Reducing Waste by Consolidating Purchase Orders

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Reducing Waste by Consolidating Purchase Orders

By Susan Pichoff, GS1 US - 08/15/2019

A working mom arrives home just before dinner to see two packages on her doorstep, items she recently ordered from her favorite retailer. One package includes a pair of toddler sandals; the other contains a new jacket she purchased for the family’s upcoming hiking trip. One is a large box, the size of an ottoman; the other a smaller package, half the size of the other.

Simple logic would lead you to believe the large box contains the jacket and the smaller box contains toddler sandals — wrong. The sandals swim in a too-big box with more air filler packs than product, and the jacket busts out of the seams of its packaging—its crumpled appearance a tell-tale sign of its cramped confines.

Anyone recently shopping online can relate to this story. But similar scenarios are playing out in the retail supply chain every day, with shipments of goods from brands to retailers. Both trading partners are missing an opportunity to consolidate and save — not just on packaging but the overall last mile costs that have been plaguing the retail industry since the dawn of omnichannel.

A better way forward

Recently, a consortium of retail industry peers collaborated to find a better way to prevent such wasteful scenarios. The GS1 US Apparel and General Merchandise Initiative published the Order Consolidation Best Practices Guideline this past spring, offering industry-supported recommendations for consolidating multiple purchase orders across various departments into a single carton to reduce shipping and handling costs while improving sustainability. 

The group, which consists of brand owners, manufacturers, retailers, and solution providers, developed the new guideline after recognizing a need to improve supply chain agility and better serve the needs of today’s environmentally conscious consumers. Additionally, the group recognized the importance of supporting their organizations’ corporate sustainability programs in a meaningful way.

The guideline offers a standards-based approach for order consolidation, to help enable the delivery of more units per carton. Without a common practice for order consolidation, brands have had to implement different methods based on each retailer’s implementation process. Since many retailers have minimum carton sizes and weights, a small product could be shipped in a larger box than necessary — effectively shipping ‘air,’ which is highly inefficient and wasteful.

The guideline also outlines best practices for leveraging data standards to share information about the consolidation of purchase orders by the brand owner and the retailer. More specifically, it provides recommendations for creating, managing and sharing consolidated Advanced Ship Notices (ASNs) and consolidated Purchase Orders (POs) across business operations. GS1 Standards play an important role to ensure consistency in data formatting, the use of common definitions, and the implementation of uniform procedures. It features real-world examples that members of industry can refer back to, including some typical GS1-128 carton labels that may be used for order consolidation between brands and retailers.

With alignment on these types of tools and business processes, the industry can collectively move forward toward eliminating waste — both in the sense of physical packaging waste and supply chain inefficiencies. Order consolidation helps shippers reduce material costs for boxes, tape, labels and packing materials, such as foam peanuts and air pillows. Using fewer cartons per shipment lowers labor costs associated with building the shipping cartons and filling, loading and unloading them. It also enables optimized cube utilization for each package, which helps improve trailer capacity, reduces fuel costs and shrinks the shipment’s carbon footprint.

Order Consolidation by the Brand Owner

There are several business scenarios where order consolidation can be used by the brand owner. The

following is just one example.

A retailer sends several different purchase orders to the brand owner:

·        PO # 1234567 for Dept. 555 (Girl’s 4-6x) for dresses (quantity of 2 items)

·        PO # 2234567 for Dept. 575 (Boy’s Toddlers) for pants and t-Shirts (quantity of 3 items total)

·        PO # 3234567 for Dept. 532 (Infants) for onesies (quantity of 2 items)

All of these items are merchandised in the store in the children’s department and could all fit easily into

a single carton. They also have the same or similar PO ship windows, are shipped from the same brand

owner distribution center, and have the same payment terms. The brand owner creates an ASN that combines this merchandise from multiple purchase orders to reduce the amount of corrugate (cartons) used and to minimize the order shipping and handling costs.

Ultimately, with heightened consumer interest in sustainability and the rising costs of last-mile delivery, the retail industry can no longer delay implementing these procedures. To maintain brand loyalty and reduce inefficiencies in fulfillment, leading companies need to stay open to greater collaboration and work within a standards-based framework for longevity and success.

Susan Pichoff is senior director, community engagement, GS1 US.