DEGREE PROJECT IN THE FIELD OF TECHNOLOGY INDUSTRIAL ENGINEERING AND MANAGEMENT AND THE MAIN FIELD OF STUDY INDUSTRIAL MANAGEMENT, SECOND CYCLE, 30 CREDITS STOCKHOLM, SWEDEN 2019
Transport Cartons' Impact on Supply Chain Efficiency
GABRIELLA ANDERSSON
EVA JONSSON
KTH ROYAL INSTITUTE OF TECHNOLOGY SCHOOL OF INDUSTRIAL ENGINEERING AND MANAGEMENT This page intentionally left blank
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Transport Cartons’ Impact on Supply Chain Efficiency
by
Gabriella Andersson Eva Jonsson
Master of Science Thesis TRITA-ITM-EX 2019:279 KTH Industrial Engineering and Management Industrial Management SE-100 44 STOCKHOLM
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Transportkartongers påverkan på försörjningskedjans effektivitet
av
Gabriella Andersson Eva Jonsson
Examensarbete TRITA-ITM-EX 2019:279 KTH Industriell teknik och management Industriell ekonomi och organisation SE-100 44 STOCKHOLM This page intentionally left blank
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Master of Science Thesis TRITA-ITM-EX 2019:279
Transport Cartons’ Impact on Supply Chain Efficiency
Gabriella Andersson Eva Jonsson
Approved Examiner Supervisor 2019-06-11 Anna Jerbrant Bo Karlson Commissioner Contact person Hennes & Mauritz Jens Fröhlich
Abstract
Large product assortments commonly lead to that fast fashion retailers have a large number of transport cartons, with varying sizes, to distribute products from manufacturing sites to distribution centers. Ultimately, the transport cartons have a large impact on the supply chain efficiency, as they affect several nodes in the supply chain network. Previous research has considered transport cartons’ impact on individual supply chain nodes, but little research has been devoted to evaluate the transport cartons impact on the supply chain network as a whole. Thus, this thesis aims to contribute with knowledge to bridge the gap in literature by investigating how a company’s transport cartons affect the overall supply chain efficiency, by applying a holistic perspective.
The thesis was conducted as a case study in collaboration with Hennes & Mauritz (H&M), a world-leading fast fashion retailer. The research identifies opportunities and challenges related to transport carton usage, and how the cartons impact supply chain efficiency. Moreover, the research evaluates the costs associated with different sets of transport carton sizes, based on a cost estimation model constructed on data provided by H&M. It is concluded that a small set of transport carton sizes could increase supply chain efficiency and generate potential cost savings due to mainly two reasons. First, a small set of transport cartons could lead to efficient container loading. Second, it could lead to efficient carton handling and optimal space utilization in the distribution centers.
Keywords: Supply chain efficiency, transport cartons, standard cartons, packing, packaging, fast fashion, H&M
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Examensarbete TRITA-ITM-EX 2019:279
Transportkartongers påverkan på försörjningskedjans effektivitet
Gabriella Andersson Eva Jonsson
Godkänt Examinator Handledare 2019-06-11 Anna Jerbrant Bo Karlson Uppdragsgivare Kontaktperson Hennes & Mauritz Jens Fröhlich
Sammanfattning
Till följd av stora produktsortiment har snabbmodeaktörer ofta ett stort set av transportkartonger, med varierande storlekar, för att distribuera produkterna från tillverkning till varuhus. Eftersom transportkartongerna påverkar fler noder i försörjningskedjan, har de följaktligen stor påverkan på hur effektiv försörjningskedjan är. Tidigare forskning har utvärderat hur transportkartongerna kan påverka enskilda noder i försörjningskedjan, men lite fokus har ägnats åt att utvärdera kartongernas effekt på försörjningskedjan, sett ur ett helhetsperspektiv. Detta examensarbete syftar till att bidra med kunskap för att överbrygga detta gap genom att undersöka hur ett företags transportkartonger påverkar den totala försörjningskedjans effektivitet genom att tillämpa ett helhetsperspektiv. Examensarbetet genomfördes som en fallstudie i samarbete med Hennes & Mauritz (H&M), som är en av de världsledande aktörerna inom snabbmode. Studien identifierar möjligheter och utmaningar relaterade till transportkartonganvändning, och hur kartongerna påverkar försörjningskedjans effektivitet. Vidare utvärderades kostnaden av att ha olika uppsättningar av transportkartonger, baserat på en beräkningsmodell grundad på data från H&M. Resultaten visade att ett litet set av transportkartonger kan ha positiv påverkan på försörjningskedjans effektivitet och generera kostnadsbesparingar till följd av två huvudsakliga anledningar. Den första anledningen är att ett litet set förenklar effektiv containerladdning. Den andra anledningen är att det kan leda till mer effektiv kartonghantering på lager och bättre utnyttjande av lagerutrymme.
Nyckelord: Flödeskedje-effektivitet, transportkartong, standardkartong, packning, paketering, fast fashion, H&M
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3 Contents
1 Introduction 8 1.1 Background...... 8 1.2 Purpose&researchquestions ...... 9 1.3 Delimitations ...... 9 1.4 Expectedcontribution ...... 9 1.5 Disposition ...... 10
2 Method 12 2.1 Researchprocess ...... 12 2.1.1 Literaturereview...... 13 2.1.2 Casestudy ...... 13 2.1.3 Modelcreation ...... 18 2.2 Qualityoftheresearch...... 18 2.2.1 Validity&reliability ...... 18 2.2.2 Generalizability...... 19 2.2.3 Researchethics...... 20
3 Literature and theory 21 3.1 Supplychaintheory ...... 21 3.1.1 Supply chain and supply chain management ...... 21 3.1.2 Fast fashion supply chain ...... 22 3.1.3 Supplychainstructuresforretailers ...... 23 3.2 Warehousing ...... 23 3.3 Transport container loading ...... 25 3.4 Packaging...... 27 3.4.1 The interface between packaging and supply chain e ciency ...... 27 3.4.2 Packaging problems ...... 28 3.5 Processmapping ...... 29 3.6 Activity-BasedCosting...... 31 3.6.1 Advantages and disadvantages with Activity based costing ...... 32
4 Case company 34 4.1 Companydescription...... 34 4.2 SupplychainprocessatH&M ...... 34 4.3 Transport carton flow ...... 35 4.4 Background to H&M’s current transport cartons and packing ...... 41 4.5 Identifiedkeystakeholderunits ...... 46
5 Results & analysis 48 5.1 Aspects to consider when deciding on a set of transport cartons ...... 48 5.1.1 Positive aspects with a large set of transport carton sizes ...... 48 5.1.2 Positive aspects with a small set of transport carton sizes ...... 49 5.1.3 Aspects to consider irrespective of the size of the set of transport cartons . . 50 5.1.4 Summary of important aspects related to the set of transport cartons . . . . 51 5.2 Distribution and usage of transport cartons ...... 53 5.2.1 Transport carton distribution ...... 53 5.2.2 Transport carton distribution per product group ...... 54 5.2.3 Customized transport cartons ...... 56 5.2.4 Main standard transport cartons and product quantity ...... 57 5.3 Cost of transport carton flow depending on the set of transport cartons ...... 59
6 Description of cost estimation model 61 6.1 Resourcesandactivitiesincludedinthemodel ...... 61 6.2 Extracts from the cost estimation model ...... 64 6.3 Calculations...... 67 6.4 Delimitations ...... 69 6.5 Limitations of the model ...... 69
7 Discussion 70 7.1 Set of transport carton sizes ...... 70 7.1.1 Problematization with current set of transport carton sizes ...... 70 7.1.2 A reduced set of transport cartons ...... 72 7.1.3 Suggestion of a common main standard carton across both channels . . . . . 73 7.2 Costestimationmodel ...... 74 7.2.1 Criticism against the result of the model ...... 75 7.2.2 Disregarded activities and their potential impact on the carton flow cost . . . 75 7.2.3 Supply chain units’ impact on the total carton flow cost ...... 76 7.3 Opportunitiesforfurtherimprovements ...... 78 7.3.1 New definition of fill rate ...... 78 7.3.2 Improved data of product unit item quantity and change of folding method . 78 7.3.3 Improved order information by increased standardization ...... 79 7.3.4 Change order strategy to order per carton ...... 80 7.4 Generalizabilityofthefindings ...... 81 7.5 Discussionofsustainability ...... 81
8 Conclusions 83 8.1 Answertoresearchquestion...... 83 8.2 Opportunitiesforfurtherresearch...... 84
9 References 85
10 Appendix 92 10.1 AppendixA-Firstroundinterviews ...... 92 10.2 Appendix B - Manual for cost estimation model ...... 96 Acknowledgements
This master thesis represents the last part of our five-year MSc degree in Industrial Engineering and Management at KTH, the Royal Institute of Technology. The thesis corresponds to 30 ECTS credits and has been conducted at the division of Industrial Management at KTH in cooperation with H&M. We would like to express our sincere gratitude to all persons who have supported us during this spring while writing our master thesis.
First, we would like to dedicate a special thanks to our supervisors at H&M, Jens Fr¨ohlich and Anders Urhed, for giving us the opportunity to write this thesis and for their support throughout the entire process. We would also like to thank Ingrid K¨allstr¨om, Johan Sv¨ard, Victor Pettersson, Andreas Enstr¨om, Maria Aslin,˚ Rene Klostermann, Karsten Gl¨ucker, Claes Holm, Ajit Krishnan Kayrat and Je↵ery Hou at H&M for sharing your knowledge and experience with us.
Further, we would like to raise our sincere gratitude to our supvervisor at KTH, Bo Karlson, for giving us guidance, encouragement and valuable feedback. Lastly, thanks to our seminar leader, Maria Hammar´en, and our seminar group at KTH for contributing with thoughtful aspects that allowed us to further improve our thesis.
Gabriella Andersson & Eva Jonsson, June 2019 Abbreviations
3PL Third-Party Logistics
ABC Activity Based Costing
CFS Central Freight Station
CMZD Customized
MHE Material Handling Equipment
SC Standard Carton
SCM Supply Chain Management
SKU Stock Keeping Unit
VAS Value Added Service List of figures
1 Illustrationoftheresearchprocess...... 12 2 The supply chain process, revised figure, Richards (2011)...... 21 3 Warehouse activities as a percentage of total cost, revised figure, Richards (2011). . 25 4 Commonly used flowchart symbols, revised figure (Oskarsson, 2013)...... 30 5 Main principles of ABC, revised figure (Gerdin, 1995)...... 32 6 ThesupplychainstructureatH&M...... 35 7 The transport carton flow from manufacturing site to DC...... 36 8 The transport carton flow in a Store DC ...... 38 9 The transport carton flow in an Online DC...... 39 10 A generic transport carton...... 41 11 String transport carton...... 43 12 Unfoldedshirt...... 44 13 Illustration of half-folding and shirt-folding, including how each folding method is packedintocartons...... 44 14 Content of packed transport cartons...... 45 15 Keystakeholderunits...... 46 16 Summaryoffirstroundinterviews...... 52 17 Total carton distribution for the store and online channel combined...... 53 18 Carton distribution by channel...... 54 19 Carton distribution jackets and blazers...... 55 20 Carton distribution jersey and knitwear...... 55 21 Customizedcartonsdistributedbyproductdivision...... 56 22 Ladieswear packed in customized cartons...... 57 23 Total carton flow cost (USD) As-Is compared with two cases...... 59 24 Main principles of ABC applied to the transport carton flow...... 61 25 Input-sheet in model for Company X...... 64 26 Costs-sheet in model for Company X...... 65 27 Assumptions-sheet in model for Company X...... 66 28 Results-sheet in model for Company X...... 66 29 Manual for cost estimation model ...... 96 List of tables
1 Interviews and observations conducted during the case study...... 16 2 Existing unique standard cartons, where the length range between 1-10 and the width ranges between 1-5, where 10 and 5 are highest...... 42 3 Key stakeholder responsibility and how the stakeholders are a↵ected by the transport cartonflow...... 46 4 Percentage impact of total carton flow cost per business unit...... 60 5 Descriptionofresourcesundertakeninthemodel...... 62 6 Descriptionofactivititesundertakeninthemodel...... 63 7 Description of calculations of resources and activities...... 68 1. INTRODUCTION
1 Introduction
This section presents the setting of the thesis. First an overview of the background to the thesis subject is presented, followed by the purpose and the research questions. Thereafter the delimita- tions of the thesis, and the thesis expected contribution, to academia and to the case company, are described. The section ends with a description of the thesis disposition.
1.1 Background
The fashion industry is a global multi-billion-dollar industry (FashionUnited, 2019) characterized by strong historical growth and ever changing market conditions (Statista, 2019). Over the last 20 years, the fashion apparel industry has undergone profound transformation (Bhardwaj and Fairhurst, 2010). Until the mid 1980s, the fashion industry was characterized by low cost mass pro- duction of standardized styles. In the beginning of the 1990s, retailers shifted towards expanded product ranges and became more responsive to upcoming fashion trends. Thus, the fashion indus- try has gone from only having spring/summer and autumn/winter collections, to release several collections of products during a year.
Today, customer demands have forced retailers to prioritize low cost garments, flexibility in design, quality, and speed to market to stay competitive (Bhardwaj and Fairhurst, 2010). Big fashion retailers such as H&M, Gap, Benetton and Inditex group do not commonly manufacture their garments, instead the manufacturing is outsourced and thus their supply chains consist of large networks of external suppliers (Escalona Orcao and P´erez, 2014). A global supply chain leads to cost advantages, whereas a local supply chain facilitates fast response to market, which is a dilemma retailers are facing today when deciding on a sourcing strategy (Guercini and Runfola, 2004). As a consequence of the increased globalization, the complexity of retailers’ supply chains as well as the complexity of logistical activities have increased. Thus, geographical integration within the supply chain is crucial to stay successful as a retailer and maintain an e cient supply chain.
Packaging has a significant impact on logistics and thus supply chain e ciency (Hellstr¨om(2007), Saghir (2004a), Johnsson (1998), Twede (1992)). However, how products should be distributed from producer to consumer is a subject that have been devoted little attention in previous research, whereas emphasis rather have been on whether the product can be produced and sold (Gustafsson et al., 2005). To stay successful, retailers must give attention to how products are distributed and what packaging solutions that should be used. Products are often enclosed and distributed in packaging with the objectives to contain, protect, handle, deliver or present goods (Paine, 2002). Improved packaging logistics would reduce handling costs and provide more secure loads, which in turn would lead to less damaged products (Gustafsson et al., 2005). Thus, by considering packaging logistics, business and supply chain performance could be enhanced and lead to higher profit margins, lower costs and reduced environmental impact.
8 1. INTRODUCTION
1.2 Purpose & research questions
The aim of this research is to understand necessary considerations of how a company’s transport cartons a↵ect supply chain e ciency and supply chain costs, from a holistic perspective. In order to operationalize the aim of this research, the following research question and sub research questions have been formulated;
RQ: How does a set of transport cartons impact supply chain e ciency and supply chain costs?
SRQ1: What stakeholder units within the supply chain are a↵ected by the transport cartons?
SRQ2: What aspects are important to consider when deciding on a set of transport cartons?
SRQ3: What is the transport carton distribution and how are the transport cartons used at H&M today?
SRQ4: How can the total cost of the transport carton flow vary depending on the set of transport cartons?
1.3 Delimitations
As the phenomenon investigated is highly complex, delimitations were made. The research was delimited to examine the transport carton flow from manufacturing sites to distribution centers (DCs), and not further shipment to end customers or stores.
As H&M is one of the biggest retailers in the world, a vast amount of data exists, and therefore further delimitations to only analyze data from the German and Central European market were made. These markets were thought to be representative for this study mainly due to two reasons. Firstly, they are the largest planning markets in Europe and have several distribution centers, tak- ing the complexity with mixed cartons and sales accuracy into consideration. Furthermore, the distribution centers in these markets are partly automated, one of the important aspects when analyzing solutions suitable for the future. To successfully be able to process the vast volume of data provided by H&M, it was delimited to only include data for the year of 2018. This delimi- tation of only analyzing one year of data allowed for analysis across all seasons, which a↵ects the collections that H&M releases and in turn what transport cartons that are used to distribute the products.
