-in" design approach is also referred to design for logistics and improves the supply chain flow while minimizing the freight costs. This 2002 VOC exhibition planted a supply chain seed in the packaging field I operated in those days. I was in front of one of the best examples of design for logistics and I was confident that I could apply the VOC design lessons in my packaging work. The VOC legacy is controversial in many aspects but it was clear to me that this design-for-logistics lesson was something worth sharing. I do envision upcoming changes in the cold chain supply of the biotech/pharma industry and these changes must be orchestrated by the supply chain organization to increase the integration of all the supply chain links. Fostering an environment where freight forwarders, carriers, shipping container suppliers, warehousing, sourcing and engineering teams collaborate to increase the design for logistics. My proposal to the supply chain links includes: 1) Establish a collaborative environment to identify the design constraints and cost drivers in your supply chain. 2) Work with sourcing, engineering, warehousing, quality and supply chain teams to align the efforts and pull together to a common goal. 3) Extend the collaboration to the external supply chain links (i.e. partners) so that the right amount of safety is built. This collaboration is known as Good Distribution Practices (GDP) and provides additional benefits such as better aircraft loading factors, smaller transportation footprint, reduced packaging waste, increase cargo security and product integrity. Until the next post.... First published on Temperature-Controlled Supply Chain References: http://en.wikipedia.org/wiki/Dutch_East_India_Company http://en.wikipedia.org/wiki/Fluyt http://en.wikipedia.org/wiki/Pallet http://en.wikipedia.org/wiki/Unit_Load_Device Have Your Say Rate this feature and give us your feedback in the comments section below

A Dutch Lesson on Trading, Packaging and Logistics

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