1.4 Expected contribution
This thesis aims to empirically contribute to the research area of packaging logistics with a unique case study, of one of the world’s largest fast fashion retailers, aiming to identify important aspects to consider related to transport cartons to enable for an e cient supply chain. More specifically, the thesis aims to illustrate potential opportunities and challenges related to transport carton usage and how it a↵ects supply chain e ciency.
9 1. INTRODUCTION
Furthermore, the thesis aims to contribute to H&M by investigating what impact the transport cartons have on its supply chain e ciency and by conducting a business case, quantifying potential cost savings. To be able to conduct the business case, a cost estimation model will be constructed, which also will be delivered to H&M.
1.5 Disposition
The outline of the thesis is as follows:
Introduction: This section presents the setting of the thesis. First an overview of the background to the thesis subject is presented, followed by the purpose and the research questions. Thereafter the delimitations of the thesis, and the thesis expected contribution, to academia and to the case company, are described. The section ends with a description of the thesis disposition.
Method: This section presents the methods used while conducting the thesis. It starts with a description of the research process which was carried out in three stages, namely a pre-study, a main study and an analysis of the results. The methods used in each stage of the research process are then thoroughly presented. The chapter ends with a discussion of the quality of the research, by discussing the thesis validity, reliability, generalizability and research ethics.
Literature and theory: This section presents previous literature and theories related to the subject under study in order to provide an understanding of the context of the research subject. First, an introduction to supply chain and supply chain management theory is presented, followed by a literature review of existing research related to warehousing, transport container loading and packaging. Last, the fundamentals of process mapping and activity-based costing are introduced, which are used as theoretical frameworks in this research.
Case company: This section gives an introduction to the case company and its operations related to the transport cartons in order to provide an understanding of the organization and subject under study. The section is based on findings from the pre-study and observations, describing the current transport carton situation. Moreover, Section 4.5 serves to answer the first sub research question.
Results & analysis: In this section, the findings from the case study are presented. First, impor- tant aspects that need to be considered related to transport cartons are identified. Second, results from data analysis of the current transport carton situation at H&M are presented. Last, results from the cost estimation model given di↵erent scenarios are presented. Analysis and explanations of the findings are presented along with the results.
Description of cost estimation model: This section presents a description of the general cost estimation model, which was constructed based on findings from the case study to calculate the total transport carton flow costs for the scenarios presented in Section 5.3. Further, the model’s main features and calculations are described. The section ends by presenting delimitations and limitations of the model.
10 1. INTRODUCTION
Discussion: This section contains a discussion about the findings in this study. First, findings related to the transport cartons are discussed. Second, criticism against the construction of the model and how it might have a↵ected the results are presented. Third, opportunities for further business improvements, detected during the case study, are discussed as well as the generalizability of the findings and sustainability aspects related to the research subject.
Conclusions: This section presents conclusive remarks and the answer to the research question evaluated in this thesis. Moreover, opportunities for further research are discussed.
11 2. METHOD
2 Method
This section presents the methods used while conducting the thesis. It starts with a description of the research process which was carried out in three stages, namely a pre-study, a main study and an analysis of the results. The methods used in each stage of the research process are then thoroughly presented. The chapter ends with a discussion of the quality of the research, by discussing the thesis validity, reliability, generalizability and research ethics.
2.1 Research process
The research topic of this thesis originated from a subject in need of investigation identified by H&M. The methodology used followed an inductive approach, designed as a case study. Case studies are suitable when the research purpose is to investigate and analyze a phenomenon in its natural context using various methods to understand the phenomenon (Collis and Hussey, 2013). In addition, case studies are useful when looking at holistic characteristics of phenomena which makes it suitable for this thesis that aims to investigate a company’s set of transport cartons from a holistic perspective (Yin, 2009). The research was initiated with a pre-study, which aimed to acquaint the authors with the organization and create a deeper understanding of the empirical context. Based on findings from the pre-study, the transport carton flow was mapped and the key stakeholder units were identified.
The pre-study was followed by a main study, which can be divided into three parts. First, semi- structured interviews with the identified key stakeholders at H&M were held. Second, quantitative data analyzes were conducted, which aimed to examine the current distribution of the transport cartons at H&M. Last, a business case was conducted, with the aim of comparing the costs for the current set of transport cartons at H&M with other potential sets of transport cartons. Throughout the entire case study, a literature review was conducted.
Figure 1: Illustration of the research process.
12 2. METHOD
2.1.1 Literature review
A literature review was initiated, starting with wide information gathering related to the area of research which then was narrowed down to specific topics as the scope of the master thesis clarified. According to Blomkvist and Hallin (2015) this is rather a typical approach when conducting a literature review due to complexity of the area of research, which makes it crucial to obtain a thorough understanding of the research area as well as understand how to position the study relative to previous research within the field. The literature review was carried out through the entire research process and was based on carefully selected sources.
Practically, the literature review was conducted by thoroughly searching for scientific literature sources using the databases KTH Primo, Web of Science and Google Scholar. Information about theories and concepts were also retrieved from dictionaries and books covering specific themes. To ensure qualified sources, the searches were filtered to only include journals and publications. Thus, the literature review was based on relevant sources from recent years and older publications where the content were considered applicable despite the publication year. Moreover, the results from previous research which were closely related to the area of research, lead to that the subject of investigation was clarified and that the investigated research questions could be formulated.
Keywords used for finding relevant literature were; Supply Chain, Supply Chain Management, supply chain costs, supply chain networks, retail supply chain, omni-channel supply chain, supply chain constraints, warehouse management, warehouse challenges, transport cartons, transport op- timization, container loading, packaging, packing problems, packaging logistics, process mapping, and Activity-Based Costing.
2.1.2 Case study
According to Collis and Hussey (2013) a case study usually follows five primary steps; 1) selecting the case, 2) preliminary investigations, 3) data collection, 4) data analysis and 5) writing the report. The actions taken in step one to four are further described below.
Selecting the case As the thesis topic originated from a subject in need of investigation, identified by the case company, there was no case selection process. The complexity with transport cartons is however a common issue for a large number of retailers (BCG, 2013), highlighting the need for investigation of the subject. Several supply chain nodes are impacted by the transport cartons, picturing the complexity of a carton strategy well.
As H&M is one of the largest fashion retailers in the world (FashionUnited, 2019), with a heavy- logistic supply chain, it is a suitable case company for studying a transport carton flow. Further, a large fashion retailer is thought to be a more relevant choice for the purpose of this thesis opposed to a small fashion retailer with less complex supply chain. Moreover, the current transport cartons at H&M has not been designed to consider all aspects from the di↵erent nodes in the supply chain.
13 2. METHOD
Neither for its current multi-channel supply chain, nor for tomorrow’s potential omni supply chain. H&M is therefore, for our aim, a highly suitable case of a fashion retailer with a transport carton strategy lacking a holistic perspective.
Preliminary investigation The preliminary investigation is a process of becoming familiar with the context in which the case study will be performed. Collis and Hussey (2013), commonly refer to the preliminary investi- gations as the pre-study. Therefore, before setting the scope and formulating research questions to be investigated during this thesis, a pre-study was made in order to gain an understanding of the overall industry in which the case company operates. This preliminary stage was also the stage where both academic and the case company’s expectations were defined. As the thesis study originated from the case company supervisors’ hypothesis, being objective during this stage of the research process was of extra importance as the perceived ’issue’ could be a subjective imagination. Therefore, before setting the scope of the thesis, several interviews were held with relevant internal key stakeholders and observations at distribution centers were made. Objectivity was achieved by interviewing employees from di↵erent units in the supply chain to obtain as many perspectives as possible of the investigated problem. Parallel to the interviews and observations at the DCs, a liter- ature study was conducted to get a general point of view based on previous research within the field.
Data collection
Interviews Interviews were held to gain a deeper understanding of how the case company and its supply chain processes work. According to Blomkvist and Hallin (2015), interviews are suitable in an initial stage of the research to develop in-depth understanding, find new dimensions of the studied area as well as find ambiguity. Thus, interviews with stakeholders from di↵erent departments were con- ducted to obtain a holistic point of view and input from di↵erent perspectives. More specifically, interviews were held with stakeholders from seven departments; Buying O ce, Production O ce, International Freight and Transport, Warehouse Logistics, Garment Care, Sales and Sustainability. These stakeholders were selected after discussions with the supervisors at H&M. They were chosen as they all have interests related to the transport cartons, which are needed to gain an overall un- derstanding of the transport carton flow, from order placement to end customer delivery. Moreover, an interview with Warehouse Logistics Business Intelligence department was conducted to discuss secondary data related to the transport cartons.
First, unstructured pre-study interviews were held to develop in-depth understanding about the area of research and clarify the investigated research problem. Second, semi-structured case study interviews were conducted, which also allowed for follow-up questions. The case study interviews could further be divided into three interview rounds. In the first interview round, all seven depart- ments were asked about challenges related to transport cartons, and about strict requirements and preferences on a potential new set of transport cartons. In the second interview round, the two
14 2. METHOD divisions Warehouse Logistics and Garment Care were asked follow-up questions on empirical find- ings from the quantitative data analysis. The third interview round consisted of questions related to cost drivers for the transport cartons and di↵erent carton sizes. All departments except Buying O ce and the Sustainability department were included in the third interview round. The reason to why these two departments were excluded, was because they do not have any costs directly attributable to the transport cartons.
All interviews were documented in writing and the duration varied between 30-90 minutes. Most of the interviews were face-to-face, but five of the interviews during the first and third interview rounds, were conducted using Skype which was due to geographical circumstances. Further, follow- up questions were asked through e-mail. All predefined questions during the first interview round, where the interviewees were asked similar questions related to the transport cartons, can be found in Appendix A.
Observations To understand the distribution center processes, two distribution center visits to Eskilstuna and Bor˚aswere made to observe the daily distribution center routines. Observations are of exploratory character and appropriate to investigate daily work routines (Blomkvist and Hallin, 2015). Since observation as a methodology can be perceived subjective, the observations were systematically documented, which Blomkvist and Hallin (2015) argues is important to stay credible as an obser- vant. Throughout the DC visits, questions were asked to clarify DC processes.
Data from secondary sources In the process of compiling a status analysis, secondary data collected from H&M’s databases were analyzed. The secondary data was extracted with help from the business unit Business Intelligence. As H&M’s databases contain a significant volume of data, it had to be reduced to a subset of the H&M assortment to create prerequisites for analysis. As such, the subset was restricted to only include data containing information related to transport carton shipments to the German store market and the Central Europe online market, during 2018. These two markets were selected be- cause they represent two large destination markets for store and online respectively, resulting in a large volume of data. By analyzing a large volume of data, the result become more trustworthy as it includes the complexity that large destination markets entail, such as for example several distribution centers. Data from both the store and online destination markets were analyzed as the automation level in the warehouses di↵ers. Further, these two markets were selected as they are automated to a great extent and thus are representative for future distribution centers.
15 2. METHOD
Summary of data collection Table 1 below summarizes all interviews and observations that were conducted during this the- sis.
Table 1: Interviews and observations conducted during the case study. Stage Date Department Interview type Interview round Pre-study 2018-12-07 Warehouse Logistics Unstructured Preliminary Pre-study 2019-01-23 Garment Care Unstructured Preliminary Pre-study 2019-01-25 Warehouse Logistics Unstructured Preliminary Business Intelligence Pre-study 2019-01-30 Garment Care Unstructured Preliminary Pre-study 2019-02-01 Garment Care Unstructured Preliminary Pre-study 2019-02-01 Warehouse Visit Observation Preliminary Eskilstuna Pre-study 2019-02-05 Warehouse Visit Observation Preliminary Bor˚as Case study 2019-02-01 Garment Care Unstructured First round Case study 2019-02-06 Warehouse Controlling Semi-structured First round Case study 2019-02-07 International Freight Semi-structured First round & Transport Case study 2019-02-08 Sales Semi-structured First round Case study 2019-02-11 Sustainability Semi-structured First round Case study 2019-02-18 Buying O ce Semi-structured Firstround Case study 2019-02-20 Production O ce Semi-structured Firstround Case study 2019-02-21 Warehouse Logistics Semi-structured First round Automation Case study 2019-03-11 Warehouse Logistics Semi-structured Second round Case study 2019-03-12 Garment Care Semi-structured Second round Case study 2019-03-01 Production O ce E-mail Third round Case study 2019-03-01 Garment Care Semi-structured Third round Case study 2019-03-12 Warehouse Controlling Semi-structured Third round Case study 2019-03-13 Sales E-mail Third round Case study 2019-03-18 Warehouse Controlling Semi-structured Third round Case study 2019-03-22 International Freight Semi-structured Third round & Transport Case study 2019-04-15 Warehouse Logistics Semi-structured Third round
16 2. METHOD
Data analysis Collis and Hussey (2013) highlights the importance of becoming familiar with the data when con- ducting a with-in case study to build up separate descriptions of events, opinions and phenomena that can be used to identify patterns.
In this thesis study, data triangulation was achieved through collection of data from di↵erent sources as interviews, observations and secondary data. Through the use of multiple data sources, bias was minimized and validity established (Yin, 2009). Several methods for structuring data analyzes exist (Blomkvist and Hallin, 2015). In this research, a thematic approach was used, which is commonly used when analyzing qualitative empiric. Thus, the data were sorted in di↵erent categories (requirements, process, costs) with the objective to later answer the research questions based on the di↵erent categories. The findings from interviews and observations were compiled and presented based on the mentioned themes and to describe the empirical setting as well as the transport carton flow.
The analysis of the secondary data was mainly conducted using Microsoft Excel, but as the compu- tational power of Excel is limited, the software Tableau was also used as a complement to overview and derive relevant data for the analyses. More specifically, four quantitative data analyzes were done analyzing the transport carton distribution, carton distribution per product group, distribu- tion of customized transport cartons and the product quantity packed in the main standard cartons.
Transport carton distribution The actual usage of di↵erent carton sizes was analyzed, for both channels combined and separately. All standard carton sizes were included, but grouped together depending on its size, resulting in a total of 17 carton groups. Each unique standard carton size was grouped together with the standard cartons with height variations of these. Further, the customized and string cartons were grouped together to create a more plausible view of what fraction of the total number of cartons they constituted. Data from all seven departments, Cosmetic, Divided, Ladieswear, Menswear, Home department, Other and Sizes 50-170, and all product categories were analyzed.
Carton distribution per product group The carton usage per product category was analyzed by grouping products with similar character- istics together. In this analysis, only data from the ladieswear, menswear and divided departments were included, which accounts for the largest amount of H&M’s revenue. A total of 15 product groups were analyzed; Jerseys, Jackets & Blazers, Blouses, Denim & Trousers, Shoes, Swimwear & Lingerie, Dresses, Knitwear, Sportswear, Socks & Tights, Shorts & Skirts, Suits, Woven tops, Accessories and Bags. Product categories with unclear descriptions or occasional deliveries such as for example New development, Mixed collection, Press collection, Promotion, Giveaways and Other items were excluded from this analysis.
17 2. METHOD
Customized transport cartons Data of carton usage of customized cartons was analyzed for all departments, including all product categories. While conducting this analysis, the product categories were grouped together as in the analysis described above. Except for analyzing the usage of the customized cartons, the customized carton measures were compared with the standard transport carton measures.
Main standard carton and product quantity The product unit quantity packed into the two main standard cartons was analyzed. In this analysis, the data was filtered to only include data from the departments, ladieswear, menswear and divided. Further, only full cartons were included, to avoid cartons packed with irrepresentative number of products. Both the average unit quantity and the mean value were analyzed to ensure that the data was representative and that the measures did not deviate too much.
2.1.3 Model creation
A cost estimation model was created to evaluate the business case of changing the set of transport cartons. A business case is an investigation of whether a future potential project will be profitable, and is conducted before a project is approved (Lester, 2017). The business case can be referred to as a document that establishes what the problem is, what the solution will be and what it will cost in terms of resources and time. The underlying purpose of the document is to inform a final decision maker that will decide whether to take on a project or not (Blais, 2012).
The model was constructed to evaluate costs related to the existing set of transport cartons, com- pared with other sets of transport cartons. The model was built using Excel and was based on data given from the stakeholder units in the third round interviews. Thus, the model was based on costs related to the transport cartons and given assumptions. In absence of reliable data re- garding product quantity packed into the di↵erent carton sizes, the model was built to take two potential scenarios regarding product quantity into account. Furthermore, the model was evaluated along with stakeholders to ensure that the main cost drivers were taken into account. A thorough description of the model can be found in Section 6.
2.2 Quality of the research
When conducting a case study, it is fundamental to consider validity and reliability to ensure good research quality (Blomkvist and Hallin, 2015). These aspects, in addition to genaralizability and research ethics, have been discussed as follows to strengthen the credibility of this research.
2.2.1 Validity & reliability
To ensure the quality of the case study the dimensions validity and reliability were considered. Validity is of importance to ensure that the research is giving a fair representation of reality. Con-
18 2. METHOD clusions should be supported by a chain of evidence, preferably triangulated using multiple data sources (Gibbert, Ruigrok, and Wicki, 2008). This thesis is built upon both quantitative and quali- tative data sources which, thus, strengthen the thesis validity. The quantitative data was extracted from H&M’s databases. The qualitative data was gathered from unstructured and semi-structured interviews and by observations during distribution center visits. Shah and Corley (2006) emphasize the importance of unstructured interviews when trying to understand all underlying perspectives which increase the construct validity of the study, depicting a more accurate representation of re- ality. Unstructured interviews were therefore held during the first stage of the case study in order to allow each stakeholder to emphasize what was most important from their point of view. The validity of the thesis is further strengthened by the fact that it covers multiple perspectives as interviews were held with stakeholders from several di↵erent business units.
The reliability dimension refers to whether a study has been conducted in the right way (Blomkvist and Hallin, 2015). A study’s reliability is furthermore increased by ensuring that the results of the study would be found again if the study was repeated. Therefore, to facilitate the replication of the case study, a thorough description of the methodology used when conducting the case study was presented. In addition, the cost estimation model used to evaluate the business case and its features are described in detail. Moreover, semi-structured interviews were held, aiding in strengthening the case study’s reliability.
The conclusion drawn from qualitative data can, however, be hard to repeat due to individual interviewee and interviewer interpretations which may impact the results (Collis and Hussey, 2013). The risk of subjective interpretation during the interviews, is however somewhat reduced as two researchers held the interviews, which possibly increases the accuracy of the thesis findings (Kaulio and Karlsson, 1998). As the case-company name is provided the reliability is further increased (Gibbert, Ruigrok, and Wicki, 2008). There are however several improvement areas related to the case study’s reliability. Firstly, recording and transcribing the interviews had facilitated replication of the case study and limited the risk of subjective interpretations. Secondly, the quantitative data that the case study was based on is company specific, and thus the reliability would have been favoured if the case study was based on data from several case companies. Lastly, some of the analyzes performed in this case study could be di cult to replicate as information, such as carton measurements and costs, was confidential and thus could not be included in the report.
2.2.2 Generalizability
The case study methodology is criticized for being unscientific in the way that it is subjective and primitive, which makes it di cult to draw conclusions to a phenomena, or explanandum (Blomkvist and Hallin, 2015). Since this thesis is based on a single case study the findings do not allow for statistical generalization. Instead analytical generalization is used, where generalization from empirical observations to the theory are taken into consideration (Yin, 2009). The analytical generalizability is achieved through a discussion of how the results’ in this case study can be applicable to other, similar cases.
19 2. METHOD
The findings in this master thesis study can be generalized to logistic heavy retail companies, where products are delivered in carton boxes and the design process not is restricted to fit specific carton measures. Moreover, research findings from di↵erent nodes in the supply chain network can be applicable to other industries with heavy logistics. A detailed discussion about how the findings in this case study are analytically generalizable will be presented in Section 7.4.
2.2.3 Research ethics
Research ethics is of great importance, especially when managing expectations from dual stake- holders (Blomkvist and Hallin, 2015). In this case, cooperating with a large retail company, caution was taken not to let the case company gain too much influence on the thesis project. Moreover, the research fulfilled the four general rules, secrecy, professional secrecy, anonymity and confidentiality for good research practice formulated by the Swedish Research Council (2017). All participants contributing to the master thesis study was informed about its purpose and their rights about consent. In the outset of the master thesis process, nondisclosure agreements were signed to ensure that confidential information was only to be used with the purpose of writing this report and not going to be jeopardized, neither during nor after the master thesis process. Since the data provided by H&M was highly confidential, consisting of detailed information about carton box shipments, it was manipulated in this report. However, this does not a↵ect the final results and conclusions in the report. Further, research misconduct defined by All European Academies (2017) as fabrication, falsification or plagiarism have been avoided by aligning results and findings with stakeholders before presenting them, justifying exclusions and manipulating data throughout the report and always referring to other researchers’ work when necessary.
20 3. LITERATURE AND THEORY
3 Literature and theory
This section presents previous literature and theories related to the subject under study in order to provide an understanding of the context of the research subject. First, an introduction to supply chain and supply chain management theory is presented, followed by a literature review of existing research related to warehousing, transport container loading and packaging. Last, the fundamentals of process mapping and activity-based costing are introduced, which are used as theoretical frame- works in this research.
3.1 Supply chain theory
3.1.1 Supply chain and supply chain management
Today, it is rarely the case that a single-firm is responsible alone for all the processes related to product creation from raw material to distribution to end customer. Instead, products reach the end customers through supply chains. Supply chain is a multi-defined concept that has been revised several times throughout history. Christopher (2011) defines supply chain as ’the network of orga- nizations that are involved, through upstream and downstream linkages, in the various processes and activities that produce value in the form of products and services delivered to the ultimate consumer’. The supply chain often constitutes of independent firms, handling various units in the supply chain, collaborating to maximize the overall supply chain performance as well as their own objectives. The common denominator of the di↵erent definitions is the consistency of di↵erent enti- ties and their interplay to deliver products or services to end customers. Below, Figure 2 illustrates the supply chain process.
Figure 2: The supply chain process, revised figure, Richards (2011).
To optimize overall business performance, Lummus and Vokurka (1999) argue that it is crucial for companies to manage the supply chain network since it can enhance a firm’s competitiveness through reduction of lead times across the supply chain. The term used for this business activity is Supply Chain Management, SCM. The Council of Supply Chain Management Professionals (2019)
21 3. LITERATURE AND THEORY defines supply chain management as: ’Supply chain management encompasses the planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities’. Thus, supply chain management includes coordination and collaboration within and across companies constituting the supply chain network, which among other entities includes suppliers, intermediaries, third party service providers, and customers. Practitioners agree that supply chain management is crucial for a firm’s competitiveness, and benefits such as reduction in supply chain costs and increased service level have been highlighted in several empirical studies (Pibernik et al., 2011).
Naturally, supply chain management has a big impact on the supply chain cost. Nilsson (2000) even argues that flow economy is the term that best describe supply chain management. Supply chain cost can be defined as ’all relevant costs in the supply chain of the company or organization in question’ and is often confused with logistics cost which is a narrower concept that refers to costs related to distribution, transportation or warehouse costs (Pettersson and Segerstedt, 2012). To ensure cost minimization and at the same time maximize customer value throughout the supply chain is challenging (Lee and Billington, 1993). Several studies discusses problems related to supply chain ine ciency resulting from isolated improvements in local or partial sections of the supply chain (Lee, 2000), further highlighting the need for supply chain management. Especially for large businesses, it has been common to breakdown the business into operational components such as purchasing, production and distribution and optimizing each operational component of the supply chain separately (Ibrahimov et al., 2012). Though, companies have in recent years, realized that optimization of isolated silos is not e cient, and instead e↵orts are concentrated to optimize the whole system and overall supply chain.
3.1.2 Fast fashion supply chain
Uncertainties in customer demand and fast changing buying pattern have challenged the industry and forced retailers to adopt to new supply chain strategies, such as fast fashion supply chains which are characterized by a larger number of product o↵erings simultaneously, in e↵ort to diminish the use of product discounting (Huang, Hsu, and Ho, 2014). In fast fashion supply chains, retailers strive to align supply quantities in response to observed product demand.
The two most common supply chain strategies to meet product demand are push and pull strategies (Yang, Cai, and Chen, 2018). A push supply chain is characterized by that retailers orders products from the supplier before the selling season, which comes with a certain inventory risk. In the pull supply chain strategy, retailers’ place at-one orders in the selling season, instead leaving suppliers to face a bigger risk. Historically, the push strategy has been most popular, but as the customers shopping pattern has changed, the pull strategy has shown to be the most successful when it comes to ordering the optimal order quantity.
A strategic question, when dealing with meeting the right product demand, is how the manufactur- ing should be carried out (S¸en, 2008). Trade-o↵s between in-house production or outsourcing are made, which has di↵erent advantages and disadvantages. In-house production ensures control over
22 3. LITERATURE AND THEORY quality and time and minimizes communication problems within the supply chain network. On the other side, outsourcing the production to contractors comes with the advantage of being more cost e cient and more flexible (Brown and Rice, 1998). An additional issue is the strategic choice of where to locate production sites, which results in trade-o↵s between supply chain responsiveness and cost e ciency, leading to that many retailers select cost e ciency and o↵-shore production in Asia and Latin America (S¸en, 2008). To shorten lead times, Stratton and Warburton (2003) found out that many retailers used local manufacturers to produce fast-response products. In situations when local manufacturing is not possible, retailers order large product quantities to minimize the risk of not meeting the customers demand at a certain selling season.
3.1.3 Supply chain structures for retailers
There are three commonly used supply chain structures for fast fashion retailers, single channel, multi channel and omni-channel. The single channel approach is used by retailers operating in one channel, i.e. pure online retailers and BM retailers (retailers that have at least one physical location, i.e. stores residing in local shopping malls). The supply chains for retailers operating both online and in-store are referred to as multi channel and have historically structured their supply chains in segregated channels, with separated systems. This is a consequence of the fact that many actors started o↵ as single-channel retailers and later on expanded their businesses to include other channels. Since it usually has been no common interface between the di↵erent channels’ supply chains the retailer’s customers have either shopped and returned products in-store or online. Thus, not allowing customers to order online and pick up in store or vice versa. As retailers recently have started facing challenges due to new customer demands on seamless shopping experiences, many retailers are now in the process of merging its supply chains. Going from separated multi channel solutions to unified solutions, independent of channel, commonly referred to as omni-channel supply chains (H¨ubner, Wollenburg, and Holzapfel, 2016). The transition towards an omni-channel supply chain is, according to H¨ubner, Wollenburg, and Holzapfel (2016), challenging but seen from a holistic perspective the transition generates considerable competitive advantages.
3.2 Warehousing
Warehouses have historically been referred to as cost centres (Richards, 2011), but is today seen as vital parts in the supply chain, enabling delivery of the right product, in the right quantity, to the right customer, at the right place, at the right time, in the right condition, at the right price. Several types of warehouses exist, operated by di↵erent suppliers, including raw material suppliers, manufacturers, retailers and companies handling reverse logistics. Warehouses are a way for suppliers to hedge against uncertain demand patterns and high seasonality. Besides, warehouses cover for production shutdowns and allow for bulk buying.
A type of warehouse typically used in retail supply chains is referred to as a Distribution Center (DC). A DC di↵ers from a warehouse as it, apart from storing products, provides value-added ser-
23 3. LITERATURE AND THEORY vices (VAS) such as steaming, cross docking, packaging etc. Thus, DC operations is more complex than general warehouse operations, resulting in more advanced warehouse equipment. Moreover, a distribution center acts as the bridge between the supplier and its consumers, and typically both retail and warehouse orders are shipped from distribution centers instead of warehouses (Mani, 2019).
An individual item that passes through the item flow at a warehouse is referred to as a stock keeping unit, SKU (Rouwenhorst et al., 2000). Typically, the item flow through a warehouse can be divided into four distinct phases; the receiving process, the storage process, the order picking process and the shipping process, which are described as follows.
Receiving SKU’s arrive by truck or internal transport. Items are checked or repacked to di↵erent storage modules before being put away to await transport to the next process.
Storing The SKU’s are placed in storage locations. The storage area can be of two di↵erent types, reserve area or the forward area. Smaller quantities of products are often stored in the forward area, where items are easier to access for an order picker. The process when SKU’s are transferred from the reserve to the forward storage is referred to as replenishment.
Order picking The process when items are retrieved from their storage locations and transported to storing and/or consolidation process, where consolidation is grouping of items destined for the same customer. The order picking can be done either manually or automated to a certain extent.
Shipping Orders are checked, packed and loaded into carriers that will deliver the products to end cus- tomers.
Gu, Goetschalckx, and Mcginnis (2010) argue that the layout design of the warehouse is a key component of warehouse optimization. This is further strengthened by Caron, Marchet, and Perego (2000), that argue that the layout design impacts more than 60 percent of the total travel distance within the warehouse. However, warehouse design is complex and depends on trade-o↵sbetween di↵erent costs. One of the biggest challenges when it comes to warehouse design is the technical capabilities. Storage units and systems have to function for di↵erent types of products with di↵erent characteristics and sizes, thus leading to di culties for warehouse optimization (Rouwenhorst et al., 2000).
To further highlight the role of the warehouse in the supply chain, warehouse costs make up be- tween one to five percent of total sales depending on the company and its type of product. In addition to this, warehousing constitutes about 22 percent of a company’s total logistics cost, with inventory carrying costs at a further 23 percent. The warehouse impact on costs highlights the importance of warehouse optimization and warehouse management. Below, Figure 3 illustrates warehouse activities as a percentage of the total cost (Richards, 2011).
24 3. LITERATURE AND THEORY
Figure 3: Warehouse activities as a percentage of total cost, revised figure, Richards (2011).
As illustrated in Figure 3, order picking constitutes the costliest activity at the warehouse. Its labor intensive, challenging to automate and can be complicated to plan. The result is that companies face the challenging trade-o↵ between speed, accuracy and costs (Richards, 2011). To increase productivity in the picking process, preparation and understanding of the products sales pattern are essential. Where products are located a↵ects travel distance and strain on employees, which in turn increase productivity and reduces cost.
3.3 Transport container loading
Transport containers are designed to facilitate and speed up handling of freight and to protect the transported goods against weather and pilferage (Steenken, Voß, and Stahlbock, 2004). Several types of standard containers exist, among them are the short twenty feet containers, forty feet containers and forty-five feet containers. Some goods, requiring special handling conditions, are transported in containers with additional properties such as reefer containers or oversized contain- ers.
Constraints in container loading can be either hard or soft (Bortfeldt and W¨ascher, 2013). Hard constraints must be met, whereas violations are tolerated for soft constraints to a certain limit. One hard constraint that cannot be overseen is the space constraints set by the dimensions of the containers. In previous research weight limits have also been addressed as hard constraints (Liu et al. (2011), Gehring and Bortfeldt (1997), Terno et al. (2000), Chan et al. (2006), Egeblad et al. (2010), Liu et al. (2011)). Another challenge when it comes to weight, is the weight distribution that needs to be spread evenly inside the container (Bortfeldt and Gehring, 2001). Otherwise, there is a risk that the cargo shifts during container movement, which will be reduced if the weight is balanced. Though, this constraint is considered to be a soft constraint. Other risks that may
25 3. LITERATURE AND THEORY arise followed by unbalanced weight are an uneven distribution of axle weight when the container is transported on a truck or that handling operations become complicated, and in worst case, impossible (Ratcli↵ and Bischo↵, 1998).
Moreover, the vertical orientation of a box is limited to one or two dimensions and should not be the smallest surface. The vertical orientation of the boxes also limits the load-bearing strength of a box. Thus, vertical orientation constraints minimize the risk that packaging get damaged and ensure stability of the load. An additional hard constraint is the stacking constraint, which restricts how many boxes that can be stacked on top of each other. The load-bearing strength of the boxes set this constraint and determines the pressure it can take, which is defined by the strength of the box’s side walls before it crashes (Bischo↵ and Ratcli↵, 1995). A box’s load-bearing strength depends on several factors, the orientation of the box when loading the container, the content of the box, and at last the surrounding conditions such as humidity, duration of the transport and the way of stacking. To avoid damage of loading, restrictions of how to stack boxes exist, prohibiting larger boxes from being put on smaller or fragile carton boxes, and limiting the number of boxes that can be stacked on each other (Junqueira, Morabito, and Yamashita, 2012). Researchers (Lin et al. (1993), Egeblad et al. (2010)) also argue that heavy items should be placed below lighter ones. Zhao et al. (2016) explains that how to load a container depend of whether the boxes are homogeneous or not. If the boxes placed in the container are rather homogeneous, loading trough wall building and layer building are the two most common strategies, whereas placing the boxes one at a time is most common when boxes are strongly heterogeneous.
There are also other soft allocation constraints such as connectivity constraints (Liu et al., 2011), which requires that the cargo is shipped together, or separation constraints, which demand that some items should not be shipped together in the same container (Eley, 2003). For example, according to Eley (2003), goods such as food and perfumery should not be shipped together. To facilitate for operations as loading and unloading the containers, pallets should be loaded with items of the same type (Terno et al., 2000). Positioning constraints have been assigned as both soft or hard constraints. The positioning of goods depends on the actual product, its size and its weight. Haessler and Brian Talbot (1990) brings up the complexity with loading close to the door, where heavy items should not be placed. Relative positioning constraints have further been discussed by several researchers (Bischo↵ and Ratcli↵ (1995), Haessler and Brian Talbot (1990)). They bring up that di↵erent goods can have a negative e↵ect on each other’s quality, and that some items require a certain distance to each other whereas other items do not. Multi-drop situations are another problem when optimizing container loading, requiring goods delivered to the same place to be strategically placed to avoid unnecessary unloading and reloading operations. Moreover, specific load-related constraints exist, which have been addressed as one of the most important issues according to several researchers (Bortfeldt and W¨ascher, 2013). Load-related constraints can be stability constraints or complexity constraints. If the load is not stable, the cartons can get damaged and get di cult to handle for employees during loading operations. Load stability can be achieved through two di↵erent ways of placing the carton boxes, vertically or horizontally, which has di↵erent advantages and disadvantages. De Castro Silva, Soma, and Maculan (2003) argue that vertical stability prevents carton boxes from falling down when being placed on top of other carton
26 3. LITERATURE AND THEORY boxes. Bischo↵ and Ratcli↵ (1995) further argue that horizontal stability prevent carton boxes to shift inside the container when its moved. Last, complexity constraints relate to limitations of technology and human resources, when complex loading patterns occur.
3.4 Packaging
To define packaging, three definitions suggested by Paine (1981) are commonly used, which refers to packaging as:
1. “A coordinated system of preparing goods for transport, distribution, storage, retailing and end-use”
2. “A means of ensuring safe delivery to the ultimate consumer in sound condition at minimum cost”
3. “A techno-economic function aimed at minimizing costs of delivery while maximizing sales (and hence profits)”
Packaging are further commonly divided into three di↵erent levels, primary packaging, secondary packaging and tertiary packaging, depending on where in the supply chain the packaging is found. Primary packaging, also referred to as sales packaging, is the packaging that end-customer’s see in stores. Secondary packaging, also referred to as grouped packaging, is the packaging used to enclose several primary packages, foremost used to make the handling in stores more e cient. Tertiary packaging, also referred to as transport packaging, is the packaging used to transport products from production to warehouses or stores and are usually not seen by end customers (). Examples of tertiary packages are wood pallets, shrink wraps and cardboard boxes.
3.4.1 The interface between packaging and supply chain e ciency
Packaging is strategically important as it has significant impact on logistics and supply chain per- formance (Hellstr¨om, 2007; Saghir, 2004b). The packaging a↵ects the e ciency of several logistic activities along the supply chain, from the point of packing to the point of emptying and recycling the packaging. To exemplify, a manufacturer wants packages easy to fill and store, a transport provider wants packages that enables for e cient loading whereas warehouses and stores want packages that enables for e cient picking, stacking, storing and replenishing. In resemblance, Hell- str¨om(2007) stresses that packaging a↵ect the cost of every logistic activity. Yet, logistical aspects have frequently been disregarded when designing packaging containers (Saghir, 2004b). Hellstr¨om (2007) argues that the reason to the disregarding of packaging’s impact on logistic activities could be due to lack of a holistic perspective. He further stresses the importance of that the packag- ing system should perform well with all present nodes in the supply chain in order to minimize sub-optimization. Further, Saghir (2004b) argues that the disregarding could be due to that pack- aging often is considered as a minor sub system of logistics, with limited influence on supply chain performance. Today businesses have started to realize that packaging is an important element
27 3. LITERATURE AND THEORY that can have large impact when trying to establish an e cient supply chain and the interaction and integration of logistics activities and packaging activities is now considered as an important competitive advantage leading to increased business performance (Hellstr¨om, 2007). Besides taking packaging logistics into consideration, Saghir (2004b) further highlights the importance of packing instructions and argues that packing instructions directly influence the time it takes to complete packaging of a product which in turn impacts lead times.
3.4.2 Packaging problems
A logistical challenge that retailers are facing is how to distribute a large variety of products to stores all over the world (Sung and Jang, 2018). Fisher (2004) mean that the complexity of this problem increases as seasonal fashion products need to be distributed to retailer’s own brand stores in thousands. In addition, fast response to the market is critical due to volatility in demand and short selling season for fashion goods (S¸en (2008), Mehrjoo and Pasek (2015)). Therefore, retailers commonly use assort-packing. Assort-packing is when the products are mixed, and packaging is done with consideration to the stores to which they will be distributed, to shorten the product distribution lead time from factories to retail stores (Chettri and Sharma, 2008). However, the traditional packing strategy for retailers is solid-packing, where factories pack the boxes with a single type of product or stock keeping unit. When the solid-packed cartons arrive at the distribution center they are unpacked, repacked, and then the products are distributed to the stores to which they are assigned. Solid-packing facilitates for the factories and is thus e cient for inbound delivery (DC deliveries). However, the distribution lead time are extended due to the need of extra labor activities at the destination market. Another constraint when it comes to assort-packaging and accurate product distribution to stores is the carton box size, which determines how many items that fit the carton box. Sung and Jang (2018) argues that the pack configuration is the biggest challenge for assort-packing. If products are distributed in the right carton sizes, the cartons might not need to be unpacked and repacked and will thus save the DC labor force a lot of time. However, pack configuration is complex, involving several parties which are impacted of the carton box size. Among them are third-party manufacturers, producing and packaging di↵erent products for several brands into carton boxes. That several parties are involved make it di cult to provide a set of carton boxes that meet every customers demand.
According to (Lee et al., 2014), using a one-sized packaging box for all products would minimize the inventory cost but would not be practical since it will lead to under and overstocking to the stores. On the other hand, if there is a packing type for all products, inventory costs will a↵ect the warehouse cost negatively. Moreover, Wilson (1965) argues that packaging problems make it di cult for cost optimization. Cardboard costs and warehouse space costs are minimized if utilization is maximized and the box fits each product exactly. Though, the cost savings from using di↵erent carton box sizes, are often o↵set because of higher price of ordering boxes in small quantities and due to increased complexity of handling the boxes in the warehouses. Thus, using carton boxes of only one size, minimize the costs for box inventory, handling and purchase. These contradictions lead to the problem of selecting an optimal number and sizes of carton boxes that
28 3. LITERATURE AND THEORY minimize the total system cost. By selecting an optimal number and sizes of boxes based on the given conditions, the researcher showed that savings over 25 percent per year out of cardboard and space costs could be achieved, which illustrates to what extent packaging problems a↵ect costs (Wilson, 1965).
3.5 Process mapping
There exist numerous definitions of what a process is. Glykas (2013) states that a process is “a collection of related, structured tasks that produce a specific service or product to address a certain goal for a particular actor or set of actors”. In resemblance, Damij (2014) argue that a process is a “logical, related, sequential (connected) set of activities that takes an input from a supplier, adds value to it, and produces an output to a customer”. Oskarsson (2013) have a stricter view on what a process is and mean that in order to classify a chain of activities as a process following requirements need to be met
1. A process is a chain of activities with a clear beginning and a clear end.
2. A process is repetitive and carefully planned
3. There exists clear goals for the process, a description of what steps that are included and what the respected results are.
4. A process comprises several activities, usually both administrative and operative, conducted in di↵erent business units.
Oskarsson (2013) argue that one of the most important requirements for classifying a flow of activ- ities for a process is that the activities are organized and that they are performed in a standardized way. An example given is if a retail company creates a unique delivery solution every time they receive a customer order, one cannot talk about order or delivery processes. Strict or not, the fundamentals of the definitions are the same, a process is a series of steps and decisions involved in transforming input to output. Further, processes can be divided into core and support processes, or interchangeably major processes and sub processes. A core process is the operational process that actually results in the final output. A support process is a portion of the core process that enables for the core process to exist. Depending on process complexity a support process can be divided into work processes, which in turn can be divided into activities which can contain a group of tasks (Damij, 2014).
Process mapping, or interchangeably process modeling, is the act of creating a visualization of a process with the purpose to gain a clearer understanding of how the process work. There are several reasons to why process mapping is beneficial. Foremost, it aids organizations in understanding its current processes, which in turn enables for process improvement. Besides, process mapping improves collaboration between di↵erent functional units and helps the units to understand their interdependent relationships. Furthermore, workflows can be simplified, speed of service can be increased, and costs can be reduced as unnecessary steps in the process can be identified and
29 3. LITERATURE AND THEORY eliminated. Process mapping can also lead to reduced variability which can improve quality as standardization reduces the risk of errors (Kalman, 2002).
The process map is an analytical tool, as well as an intervention tool. It is analytical in the sense that it visualizes critical interconnections between business units and identifies illogical, unneces- sary and missing steps in a process. It is an intervention tool as the creation of the map facilitates discussion of the processes parts, serving as a catalyst for change (Harrington, 1991). Yet, it is important to remember that the process map itself is not a solution to a problem, it is rather a tool to identify where improvement e↵orts should be focused (Aguilar-Sav´en, 2004).
Flowcharts
The result of process mapping is a graphical illustration of the process, commonly displayed as a flowchart. Flowcharts consist of a number of commonly used geometric symbols representing di↵er- ent steps or actions in a process and displays interconnections between business units. Harrington (1991) states that “Flowcharts discipline our thinking by helping identify where lack of clarity ex- ists and also help make us aware of the di↵erences between the way an activity is supposed to be conducted and the way it is actually conducted”
Figure 4 displays some commonly used flowcharts symbols. Activities, tasks and departments are displayed in rectangles, end points are displayed in ellipses and decision points are displayed with diamonds. Arrows depict the process’s material flow, while dashed arrows depict the process’s information flow. Depending on the process that is being illustrated numerous of other symbols could be added, but on a high-level it is preferred to keep the flow chart as basic as possible in order to ensure that the flowchart is easy to understand (Oskarsson, 2013).
Activity/Task/Department Decision point End point
Material flow Information flow
Figure 4: Commonly used flowchart symbols, revised figure (Oskarsson, 2013).
30 3. LITERATURE AND THEORY
3.6 Activity-Based Costing
The Activity-Based Costing method (ABC) is a process-oriented method which arose in the late 1970s due to the need of better allocation of costs. While traditional costing methods assumes that products consume resources ABC instead assumes that products consume activities and that activities in turn consume resources (Homburg, 2001).
ABC is based on the identification of activities, to which costs can be traced. There is no formal definition of ’activity’ but earlier research refers to activities as ’a combination of people, technology, raw materials, methods and environment that produces a given product or service’ (Brimson, 1991) and ’Activities as a mean of performing process analysis to enable business process improvements’ (Harrington, 1991). Thus, activities are basically anything that is done in an organization. To be able to perform activities organizations needs resources. Resources can for example be raw- materials needed to produce a product or machines needed to carry out an activity. The use of resources, due to performance of activities, eventually causes costs.
Kaplan et al. (1998) suggest three questions that can serve as guidelines when formulating activities for the ABC-calculation.
1. What are the activities?
2. How much do the activities cost?
3. How many of each activity, and what time is needed to produce a product/service?
The first and second question are relatively easy to answer. The first can be answered by an organization’s employees and the second question can usually be answered by an organization’s controlling or finance department. The answer to the third and last question is usually not as straight forward as the previous. To answer the third question, activities need to be traced to the final products, services, projects etc. referred to as cost-objects. There are three common ways to do this:
1. Direct attribution
2. Allocated
3. Casually assigned using drivers
The first method, direct attribution, is the most straight-forward and accurate way of tracing ac- tivities or resources to cost-objects, but the method can only be used in situations where activities directly match to cost-objects. In many cases, activities cannot be assigned direct to cost-objects and then the latter methods must be used. The second method, allocation, means to simply dis- tribute costs to costs-objects in an arbitrary manner and should only be used when none of the other methods are working. The third method uses drivers, which links resources to activities and activities to cost-objects. Drivers are usually segmented into resource drivers and activity drivers. Resource drivers are used to allocate the quantity of resources consumed to an activity and activity drivers are used to trace the amount of consumption of an activity to a cost object, as illustrated
31 3. LITERATURE AND THEORY in Figure 5. Thus, the selection of resource and activity drivers and how they are quantified are two important aspects when using the ABC method, which are further discussed below.
Figure 5: Main principles of ABC, revised figure (Gerdin, 1995).
Selecting drivers To select accurate drivers are crucial for an ABC-calculation and several opinions exists on how the selection should be done. Yet, three aspects should always be evaluated; data availability, the correlation between the implied consumption of an activity and the real consumption, and the behavioural e↵ect that a driver can induce (Emblemsv˚agand Bras, 2001). In addition, the num- ber of selected cost drivers are important. A high number of cost-drivers usually leads to a more accurate distribution of overhead resources (Homburg, 2001). However, a large number of cost drivers increases the complexity of the ABC-calculation, is costly and can be hard for management to interpret. Hiromoto (1988) highlights that in practise it is usually necessary to concentrate on a smaller number of particularly important cost drivers.
Quantifying drivers As drivers are used to assign costs to resources and activities they need to be quantified. When quantifying drivers three terms are commonly used, driver value, driver intensity and driver cost. The driver value refers to the number of times an activity is performed, i.e. 40 working hours, 100 pieces etc. The driver intensity refers price per unit of a driver, i.e. 20$ / working hour etc. Lastly the driver cost refers to the final cost, given by multiplying the driver value with the corresponding driver intensity (Emblemsv˚agand Bras, 2001).
3.6.1 Advantages and disadvantages with Activity based costing
The main advantage with ABC is that it maps costs to activities and not to the products/services themselves, leading to that ABC provides a more truthful representation of product costs. ABC is particularly beneficial in manufacturing and technology organizations where overhead costs consti- tutes a large part of the total costs. Furthermore, ABC is advantageous since it aids organizations in identifying which activities that create value and which do not. In addition, ABC traces costs to products beyond the factories and warehouses, creating possibilities for more accurate cost reduc- tions. However, some critics mean that ABC focuses too much on costs, not considering demand
32 3. LITERATURE AND THEORY and revenues linked to di↵erent products. ABC is furthermore criticized for being costly and com- plex. Even basic ABC-calculations demands several calculations and requires a large amount of data. ABC systems are moreover costly to implement, time-consuming and demands regular up- dates of activity costs to stay accurate. Another issue that needs to be considered when using ABC is the availability of data. If data is not easily available large measurements arrangements can be necessary, which can be costly (Richards, 2011).
33 4. CASE COMPANY
4 Case company
This section gives an introduction to the case company and its operations related to the transport cartons in order to provide an understanding of the organization and subject under study. The section is based on findings from the pre-study and observations, describing the current transport carton situation. Moreover, Section 4.5 serves to answer the first sub research question.
4.1 Company description
With net sales amounting to SEK 2010 billion (H&M, 2019), H&M group is today one of the largest fashion retail groups in the world (FashionUnited, 2019). The company includes eight unique brands; H&M, COS, Monki, Weekday, Other Stories, H&M Home, ARKET and Afound. H&M group is present in 72 markets, and in 47 of these markets, customers are o↵ered online store solutions (H&M, 2019).
The company was founded in 1947 as a single brand, ‘Hennes’. It originates from a women clothing store located in V¨aster˚as, Sweden. In 1980, H&M acquired the Swedish mail order company Rowells, which operated as a separate channel for H&M mail orders. In 1998, H&M started to o↵er e-commerce, which was operated by the previous mail order channel. The company has gone from only selling women’s clothing to o↵er a wider product range including fashion for men and children, beauty, accessories, furnishings and healthy food (H&M, 2019).
4.2 Supply chain process at H&M
The pre-study created an understanding for H&M as an organization and how its supply chain operations are carried out. More specifically, it provided valuable insights about the garment and transport carton flow at H&M and how the transport cartons a↵ect business units within the supply chain. Thus, the pre-study created an understanding for the overall transport carton situation and what aspects that are important to consider when evaluating the transport cartons.
H&M is a company operating worldwide leading to a complex supply chain network involving numerous actors. As H&M’s sales volume of garments is large, several independent manufacturers that are located in di↵erent continents supply H&M with garments. Thus, collections consist of garments produced at di↵erent manufacturing sites, that are sold in stores all over the world. Figure 6 illustrates a simplified setting of the H&M supply chain structure with one manufacturing site, supplying two regions.
34 4. CASE COMPANY
Figure 6: The supply chain structure at H&M.
As previously mentioned in Section 1.3, the scope of this thesis is set to analyze problems related to transport cartons. As can be seen in Figure 6, the supply chain nodes that the transport cartons passes through and thus are important to take into consideration, are marked in red. More specifically, the transport carton usage starts when orders are packed into the cartons and ends when the cartons have been emptied and all products have been picked at the distribution centers. However, the whole supply chain is illustrated to create an overall understanding for how the business works, from order placement to delivery to end customer. Below follows a brief description of the process.
When an order is placed, a manufacturing site produces the garments and packs them in transport cartons that then are transported by third-party logistic providers (3PL) to distribution centers in several regions. Depending on the distribution center, the garments are either distributed to di↵erent stores in a specific region, or directly to end customers if the garments are distributed from an online distribution center. The manufacturing sites have in turn suppliers of their own, which provides them with necessary products and material for producing the orders, such as cardboard boxes to pack the garments into.
4.3 Transport carton flow
In order to be able to answer the first sub research question the carton flow was mapped to identify key stakeholder units at H&M, as well as to understand what resources and activities that are a↵ected by the transport cartons. The transport carton flow is illustrated in Figure 7, 8 and 9 and is further described below. Based on the process mapping theory described in Section 3.5 activi- ties are displayed in rectangles, decision points in diamonds, end points in ellipses and the carton flow are displayed with arrows. The activities represented in the Figures describe the activities performed in H&M’s DCs in general. However, some processes might be carried out di↵erently
35 4. CASE COMPANY depending on the DC as the design of the DCs can di↵er.
Manufacturing site Collect carton recommended in packing instruction
Pack carton
Load carton into truck
Transport Transport carton to Unload carton at the Unload carton at CFS destination market by airport road
Reload carton onto Reload carton into pallet transport container
Transport carton to Transport carton to Load pallet with carton destination market by destination market by into the aircraft rail sea
Transport carton to Dray transport destination market by container to DC air
Unload carton at destination airport
Load carton into truck
Transport carton to DC
Distribution Center DC Store DC Online
Figure 7: The transport carton flow from manufacturing site to DC.
36 4. CASE COMPANY
Manufacturing site The carton flow starts when the workforce at the manufacturing sites starts to pack an order. Each garment in an online order, are packed in a polybag. For a fraction of the store orders a master polybag, enclosing all products in the carton, is used. When the carton packing is completed, the cartons are taped and marked. Lastly, the cartons are loaded into a truck.
Transport The truck carries the cartons from the manufacturing sites either directly to the destination market, or to a central freight station (CFS) or an airport, depending on what mean of transport that will be used.
When cartons are shipped by sea or rail, they are transported by truck to a CFS where they are reloaded into a transport container. The transport container is in turn loaded onto a cargo vessel or freight train. When the transport container arrives to the CFS in the destination market, it is handled depending on if the cartons in the container are supposed to go to one or several DC’s. If all the transport cartons in the container are going to one DC, the transport container is drayed directly to that DC. If the transport cartons in a container are supposed to be distributed to several DCs, the cartons are reloaded into trucks that go to the di↵erent DCs.
When cartons are shipped by air, they are transported to the airport, where they are loaded onto pallets. The pallets are then loaded into the aircraft. When the cartons arrive at the destination market, the cartons are unloaded from the aircraft and reloaded into trailers or transport contain- ers, which then are drayed to the DCs. The case-company has separated supply chains for its stores and online orders, including separated DCs. Cartons containing store orders are thus sent to ’Store DCs’ and cartons containing online orders are sent to ’Online DCs’.
37 4. CASE COMPANY
Distribution Center Store Unload carton
Scan and label carton
Yes Yes Yes Possible to First carton Quality control Objection? correct at VAS of article? DC?
No No No Inbound Does the Yes carton have other end- Cross-dock carton Send stop order destination than current DC?
No
Yes Mixed Split carton carton?
No
Sort and place carton on correct pallet
Yes Allocation Allocation Place carton in Recycle carton when share? allocation pick location empty
No
Is the pick Yes Picking location for Place carton in pick Recycle carton when area the carton location empty empty?
No Yes
Buffer Place carton in high area rack buffer
Is the pick Yes location for the carton empty?
No
Products in Yes carton Transport carton to DC needed in where its needed other DC?
Figure 8: The transport carton flow in a Store DC
38 4. CASE COMPANY
Distribution Center Online Unload carton
Scan and label carton
Yes Yes Yes Possible to First carton Quality control Objection? correct at VAS of article? DC?
No No No Inbound Does the Yes carton have other end- Measure and weigh Cross-dock carton Send stop order destination products in the carton than current DC? No
Yes Mixed Split carton carton?
No
Sort and place carton on correct pallet
Is the pick Yes Picking location for Place carton in pick Recycle carton when area the carton location empty empty?
No
Buffer Place carton in high area rack buffer
Is the pick Yes location for the carton empty?
No
Products in Yes carton Transport carton to DC needed in where its needed other DC?
Figure 9: The transport carton flow in an Online DC.
Distribution Center Store
Inbound The cartons are unloaded from the trailer/container and are then put on an automated conveyor, non-automated conveyor or direct on pallets depending on the equipment available in the distribu- tion center. Cartons should be unloaded in an upright position to maintain good garment care. The cartons are then scanned and labelled. If a carton contains products that are ordered for the first time, the products are quality controlled. If there is a remark on the products during the quality control, the carton with the products is sent for value added service (VAS), usually steaming or relabelling of the products. In rare cases, the condition of the products can not be corrected by VAS, and then a stop order is sent to the manufacturer. The manufacturer then needs to evaluate what caused the problem. If the products pass the quality control, the carton is either handled
39 4. CASE COMPANY within the current DC or cross-docked to another DC, external or internal. If the cartons handled at the current DC are mixed, they are being deconsolidated. All mixed cartons must be put aside and an operator must split the carton so that all di↵erent products are separated into di↵erent cartons. The cartons are then sorted depending on the cartons next destination in the DC which can be either the allocation area, the picking area or the bu↵er.
Thus, after the inbound process the cartons are moved to either the allocation area, the picking area or the bu↵er, usually by conveyors or trucks.
Allocation area Cartons containing products from new collections that arrive to the DCs for the first time are moved to the allocation area, where the products are allocated to di↵erent stores. The cartons can either be:
1. Placed in allocation picking locations where products are picked on pieces level by store-to- goods picking
2. Split into totes that are distributed to di↵erent stores, which is referred to goods-to-store picking
3. Sent as they are straight to stores (only to large stores forecasted to need large quantities of a product)
Picking area Cartons containing replenishment products that needs to be restocked in the stores immediately continues to the replenishment picking location. Cartons can either be:
1. Placed in picking locations where products are being picked on pieces level by store-to-goods picking.
2. Sent as they are straight to stores (only to large stores forecasted to need large quantities of a product)
Bu↵er area Cartons containing replenishment products that are not needed in the picking location immedi- ately are moved to the bu↵er area, consisting of high racks, where they are stored until the picking location for the product becomes empty and needs to be refilled. In case of inventory imbalances H&M sometimes relocate transport cartons to other DCs facing the risk of a stockout.
40 4. CASE COMPANY
Distribution Center Online
The DC activities performed in online DCs are similar to the activities performed in store DCs, but are usually automated to a larger extent.
Adi↵erence compared to the store DCs is that cartons that passes the quality control at the online DCs are weighed and measured. The reason to this procedure is to document the information at the online website and to ensure that the items are packed and franked correctly when shipped to the end-customers. Furthermore, the storing process di↵ers slightly, where online DC’s only have one picking location as products go straight to end customers. Consequently, cartons go either straight to the picking location or to the bu↵er after passing the inbound process.
When all products in a carton is picked, the carton is recycled and the carton flow is com- pleted.
4.4 Background to H&M’s current transport cartons and packing
In order to gain an understanding of the transport carton usage and the activities related to it, the current transport carton situation was examined.
Transport cartons at H&M
H&M uses cardboard transport cartons, which can be seen in Figure 10, when shipping products from the manufacturing sites to the distribution centers and has today a large set of di↵erent trans- port carton sizes. The large set of transport carton sizes is partly a consequence of H&M’s large product assortment and partly a consequence of the integration of H&M and the mail ordering company Rowells, as described the in Section 4.1. H&M and Rowells had di↵erent sets of carton sizes, which were merged after the acquisition.
Figure 10: A generic transport carton.
The transport cartons in today’s set are classifies as standard cartons, customized cartons or string cartons.
41 4. CASE COMPANY
Standard transport cartons A standard transport carton can be defined as a carton size that is used frequently, is considered to be a good fit for the majority of the products, and usually meet the requirements for the automation in the distribution centers. In total, approximately 60 standard cartons exist. Of these standard cartons, 14 unique carton sizes exist. The remaining standard cartons are variations of the unique standard cartons, with same length and width but with di↵erent heights.
H&M’s standard carton measures are confidential. Thus, to gain an understanding of how the unique standard cartons deviate from each other despite the confidentiality Table 2 below lists how the length and width of the carton sizes ranges between 1-10 and 1-5 respectively, where each number in the scale represent a specific length or width. As mentioned, each unique standard carton has di↵erent height variations, but these are not represented in the table below. Descriptive comments on carton sizes are documented in the table.
Table 2: Existing unique standard cartons, where the length range between 1-10 and the width ranges between 1-5, where 10 and 5 are highest. Standard carton Length Width Note SC2 4 2 Main standard carton Online SC3 4 3 Suitable for jeans & trousers SC4 4 4 Main standard carton Store & Online SC5 3 3 Suitable for upperwear SC6 3 4 SC7 2 3 Suitable for upperwear SC8 2 4 SC10 1 1 Suitable for jewellry and cosmetics SC21 5 5 SC22 6 5 SC23 7 5 SC24 8 5 SC25 9 5 SC26 10 5
Of the standard cartons, one standard carton size is selected as the main standard carton for dis- tribution of store orders, referred to as SC4, and two standard carton sizes are selected as the main standard cartons for distribution of online orders, SC2 and SC4. The main standard carton sizes are the ones that should be used when packing products to the greatest possible extent as the storage areas at the distribution centers are optimized for these cartons. The online channel should foremost use the SC2 carton, but when SC2 is unsuitable, the SC4 should be used. The di↵erence between the two main standard cartons is that the SC2 is narrower in width than the SC4. Thus, if SC2 is used, additional cartons can be fitted into the racks.
42 4. CASE COMPANY
Customized transport cartons Customized transport cartons are customized to fit certain products, and today thousands of dif- ferent customized cartons exist. Customized cartons should mainly be used for unfoldable products such as cosmetics, home furnishing, accessories and products packed in inner cartons. Exclusive products, such as guest designer collections are furthermore distributed in customized transport cartons to ensure the condition of the products. Customized cartons should only be used when none of the standard carton sizes are suitable. The main reason for this is that several of the customized cartons do not meet the requirements for the automated equipment at the distribution centers.
String transport cartons String transport cartons are used for packing small quantities of ‘hanging garments’, which are garments extra sensitive to wrinkles. String cartons have elastic strings at the short ends in which a hanger can be attached, as displayed in Figure 11. String cartons are handled di↵erently depend- ing on if they are sent to store or online distribution centers. At the store distribution centers, garments packed in string cartons are handled and stored in specific ‘hanging areas’. At the online distribution center, no hanging area exist, and the string cartons are handled as the other transport cartons. As for the customized cartons, some string cartons sizes can be handled of the automation, and some cannot. However, string cartons are used sparsely and the number of di↵erent sizes is small.
Figure 11: String transport carton.
Packing of transport cartons Today, the choice of transport carton size depends on the product, the destination market and if it is a store or online order with the aim to maximize fill rate and ensure good garment care. A product order should be packed according to a list of packing instructions that comes together with the order. The packing instruction consists of several pages and contains information about how the product should be folded, in which carton it should be packed and recommend how many products that should be packed into a carton. The number of pieces that fit into a transport carton
43 4. CASE COMPANY varies depending on the product, and thus the instruction gives a recommendation of a relatively wide range of products that could be packed into each carton.
Most of H&M’s products are folded before they are packed into transport cartons. As described above the packing instruction suggests how the product should be folded. There are two di↵erent ways of folding upperwear garments at H&M, either half-folding or shirt-folding.
Figure 12: Unfolded shirt.
Figure 13: Illustration of half-folding and shirt-folding, including how each folding method is packed into cartons.
When half-folding, the garment is only folded once at the middle of the garment. The half-folding method is the easiest and least time consuming folding method and creates least folding marks on the garment. When shirt-folding, the sleeves of the garment are folded backwards and thereafter the garment is folded on the middle. The shirt-folding method is slightly more time consuming than half-folding. The advantage of shirt-folding is that the garments can be adapted to properly fit di↵erent carton sizes. In addition, products of di↵erent sizes can be adjusted to a shape a uniform stack if the products are shirt-folded.
Today, half-folding is the most commonly used method at H&M when packing store orders, and shirt-folding is most the commonly used method when packing online orders. Depending on how the products are folded, the products are packed in either one, or two stacks inside the cartons. Half-folded garments are packed in one stack, while shirt-folded garments are packed in two stacks as illustrated in Figure 13. Thus, store orders are usually packed in one stack, while online orders are usually packed in two stacks.
A packed transport carton can be referred to as a solid carton, an assortment carton, a distro pack carton or a mixed carton. A solid carton is a carton that contains the same product, in the same size, and the same color. An assortment carton contains bundles of the same products, in the same color, but with varying sizes, that are distributed in bundles to stores. A distro pack carton contains products that are sold in multi-pack, which for example is common when selling
44 4. CASE COMPANY underwear and accessories. A mixed carton is a carton that contains di↵erent sizes of a product, and in rare cases, it could also contain di↵erent colors of the product or even di↵erent products. Figure 14 below illustrates the content of the packed cartons.
Figure 14: Content of packed transport cartons.
Regardless of the content of the packed carton, a packed transport carton can be referred to as a full or last carton. An order should be packed in as many full cartons as possible, and if needed, one last carton could be used to fit the last products of the order. The last carton should have the same length and width as the full cartons used, but with a lower height, adjusted to fit the number of products packed.
Three important aspects when packing transport cartons are high fill rate, garment care and weight. H&M defines fill rate as the number of products per transport carton. However, as the number of products that go into a transport carton depends on the product volume, fill rate will henceforth in this study be referred to as the fraction of the volume of the products divided by the volume of the carton. Moreover, garment care is an important aspect to take into consideration when packing the cartons to ensure that the condition is representable when the end customer receives the product. One activity performed to ensure garment care, is quality control of how the transport cartons are packed. This procedure aims to prevent mold and to ensure that the packing instruction is followed. Moreover, a packed transport carton cannot exceed 20 kg because of weight requirements foremost due to ergonomic reasons.
Shipment of transport cartons H&M ships its transport cartons by sea, rail, road and air. Shipping by sea stands for the largest proportion of the shipments, and air for the lowest. Occasionally the means of transportation are used combined, for example can a transport carton be shipped by both air and sea when trans- ported from the manufacturing site to the distribution center. The mean of transport is foremost based on ‘in-shop-week’, referring to the date when products should be available for the customers, but sustainability aspects are also considered as H&M wants to minimize its environmental foot- print.
45 4. CASE COMPANY
4.5 Identified key stakeholder units
This section serves to answer the first sub research question regarding what stakeholder units within the supply chain that are a↵ected by the transport cartons.
Figure 15: Key stakeholder units.
Seven business units were recognized as the most important stakeholders when evaluating the transport cartons, which can be seen in Figure 15. These key stakeholder units were identified as they are a↵ected direct or indirect by the transport carton flow. Production O ce, International Freight & Transport and Warehouse Logistics are direct a↵ected as they have responsibility of sections and activities in the transport carton flow. Buying O ce, Sales, Garment Care and the Sustainability department are indirect a↵ected as their responsibility has impact on the processes in the transport carton flow.
To gain an understanding of each departments function, its responsibility relevant for this master thesis, is briefly summarized in Table 3 below.
Table 3: Key stakeholder responsibility and how the stakeholders are a↵ected by the transport carton flow. Stakeholder Responsibility A↵ected Buying O ce Order correct number of pieces Indirect to destination markets Production O ce Ensure that production is performed Direct correctly at manufacturing sites International Freight Shipping from manufacturing sites Direct & Transport to destination markets Warehouse Logistics All activities at distribution centers Direct Sales Project product quantity to stores Indirect Garment Care Ensure optimal garment care across Indirect all entities in the supply chain Sustainability Ensure sustainable solutions across Indirect all entities in the supply chain
46 4. CASE COMPANY
An explanation to how each stakeholder is a↵ected or a↵ects the transport carton flow is described as follows:
Buying O ce place orders that are packed into transport cartons. • Production O ce has the responsibility of all activities at the manufacturing site. • International Freight & Transport is responsible for shipping of the transport cartons. • Warehouse Logistics is responsible for all activities at the DCs, thus handling the transport • cartons and the garments at the DCs.
Sales is a↵ected by the garment quantity packed into transport cartons as the department • needs to distribute the correct number of garments to each store.
The Garment Care department is responsible for ensuring garment care, which is a↵ected • in all stages of the transport carton flow. Except of this, Garment Care is responsible for carton procurement and thus, select all carton sizes that the manufacturing site can order.
The Sustainability department is a↵ected since several stages in the transport carton flow • have environmental impact.
As illustrated in Figure 15, Buying O ce, Production O ce, International Freight & Transport, Warehouse Logistics and Sales could be seen as separate entities in the supply chain, whereas the Garment Care and the Sustainability departments operates across all entities.
47 5. RESULTS & ANALYSIS
5 Results & analysis
In this section, the findings from the case study are presented. First, important aspects that need to be considered related to transport cartons are identified. Second, results from data analysis of the current transport carton situation at H&M are presented. Last, results from the cost estima- tion model given di↵erent scenarios are presented. Analysis and explanations of the findings are presented along with the results.
5.1 Aspects to consider when deciding on a set of transport cartons
Section 5.1 serves to answer the second sub research question of what aspects that are important to consider when deciding on a set of transport cartons.
During the first-round interviews it became clear that the identified stakeholder units had conflicting opinions regarding what factors that needed to be considered when selecting a set of transport carton sizes. Consequently, the stakeholder units’ opinions di↵er regarding how many and which carton sizes that are needed. Figure 16 summarize findings regarding stakeholders’ di↵erent objectives and how they aim to achieve these, categorized and presented for each of the seven stakeholder units. Furthermore, based on findings from the first round interviews, positive aspects of di↵erent sets of transport cartons were identified and described in Section 5.1.1, 5.1.2. In addition, Section 5.1.3 highlights aspects that could have impact on supply chain e ciency, irrespective of the size of the set of transport cartons.
5.1.1 Positive aspects with a large set of transport carton sizes
Two stakeholder units, Garment Care and Sales, highlighted the advantages with a large set of transport carton sizes.
The Garment Care department emphasized that a large set of transport carton sizes facilitates for good garment care as it increases the likelihood of having a suitable transport carton size for each product. Various products need to be packed di↵erently depending on fabric, size, the products sensitivity to wrinkles, climate and transport stressing the need for a large set of transport carton sizes. In addition, Garment Care argued that a large set of transport carton sizes facilitates for high fill rate in the transport cartons, which means that no empty space should exist on the length, width or height in the transport carton. Low fill rate could impair the condition of the products within the carton as it could lead to product movement or in worst case damaged products due to that the cartons break more easily. Product movement could lead to that garments become wrinkled, which could require value added services at the DCs. Damaged cartons could lead to that garments become dirty or damaged, which in worst case could lead to that the garments cannot be sold. Product movement and damaged cartons could be avoided by having high fill rate inside
48 5. RESULTS & ANALYSIS the cartons. High fill rate prevents the cartons from breaking during transport as they become more stable and less sensitive to the pressure from cartons stacked on top (Garment Care). Moreover, the Sustainability department mean that the largest environmental impact comes from production of garments, further highlighting the need for high fill rate and ultimately minimization of product damage. As H&M has a large variety of products with di↵erent characteristics, depending on seasonal variations and fashion trends, Garment Care means that it could be di cult to achieve high fill rate if the set of transport cartons consisted of only a few carton sizes.
The Sales department further highlighted the advantages of having a large variety of carton sizes as it could facilitate for e cient and accurate product distribution to DCs and subsequently e cient and accurate product distribution to stores. The Sales department explained, that if products are packed in the right quantities in appropriate carton sizes already at the manufacturing site the transport cartons do not have to be deconsolidated and repacked at the DCs. That cartons do not have to be deconsolidated could save the DCs time and money and shorten lead times to end customers. Further, as deconsolidation is a time-consuming activity, DCs can in stressful times disregard the deconsolidation. According to the Sales department, undeconsolidated cartons could have negative impact on sales as it could lead to that the stores are either under or overstocked. Overstocking could in worst case lead to realization of products that not had to be discounted if they had been sent to the right store in the first place. Understocking could in worst case lead to impaired brand image due to that customers do not have the opportunity to buy specific garments. Thus, the Sales department stressed that having a large variety of transport cartons, including especially small sizes, could amend the mentioned problems as the need for deconsolidation would be reduced.
5.1.2 Positive aspects with a small set of transport carton sizes
The advantages of having a large set of transport carton sizes could according to Production O ce, International Freight & Transport and Warehouse Logistics be o↵set by the ine ciencies a large set of transport cartons causes throughout the supply chain.
Production O ce argued that today’s large set of transport cartons leads to that products are recurrently packed in non-suitable cartons, leading to low fill rate and improper garment care. The large set of di↵erent carton sizes makes it di cult for the workforce in the manufacturing sites to select an appropriate transport carton size. When asked about the packing instructions that are enclosed to each order, Production O ce explained that the instructions are far too detailed and complex, leading to that they are frequently disregarded. The perception that instructions are commonly disregarded, was shared by Garment Care. Consequently, because the selection of an appropriate transport carton size is complicated, Production O ce argued that it would facilitate for the workforce if the number of di↵erent transport cartons was reduced.
International Freight & Transport argued that less carton sizes would improve space utilization in the transport containers, which according to the Sustainability department is of greatest importance seen from both a cost and sustainability perspective. Furthermore, transport cartons with heavily
49 5. RESULTS & ANALYSIS diverging bases often lead to bad container loading during transport as they are hard to stove properly (International Freight & Transport). Instead, cartons with the same basis are preferred to build a stable load inside the transport containers which further strengthens the argument to why a small set of cartons is beneficial.
Moreover, Warehouse Logistics argued that space utilization at the DCs could be more e cient if the number of di↵erent carton sizes was reduced. Thus, if the set consisted of less carton sizes, it would be easier to optimize the storage locations to better fit the set of transport cartons. Warehouse Logistics further highlighted the issues with a large number of customized cartons. Besides impaired container loading, customized carton sizes increase the need of manual handling in the DCs as some of the customized carton sizes do not meet the requirements for the warehouse automation. In addition, Warehouse Logistics meant that a reduced and common set of cartons across both the online and the store channel would pave the way for a future omni-channel supply chain.
5.1.3 Aspects to consider irrespective of the size of the set of transport cartons
As mentioned in Section 5.1.1 product movement could have negative impact on garment care and could according to the Garment Care department be amended by the folding method. As mentioned in Section 4.4, the most common folding method used at H&M today is half-folding. However, Garment Care argued that the shirt-folding method are advantageous as it enables adjustment of the folded stack sizes. Thus, by using shirt-folding to a larger extent, garments could be adapted to better suit the available carton sizes, which would ensure garment care and improve fill rate.
Further, fill rate is not only a↵ected by the folding method or by the transport carton size. Today, according to Production O ce and Garment Care, low fill rate could also be a result of that manufacturers are penalized if products mold. To prevent mold, the manufacturers are required to have a two-centimeter air gap between the products and the top of the carton, which enables for moisture to seep out of the carton. Though, Production O ce argued that the manufacturers pack less products than necessary into the transport cartons, leading to bad fill-rate and insu cient garment care. Thus, the penalization of mold could be perceived counterproductive as the workforce at the manufacturing sites do not optimize for fill rate, but instead strive to minimize the risk of mold. Production O ce suggested that a remedy to this issue could be to introduce an additional requirement on fill rate and introduce follow-ups on packed orders to a larger extent.
An additional suggestion of how to ensure fill rate was presented by Production O ce and Inter- national Freight & Transport. The interviewees suggested that product samples should be test packed before Buying O ce placed the order. Ideally, test packing would lead to order sizes better adjusted to the present transport cartons and result in higher fill rate. Possibly, test packing could also solve deficiencies related to packing information (Production O ce, International Freight & Transport). Production O ce further mentioned that manufacturers currently fill out informa- tion regarding orders di↵erently and with various quality. This di↵erence complicates follow-ups of information about orders since the data is not always reliable. A third argument to why test
50 5. RESULTS & ANALYSIS packing would be beneficial was given by Warehouse Logistics whom meant that test packing sam- ples would remove responsibility from some of the online DCs. As mentioned in Section 4.3 the first Online DC that receives a new product has to measure and weigh the item, and then report the product information to an internal system that gives suggestions of how the products should be packed from the DCs for end customer deliveries. By test packing and measuring the products at the manufacturing sites, product information could be improved earlier on in the supply chain which could facilitate handling at the DCs (Production O ce). In line with the suggestion on test packing, International Freight & Transport and Garment Care argued that Buying O ce should place orders per carton instead of per piece as their perception is that it would improve both carton fill rate and container space utilization. Warehouse Logistics further emphasized the importance of taking the carton size into consideration when placing an order. They argued that if a carton fit X products and the placed order include X + 3 products, then the three excess products, that would require an additional last carton should be su ciently motivated to ignore due to e ciency and cost disadvantages. However, Buying O ce disa rmed and argued that orders need to be placed per piece to achieve the best possible accuracy.
5.1.4 Summary of important aspects related to the set of transport cartons
Garment Care and Sales highlighted the advantages of a large set of transport carton sizes while Production O ce, International Freight & Transport and Warehouse Logistics highlighted the advantages with a small set of transport carton sizes.
Garment Care and Sales argued that a large set of transport carton sizes could be advantageous as it could facilitate for good garment care, high fill rate within the cartons and e cient distribution to stores. However, proper garment care and high fill rate could be achieved in other ways than by having several carton sizes. Garment Care mentioned that if garments were shirt folded to a larger extent they could be adapted to suit several carton sizes, weakening the argument for a need of a large set of transport cartons. Furthermore, interviewees suggested that test packing product samples could lead to order sizes better adjusted to the transport cartons and subsequently higher fill rate, which also would reduce the need for a large set of transport cartons. Moreover, Production O ce suggested that high fill rate could be ensured by introducing requirements on fill rate and follow-ups on packed orders to a larger extent.
Production O ce, International Freight & Transport and Warehouse Logistics further argued that a smaller set of carton sizes would be advantageous due to mainly three reasons. First, a small set of transport carton sizes facilitates the selection of an appropriate transport carton size in the manufacturing sites. Second, it facilitates for e cient container loading. Third, it facilitates for e cient handling and optimal space utilization in the DCs.
In conclusion, the stakeholders face di↵erent challenges and have contradictory requests and opin- ions regarding the transport cartons. Advantages with both a large and a small set of carton sizes exist. However, findings from the interviews indicated that main the advantages with a large set of transport carton sizes, which are high fill rate and good garment care, could be achieved without
51 5. RESULTS & ANALYSIS a large set of transport cartons. Thus, according to findings from the interviews, a small set of transport carton sizes would be favourable seen from a supply chain e ciency perspective.
Figure 16: Summary of first round interviews.
52 5. RESULTS & ANALYSIS
5.2 Distribution and usage of transport cartons
In order to answer the third sub research question, the current transport carton distribution and usage at H&M were analyzed. The analyzes were conducted in addition to the interviews, in order to gain an objective perspective of the actual transport carton usage. More specifically, five analyzes were made. Initially, the overall usage of di↵erent carton types was investigated. This analysis was followed by in-depth analyzes of how the carton usage di↵ered between orders and product categories.
All transport carton types and sizes were included in the analyzes, but only the transport cartons that constituted the largest fractions of the used cartons are displayed in the pie charts. However, as the total number of cartons is large, it is important to highlight that the carton sizes that constitute small fractions of the total number of cartons still are considerable.
5.2.1 Transport carton distribution
The data analysis confirmed that H&M uses a large number of di↵erent carton sizes, and further showed that the di↵erent sizes are used to a varying extent. This can be seen in Figure 17, which displays the usage of all standard cartons, including all height variations, and customized cartons, grouped together for both channels combined. When analyzing the carton size usage for the store and online channel combined, it was clear that three standard cartons, SC4, SC2 and SC3, were used most frequent. That SC4 and SC2 were used most frequently was expected since they are the company’s two main standard cartons and thus should be used the most. However, the fact that the SC3 carton was used to such a large extent was more surprising.
Figure 17: Total carton distribution for the store and online channel combined.
53 5. RESULTS & ANALYSIS
Moreover, carton size usage varied between the store and online channel. When analyzing the carton size usage for the channels separately it was clear that the online channel used its main standard carton, SC2, to a greater extent than the store channel used its main standard carton, SC4, which can be seen by comparing the pie charts in Figure 18, displaying the carton size usage for store and online separately. One reason to this di↵erence might be that the folding technique di↵er. In the online channel, shirt-folding is the technique regularly used, while in the store channel, half-folding is the technique regularly used. As mentioned in Section 4.4 shirt-folding makes it easier to adjust the width of products, despite di↵erent characteristics and sizes, to better fit into several carton sizes. Another reason given by the interviewees to why the online channel used its main standard carton to a greater extent than the store channel used its, is that online orders are packed in polybags. The interviewees’ perceptions are that the use of polybags makes it more important to fold the products correctly to properly fit into the polybag, and subsequently the carton. However, other stakeholders argued that the use of polybags should not a↵ect the ’accuracy’ of the packing.
Figure 18: Carton distribution by channel.
5.2.2 Transport carton distribution per product group
H&M ships approximately the same fraction of the product categories to both channels. Yet, the carton sizes used for packing the same product groups di↵ered. When looking at the carton size usage among all product groups it was apparent that online orders of the same product group were packed in less di↵erent carton sizes than store orders. Of all product categories, Jersey, Jackets & blazers and Knitwear are the three product categories shipped the most. Both the store and online channel shipped the majority of orders of jackets and blazers in the SC4. A reason to why online orders of jackets and blazers are packed in SC4 instead of SC2, is that jackets and blazers cannot be shirt-folded properly since they often are too chunky, which make them improper to shirt-fold as it would lead to poor space utilization in the carton.
54 5. RESULTS & ANALYSIS
Figure 19: Carton distribution jackets and blazers.
When looking at the remaining product groups, the finding that online orders are packed in its channels main standard carton to a larger extent than store orders are packed in its channel’s main standard carton is further strengthened. This di↵erence is especially noticeable when looking at the carton distribution for the product groups shipped the most, excluding jackets and blazers. Online orders containing jerseys and knitwear are for example packed in SC2 to 87% and 90 % respectively, while the corresponding fractions for store orders, packed in SC4, are 28% and 19%. For the store orders, two other carton sizes, SC5 and SC3, are instead identified as the ones used most frequent when shipping jerseys and knitwear.
Figure 20: Carton distribution jersey and knitwear.
A hypothesis to why the SC5 is used frequently is because it is slightly shorter than the main standard carton, making it suitable for upperwear and jerseys, not wide enough to fit the main standard carton. Though, that the SC3 was used to a such great extent for shipping knitwear and jerseys in the store channel were surprising to the interviewees. The SC3 has narrower width than
55 5. RESULTS & ANALYSIS the SC4 and should, as previously mentioned, foremost be used when packing heavy items such as jeans and trousers which only constitute around 10% of H&M’s orders. The interviewees could thus not explain why the SC3 carton was used as frequent when packing upperwear garments.
5.2.3 Customized transport cartons
The customized cartons come in over 1000 di↵erent sizes and constitute around 7% of the total number of transport cartons, considering both channels. The primary reason to why customized cartons are used, is because H&M’s product designers do not design products with respect to the carton sizes.
Consequently, a lot of di↵erent carton sizes are needed to fit the di↵erent products. Products that are especially di cult to fold and fit into standard cartons are home products, accessories and large, fragile garments extra sensitive to wrinkles. Findings from the data analysis indicated that the above mentioned products were, as expected, the products most commonly sent in customized cartons. More specifically, when comparing the usage of the customized cartons between prod- uct departments, the data showed that home products were packed in customized cartons most frequently. Children size clothes and items from the ladieswear department were other products recurrently packed in customized cartons. The product categories from the ladieswear department that were shipped the most in customized cartons were ladies accessories, hats and gloves, and shoes and sneakers, which coincided with the interviewees’ perception. For example, accessories are often small, fragile and heavy, which make them unsuitable for standard cartons as the carton’s weight limit could be exceeded in case it is well-filled. On the other hand, if the carton is not completely filled, the accessories will move too much and risk to become damaged. In addition, hats, gloves, shoes and sneakers are garments di cult to fold and fit into standard carton sizes without damag- ing the product quality. Besides the products mentioned above, the product category ’Jersey’ was shipped in customized cartons more than expected. The product group ’Jersey’ constituted nine percentage of the ladieswear products shipped in customized cartons. As jerseys are garments that usually have similar measures they should, according to the interviewees, be packed in standard cartons.
Figure 21: Customized cartons distributed by product division.
56 5. RESULTS & ANALYSIS
Figure 22: Ladieswear packed in customized cartons.
When analyzing the usage of customized cartons for the store and online channel separately, it was clear that customized cartons were used more frequently in the online channel, than in the store channel. Customized cartons constituted around 17% of the total amount of transport cartons used for online orders, but only around 4% of the total number of transport cartons used for store orders.
An additional finding was the similarity between the sizes of the customized cartons and the stan- dard cartons. According to the analyzed data several of the cartons defined as customized, had exactly the same measures as some of the standard cartons. These customized transport cartons constituted 12% of the total number of shipped customized transport cartons. Other customized cartons deviated from the standard carton sizes by minimal measures, in some cases the measures di↵ered by as little as a single centimeter on the length or width. That the customized carton sizes are similar, or in some cases even identical to the standard carton sizes, could according to Garment Care be due to an old IT-system that is no longer used. The IT-system had strict require- ments on weight of standard cartons, making it impossible to register a packed standard carton that exceeded the weight requirement. As no strict requirements of weight existed for customized cartons, standard cartons were registered as customized cartons with slight deviations from the actual standard carton size to overcome this problem.
5.2.4 Main standard transport cartons and product quantity
When comparing the product unit quantity packed into the two main standard cartons in each channel, the quantity that was packed into the cartons varied depending on product category. For several product categories, the data indicated that the two channels packed products from the same product category in di↵erent quantities, although the same standard carton was used. For example, the store channel packed a di↵erent amount of dresses into the SC2 than the online channel did.
For the majority of the product categories, the store channel seemed to pack larger quantities in both the two main standard carton sizes, than the online channel did. However, for some product
57 5. RESULTS & ANALYSIS categories, the online channel packed a larger quantity of products into the standard cartons. This pattern was especially characteristic for the product types jersey basic, knit woven, outdoor/blazers and woven tops. An arguable explanation to why the store channel seem to pack larger quantities of products overall into both main standard cartons sizes could be because the online channel uses shirt-folding to a great extent and thus do not fit as large amount of products into the carton. On the other hand, interviewees mentioned that the shirt-folding technique makes it possible to pack a larger quantity of products into the carton in comparison to when the half-folding technique is used. Another reason to why the workforce at the manufacturing sites seem to fit more products into the cartons when packing store orders, could be because they do not pack products into polybags that requires extra space, which the online channel does. Even though the quantity of packed products in the main standard cartons di↵ered between the channels, and in the two standard carton sizes, the di↵erence was not as large as expected for several product types. Logically, the larger standard carton size would fit a larger number of the same product than the smaller carton size, but this was not always the case. In some cases the data even showed that some product types were packed in larger quantities in the smaller standard carton, SC2, than in the larger standard carton, SC4.
58 5. RESULTS & ANALYSIS
5.3 Cost of transport carton flow depending on the set of transport cartons
In order to answer the fourth sub research question, a cost estimation model was constructed, aiming to investigate how the total cost for the transport carton flow vary depending on the transport carton sizes.
Figure 23 shows the total cost for the transport carton flow As-Is compared with two possible cases, Case A and Case B. For each case, the costs for two possible scenarios were calculated. The transport cartons included in the two cases, were selected based on findings from the second round interviews and the data analysis. The reason to why the cartons were selected was because interviewees suggested that the cartons were suitable for a wide range of products, which also were strengthened by findings from the data analysis indicating that the chosen cartons were used fre- quently.
Figure 23: Total carton flow cost (USD) As-Is compared with two cases.
To be able to make a fair comparison between the costs for the transport carton flow As-Is and the scenarios To-Be, the calculations were based on the same number of distributed pieces in all cases. Thus, the number of pieces were the same as the number of pieces distributed in the As-Is scenario, which is based on data from the German and central European market during 2018. Due to the
59 5. RESULTS & ANALYSIS large number of customized cartons, simplifications were necessary when calculating the cost and volume for the customized transport cartons. In the model, the customized sizes are represented as one customized size (CMZD), based on average values of all customized carton sizes distributed during 2018.
The As-Is scenario is based on the transport carton usage As-Is today and considers the situation of having multiple transport carton sizes, more specifically around 60 di↵erent standard carton sizes and the average CMZD carton size. Case A considers the case of having four di↵erent standard carton sizes, SC2, SC3, SC4, SC5 and the customized carton size CMZD. Case B considers the case of only having 2 di↵erent transport carton sizes, SC2 and CMZD.
The calculations in Scenario 1 are based on the premise that the same transport carton volume as in the As-Is scenario should be distributed. In both Case A and Case B, the weighted average volume of the transport cartons selected was smaller in comparison to the As-Is scenario, leading to an increased number of transport cartons. As can be seen in Figure 23, the increased number of cartons resulted in higher costs at the manufacturing sites. Though, shipping and distribution center costs were decreased, highlighting the benefits with a reduced number of carton sizes when transporting and handling cartons at the DC.
The calculations in Scenario 2 are based on the premise that the same number of pieces fit into the same, or even a reduced, number of cartons as today. According to interviewees, even though the volume of the total number of cartons is smaller, the same number of products should fit into the selected transport carton sizes, with the requirement that shirt-folding is used.
As can be seen in Figure 23, the total carton flow cost was lower in both Case A and Case B, compared to the As-Is scenario. Thus, the result indicates that a reduced set of transport cartons could decrease the overall carton flow cost. The reduction of the carton flow cost varied between 0,5-2 % for Scenario 1 and 19-25 % in Scenario 2. The reason to the larger reduction in Scenario 1 is that Scenario 2 is based on a significantly lower transport carton volume than the As-Is scenario and Scenario 1. However, the percentage cost saving in Scenario 1 is indeed considerable as the total transport carton cost is high. Below Table 4 displays the relative impact on the total carton flow cost per business unit in the carton flow. The figures are based on the results shown in Figure 23 and include all cases, including As-Is. As can be seen in the table, the largest cost drivers are activities performed in relation to shipping, followed by activities at the distribution centers.
Table 4: Percentage impact of total carton flow cost per business unit. Unit in carton flow % impact (of total cost)
Manufacturing site 13-16%
Shipping 47-50%
Distribution center 36-38%
60 6. DESCRIPTION OF COST ESTIMATION MODEL
6 Description of cost estimation model
This section presents a description of the general cost estimation model, which was constructed based on findings from the case study to calculate the total transport carton flow costs for the scenarios presented in Section 5.3. Further, the model’s main features and calculations are described. The section ends by presenting delimitations and limitations of the model.
To be able to answer the fourth research question, a cost estimation model for the transport carton flow was constructed. As the aim of the model is to estimate costs for di↵erent transport carton sizes throughout the whole transport carton flow, identified resources and activities related to the transport carton flow were included, see Section 4.3. Moreover, the supervisors at the case company requested a model that could estimate the total transport carton flow cost for the set of cartons As-Is as well as To-Be, if the set of transport carton sizes was changed. The model is constructed so that costs for di↵erent sets of carton sizes can be compared. Further, the model is categorized to display costs from resources and activities related to the cartons separately and as a total.
6.1 Resources and activities included in the model
To calculate the costs in the transport carton flow the ABC approach described in Section 3.6 was used. The cost objects to which the activities and resources are traced, are the di↵erent transport carton sizes.
The resources and activities included in the model, based on the main principles of ABC, are shown in Figure 24. The costs for the resources and activities were given by controllers and responsibles for the di↵erent stakeholder units in which the resources and activities were identified. A few of the identified activities in the transport carton flow were not included in the model, as they were not requested to be taken into account by the case company. However, some of these activities could have an impact on the total transport carton flow cost and are therefore discussed in Section 7.2.
Figure 24: Main principles of ABC applied to the transport carton flow.
61 6. DESCRIPTION OF COST ESTIMATION MODEL
To gain an understanding for the resources and activities that were taken into account in the cost estimation model, the resources and activities in need of further explanation are described below.
Resources
Table 5: Description of resources undertaken in the model. Resource Description Transport carton Cardboard boxes that products are shipped in from manufacturing site to distribution center. Adhesive tape Tape for closing the cartons and stickers to mark & carton marking the cartons. Master polybag A large plastic bag inside the carton that encloses all products inside the transport carton. Used to prevent mold. Polybag A small plastic bag that encloses a single product. Used for products in online orders to enable for more e cient distribution to end customers. New carton at DC If a transport carton needs to be deconsolidated or is damaged when arriving to the DC, an additional transport carton is used, purchased in the destination market.
62 6. DESCRIPTION OF COST ESTIMATION MODEL
Activities
Table 6: Description of activitites undertaken in the model. Activity Description Packing into polybag The activity of packing garments (only online orders) into polybags at the manufacturing site. Shipping The activity of shipping transport cartons by either sea, rail, road or air. Including the sub activities of loading and unloading the cartons on and o↵ the mean of transport. Inbound activities The activities performed on all incoming cartons, such as unloading, scanning, labelling and quality control. Deconsolidaton The activity of deconsolidating mixed cartons into two or more cartons. Preparation The activity of sorting cartons to correct destination in the DC. Placing in bu↵er The activity of placing cartons into the high-rack bu↵er. Placing in picking area The activity of placing cartons into the picking location in the picking area. Storing in bu↵er The activity of having cartons stored in the bu↵er, which requires the resources rent, water, heating, electricity, maintenance and depreciation of equipment. Storing picking Area The activity of having cartons stored in the picking area, which requires the resources rent, water, heating, electricity, maintenance and depreciation of equipment. Manual handling The activities of manually handle cartons that cannot go into the automation. Refilling picking location The activity of refilling the picking location with a carton from the high-rack bu↵er.
63 6. DESCRIPTION OF COST ESTIMATION MODEL
6.2 Extracts from the cost estimation model
Below the model is applied to a fictive company, Company X, in order to illustrate how the model is designed and how the results generated by the model could look like. Moreover, a description of the sections and all sheets included in the cost estimation model, as well as the model’s color coding can be found in Appendix B.
Input To-Be In the Input To-Be sheet, the user fills in what fraction of the total number of pieces that should be packed in each carton size, for store and online orders respectively. The list of carton sizes can be extended by the user by selecting carton sizes from a pre-defined list in the ’Select carton size’ cells. The user can moreover decide what fractions of the total number of pieces that store and on- line orders should constitute. All calculations in the model are based on the input given in this sheet.
Figure 25: Input-sheet in model for Company X.
64 6. DESCRIPTION OF COST ESTIMATION MODEL
Costs The sheet ’Costs’ presents all costs that have been used when performing the calculations and can be changed by the user.
Figure 26: Costs-sheet in model for Company X.
65 6. DESCRIPTION OF COST ESTIMATION MODEL
Assumptions The sheet ‘Assumptions’ presents all assumptions that have been used when conducting the calcu- lations and can be changed by the user.
Figure 27: Assumptions-sheet in model for Company X.
Result The sheet ’Results’ presents the result of the To-Be scenario based on the users input, in comparison to the As-Is scenario, which is based on raw data.
Figure 28: Results-sheet in model for Company X.
66 6. DESCRIPTION OF COST ESTIMATION MODEL
6.3 Calculations
Table 7 displays the calculations, categorized by resources and activities, that were included when calculating the total cost for the transport carton flow. The total cost per activity and resource was further calculated per transport carton size and summarized to the total cost for the transport carton flow. As previously mentioned, the majority of the calculations were based on costs given from controllers at the case company. Some of the calculations were based on simplifications of the reality, which are described in detail below.
Number of pieces per transport carton size The estimated number of pieces that fit into a carton size is based on its volume related to one of the main standard cartons, SC4. As the number of pieces that fit into a carton di↵er depending on garment type, the calculation is further based on controllers’ estimations of how many pieces that, in average, fit into a SC4.
CMZD transport cartons As the number of shipped customized cartons is large, and di↵er depending on product charac- teristics and fashion trends, the used customized carton sizes vary heavily. Thus, the customized carton volume that has been used in in this model, is simplified to the weighted average volume of the customized cartons shipped during 2018. Moreover, as the secondary data did not contain the purchase price for all individual customized carton sizes, an average price of the existing customized cartons was used when calculating the purchase cost for the CMZD transport carton.
Storing in bu↵er and picking area at DC The storing cost for the carton sizes in the bu↵er and picking area is based on the width of the main standard cartons, SC2 and SC4, since the shelves are optimized for these two carton sizes. Further, the storing cost per carton is calculated by taking the total DC cost (rent, heating, water, electricity, maintenance and depreciation) per square meter divided by the average number of cartons stored per square meter. When storing other cartons sizes than the two main standard cartons, unutilized storing capacity is accounted for by adding a percentage cost based on the loss in volume in storing capacity.
67 6. DESCRIPTION OF COST ESTIMATION MODEL
Table 7: Description of calculations of resources and activities. Calculation of total costs
Resources
Transport cartons N C n , where i=1,...,N i=1 i · i Adhesive tape and carton marking P C n tape&marking · tot Master polybags C % n masterpolybag · masterpolybags · tot Polybags C m polybag · tot New carton at DC Included in the activity cost for deconsolidation
Activities
Storing in bu↵er at DC Crent+Cheating+Cwater+Celectricity+Cmaintenance+Cdepreciation z¯j,buffer Storing in picking area at DC Crent+Cheating+Cwater+Celectricity+Cmaintenance+Cdepreciation z¯j,pickingarea
Shirt-folding Cshirt folding ntot · Pack into polybags C m packpolybag · tot N i=1 ni cbmi Shipping sea Csea %sea · cbm40ftcontainer · · P N n cbm Shipping rail C % i=1 i· i rail rail cbm40ftcontainer · · P N n cbm Shipping road C % i=1 i· i road road cbm40ftcontainer · · P Shipping air C % N n cbm , where i=1,...,N air · air i=1 i · i Deconsolidation C P % n deconsolidation · deconsolidation · tot Inbound C n inbound · tot Preparation C n preparation · tot Storing C n storing · tot Bu↵er C n buffer · tot Manual handling C % n manual · manual · tot Refill picking location C n refill · tot
68 6. DESCRIPTION OF COST ESTIMATION MODEL
C=cost N = number of transport carton sizes N ntot = i=1 ni = number of cartons ,where i=1,...,N m = N m = number of cartons containing online orders ,where i=1,...,N tot P i=1 i p = pieces P z¯jbuffer = avg. number of cartons that can be stored in the bu↵er, where j = SC2, SC4 z¯jpickingarea = avg. number of cartons that can be stored in the picking area, where j = SC2, SC4 cbm = cubic meter
6.4 Delimitations
As the cost estimation model is supposed to calculate costs related to the transport carton flow, soft factors such as impaired brand image or price reduction if items are overstocked, are not taken into consideration. Further, the model is delimited to not include bundled and string transport cartons or shipping of hanging garments.
6.5 Limitations of the model
The cost estimation model is based on data from only one case study, and could thus not be used to draw statistically significant conclusions. However, if the cost estimation model is applied on a company operating in the same context as the studied case company, the level of generalizability is increased.
The cost estimation model is moreover based on secondary data from the case company’s databases and primary data collected from interviews. The secondary data in this model is limited to only include data from one geographical region, which could be seen as a limitation as it possibly a↵ects the outcome of the model as the data di↵ers between regions. However, this restriction was made to enable for data analysis, as the volume of data otherwise would be too large to handle in the softwares used. Further, primary data regarding costs are limited to only take costs from one DC as well as costs from one supplier site into consideration, which could have a↵ected the models accuracy negatively as costs varies in di↵erent countries. In addition, the primary data regarding costs were obtained by hearing interviewees responsible for the considered area.
Furthermore, due to the short time frame of this thesis, simplifications of the reality were necessary when calculating some of the transport carton flow costs. Logically, some of the simplifications could thus have a↵ected the outcome of the model. When storing cartons other than the SC2 or SC4 in the bu↵er or picking area, the added cost is somewhat a limitation of the model. This approach was chosen to illustrate the loss in space utilization coming with using carton sizes not designed to fit the racks. Thus, according to the model, it is costlier to store carton sizes other than SC2 or SC4, which measures are not optimized for today’s picking and bu↵er locations. In practice, this is not the case, as the cost for the DC is fixed.
69 7. DISCUSSION
7 Discussion
This section contains a discussion about the findings in this study. First, findings related to the transport cartons are discussed. Second, criticism against the construction of the model and how it might have a↵ected the results are presented. Third, opportunities for further business improve- ments, detected during the case study, are discussed as well as the generalizability of the findings and sustainability aspects related to the research subject.
7.1 Set of transport carton sizes
Today H&M has a large number of di↵erent carton sizes and, in many cases, the fill rate in the cartons is low. This could be a result of sub optimization as the stakeholder units often have contradictory objectives. According to Ibrahimov et al. (2012) and Lee (2000) this is a common problem for large businesses and is also one of the reasons to why supply chain management is of high importance to ensure an e cient supply chain flow. Thus, by applying a holistic supply chain approach, H&M has the opportunity to improve its supply chain e ciency while simultaneously reduce costs.
7.1.1 Problematization with current set of transport carton sizes
The selection of an optimal number of transport carton sizes is complex, and as mentioned, several aspects need to be taken into consideration. The transport carton size and the number of di↵erent sizes impacts several units in the supply chain and during the case study it became clear that the units’ opinions di↵er regarding how many, and which carton sizes that are needed. As discussed in Section 5, the reason to why H&M has a large set of di↵erent carton sizes is to facilitate for high fill rate and good garment care within the cartons. Yet, this is not always the case. Despite the large set of available transport carton sizes, products are recurrently packed in non-suitable cartons, leading to low fill rate and subsequently decreased garment care.
High fill rate in the cartons is considerable as it could increase supply chain e ciency and reduce several of the supply chain costs. For instance, transport cartons with low fill rate contribute to additional transport costs as it leads to that the containers are not fully utilized. Further, the manual handling of cartons constitutes a large cost item today, which could be reduced by having high fill rate in the cartons. According to interviewees, transport cartons mainly get damaged during transport as the pressure from stacked cartons becomes too high. If the fill rate is low, the transport cartons break more easily. Carton breakage thus have negative impact on the supply chain e ciency as it requires manual handling at the DC and contributes to unnecessary costs, such as repacking of garments into new transport cartons at the DCs, and a increased need for
70 7. DISCUSSION value added services. Moreover, if cartons have low fill rate, the storage areas at the DCs are not fully utilized.
According to interviewees, the problem with low fill rate and subsequently bad garment care, could be due to poor packing instructions, which lead to that the workforce in the manufacturing sites commonly choose another carton than the one prescribed in the instruction, resulting in that the same product often are packed in di↵erent carton sizes. Nevertheless, that the workforce in the manufacturing sites takes own decisions regarding what carton sizes to use, do not necessarily need to be bad. As the workforce in the manufacturing sites pack the transport cartons, they should have best insight in what transport carton that best suits what product. However, due to the large set of existing carton sizes it is di cult to select the best suited carton, leading to a suboptimal solution where the same product is packed in several di↵erent carton sizes with low fill rate.
However, low fill rate do not necessarily only depend on that the selected transport carton size is unsuitable. It could also be a consequence of the fact that the workforce at the manufacturing site do not pack a su cient number of products into the cartons to avoid stop orders resulting from mold. To avoid that products are packed in carton sizes with low fill rate, our suggestion is that the packing instructions either should be improved, or that the set of carton sizes should be reduced, to simplify the selection of transport carton at the manufacturing sites.
An argument against reducing the set of carton sizes is, according to the Sales department, that having several carton sizes could facilitate for an e cient and accurate product distribution to markets and regions and subsequently to stores. This finding coincides with the findings proposed by Lee et al. (2014), who argues that several carton sizes could reduce the risk of under and overstocking in stores. The Sales department means that several carton sizes reduce the need for deconsolidation. However, findings from interviews and observations indicate that this is not always the case. Cartons need to be deconsolidated despite the large number of carton sizes that exists today. The deconsolidation is moreover not always performed leading to the above mentioned problem with overstocked and understocked stores. Thus, even though several di↵erent carton sizes exist, the accuracy to markets, regions and stores is occasionally incorrect. As the large set of transport cartons used today in fact do not facilitate for e cient distribution to stores, our perception of the fact that the set of transport carton sizes could be reduced is further strengthened. However, H&M’s large set of transport cartons is, as mentioned above, foremost a consequence of H&M’s large product assortment. If the transport cartons had been selected with the purpose of enabling direct distribution to stores, the outcome might have been di↵erent. Thus, as having a large set of transport cartons do not by default lead to e cient distribution, our perception is that to enable for e cient distribution the carton sizes need to be selected with respect to that purpose.
To summarize, H&M’s large set of di↵erent carton sizes, should according to the findings in this thesis and previous research imply good garment care, high fill rate within the cartons and accurate product distribution to destination markets and regions. However, the findings from the case-study show that the garment care could be improved, that the fill rate occasionally is low and that product distribution is inaccurate. Thus, the large set of di↵erent carton sizes that exist at H&M today
71 7. DISCUSSION is counterproductive, as it in fact do not facilitate for the factors given as the reasons behind the large set of transport cartons. Consequently, according to the findings in this thesis, H&M would benefit from reducing its current set of transport carton sizes.
7.1.2 A reduced set of transport cartons
Findings from this study indicate that a reduction of the current set of transport cartons could ben- efit supply chain e ciency and lead to potential cost savings. More specifically, it would facilitate for the workforce at the manufacturing sites to select a suitable transport carton for the products, which hopefully would improve fill rate, and thus reduce the negative e↵ects followed by having low fill rate in the transport cartons. In addition, a reduced set of transport cartons would possibly lead to improved space utilization in the transport containers as well as in the storing areas at the DCs.
The data analyzes, described in Section 5.2, further strengthen that a reduction of H&M’s current set of transport cartons should be possible. When comparing the carton usage in the store and online channel it was clear that the online channel used less di↵erent carton sizes than the store channel. This di↵erence could be a consequence of the fact that online orders are packed using the shirt-folding method. With this folding method, the garments can be adapted to properly fit several carton sizes, reducing the need for a large set of transport carton sizes. Thus, these findings indicate that it should be possible to reduce the number of di↵erent carton sizes, but it could require that the products are shirt-folded to a larger extent when packing store orders.
An additional argument to why it should be possible to reduce the number of di↵erent carton sizes is that the same product often is packed in di↵erent carton sizes, implying that more than one carton could be suitable for a product. Many of the transport carton sizes have similar measures and a reduction of the set of transport cartons should thus be possible without having negative impact on garment care. This argument is especially true for customized transport cartons, which according to the findings in Section 5.2, were very similar, or even identical, to some of the standard transport carton sizes.
During the case study a handful of transport cartons were identified as suitable for the majority of the products and are thus argued to be a good foundation when selecting a reduced set of transport cartons. These were SC2, SC3, SC4, SC5 and SC7. The SC2 and SC4 carton should be included as the storing areas in the DCs are optimized for these two carton sizes. Further, SC2 is suitable when shirt-folding products whereas SC4 is a large carton, suitable when shipping large product volumes or products that do not have a specific folding pattern such as socks or lingerie. SC3 is suitable for heavy items such as jeans, whereas SC5 and SC7 are suitable for half-folded garments as the width is smaller than the SC4.
72 7. DISCUSSION
7.1.3 Suggestion of a common main standard carton across both channels
Interviewees suggested that a common main standard carton across both channels would pave the way for a future omni-channel supply chain, which according to H¨ubner, Wollenburg, and Holzapfel (2016) is the most e cient supply chain strategy for retailers. Therefore, H&M should strive to use only one main standard carton across both channels, instead of two main standard cartons that are used today. However, as the product designers do not consider the transport cartons when designing the products, all di↵erent product categories cannot fit into one transport carton size. Though, findings from Section 5.2 indicate that the majority of the products should be possible to pack in one carton size to a large extent as online orders today frequently are packed in the main standard carton SC2.
This thesis foremost evaluated which of the two current main standard cartons that would be the best main standard carton. The reason behind this choice was that the shelves and picking locations currently are adapted for the SC2 and SC4 carton and it would be costly to adapt the storing areas for another carton size. As H&M has numerous DCs worldwide, potential cost benefits, coming from selecting another carton size than the two current main standard cartons, would probably be o↵set by costs for changing the racks and shelves in the DCs. Below follows a discussion of what carton size that would be a suitable choice of main standard carton for both store and online orders.
An argument to why SC4 should be selected as the standard carton is due to that it is larger than the SC2 carton, and thus fit a larger number of products. However, findings in this study indicate that the SC4 is too large for the majority of the product categories, often leading to low fill rate and consequently bad garment care. Moreover, for heavy product categories, the SC4 is unsuitable as the fill rate cannot be optimized due to that the weight limit of 20 kg is exceeded.
Compared to the SC4 carton, the SC2 is perceived to be suitable for a larger number of the product categories. In addition, interviewees from the Garment Care department argues that the same number of pieces that currently are packed in the larger standard carton SC4, can be packed in the SC2 if the garments are shirt-folded, which further motivates that the SC2 should be selected as the main standard carton for both online and store orders. Moreover, SC2 is narrower in width than the other main standard carton, SC4. Thus, using the SC2 as the main standard carton also for store orders, would increase the number of picking locations in the shelves in the picking area. Picking is identified as the costliest activity within the DCs (Richards, 2011) and more picking locations would reduce the walking distance for the workforce, leading to faster picking and reduced costs.
In conclusion, when comparing the SC2 and SC4 carton, the SC2 was identified as the best choice of main standard carton.
73 7. DISCUSSION
7.2 Cost estimation model
The results from the cost estimation model indicated, in accordance to the qualitative findings, that large cost savings could be captured if the set of transport cartons was reduced. The model showed that for both scenarios that were evaluated, in the two di↵erent cases, the costs decreased in comparison to the costs for the set of transport cartons As-Is. The decreased costs are foremost a result of a more homogeneous set of carton sizes, leading to better space utilization in the transport containers and storage locations at the distribution centers.
Both Scenario 1 and 2 were cheaper than the As-Is scenario. The two scenarios that are taken into account in the model, are as described in Section 6, based on that a di↵erent number of pieces fit into the transport carton sizes. The first scenario is based on the assumption that the same volume of transport cartons are distributed as in the As-Is scenario. The second scenario is based on that the same number of pieces that fits into today’s larger main standard carton, SC4, could fit into some of the smaller transport carton sizes if the products are shirt-folded, thus leading to that less number of cartons are distributed than in the As-Is scenario. When comparing the result of Scenario 1 and 2, Scenario 1 was cheapest for Case A and Scenario 2 was cheapest for Case B
Scenario 1 required an increased number of transport cartons for both cases, due to that the sets of carton sizes that were selected consisted of cartons with smaller volume, than the volume of the cartons in the As-Is scenario. When comparing Scenario 1 for the two cases, the set of cartons in Case A required a lower number of transport cartons than the set of cartons in Case B. The lower number of cartons is identified as the main reason to why Scenario 1 becomes cheaper in Case A than in Case B, as less cartons lead to less handling costs for several activities at both the manufacturing sites and at the distribution centers. However, when comparing the storing costs at the distribution center, the cost is lower in Case B since the storage locations are optimized for the SC2 and SC4 cartons, as previously mentioned in the Section 6.3. As the set of cartons in Case B only constitutes of SC2 and CMZD cartons, the storing cost is thus lower.
Scenario 2 is as mentioned based on the premise that the same number of pieces that go into the SC4, also fits into some of the smaller transport carton sizes, namely the SC2, SC5 and SC7. This implies that the fill rate of these transport cartons is considered to be higher in Scenario 2 than in Scenario 1. Thus, if the assumption regarding fill rate in the above mentioned transport cartons is reliable, the total transport carton volume would be reduced and large cost savings could captured, which were the case in Scenario 2 for both Case A and Case B. Furthermore, the SC2 is the smallest carton size of the cartons evaluated, leading to that the fill rate in the transport cartons in Case B is even higher than in Case A. Thus, for Case B, the transport cost is further decreased compared to Case A, as the distributed volume is lower.
74 7. DISCUSSION
7.2.1 Criticism against the result of the model
In the first scenario, the number of pieces that fit into the di↵erent transport cartons were based on the assumption that 50 pieces go into the main standard carton SC4, and the number of pieces that go into the other transport carton sizes were based on the relation between that transport carton size and the SC4 carton size. This method could be criticized, but was used in the absence of other reliable data related to fill rate of the di↵erent transport carton sizes.
The second scenario was based on the premise that the same number of pieces fit into a handful of the smaller carton sizes, which was information given by responsibles at the Garment Care department. The premise was based on observations from ’test packing’ of products into the mentioned transport carton sizes. However, the data analyzes in section 5.2 do not cohere with that assumption and indicate that a di↵erent number of products fit into the di↵erent transport carton sizes. Thus, to be able to fully trust the results of the model, validation of the product unit item quantity is needed, to ensure that the same number of products fit into the transport carton sizes.
Moreover, the result of the model imply that the storage costs are cheaper for a reduced set of carton sizes. As mentioned in the description of the model in Section 6, the costs for storing cartons other than the two main standard cartons, have been taken into account by adding a percentage cost based on the loss in volume in storing capacity. Though, as the distribution centers already exist the actual cost for storing other cartons than the standard cartons are not costlier in reality. However, the storage space is not used as e cient.
In conclusion, even though the result of the model shows that the overall transport carton flow cost are reduced for the two evaluated cases, it can be argued that some of the costs, mainly at the distribution center, not would be a↵ected. In both cases, activities at the distribution center are cheaper for the second scenario. The activity costs are based on employee salary, and thus the total cost from in-house distribution centers, will only be reduced if resources are utilized as least as e↵ectively or if the number of employees is decreased.
7.2.2 Disregarded activities and their potential impact on the carton flow cost
The two given scenarios, implicates changes in resources or activities of the transport carton flow that potentially could lead to decreased or increased costs, which has not been accounted for in the model.
Changes of resources or activities that could lead to decreased costs A reduced set of transport cartons would lead to a larger number of the selected carton sizes and potentially opportunities for cost savings from bulk buying, which not have been accounted for in the model. Moreover, additional cost savings could potentially arise due to improved fill rate in the cartons, which is the situation of the second scenario. Improved fill rate could lead to less damaged
75 7. DISCUSSION transport cartons, which would reduce the number of cartons that need to be deconsolidated and garments in need of VAS. Further, the model did not consider the additional cost of storing cartons in external warehouses, which potentially would be reduced. The capacity in H&M’s DCs are not always su cient to handle all cartons coming to the DC, leading to that H&M occasionally need to store cartons in external warehouses. If the same number of pieces could be shipped in a lower volume of cartons, as assumed in Case B, the need for external storing would decrease and the cost would be reduced.
Changes of resources or activities that could lead to increased costs Scenario 1 requires an increased number of transport cartons and Scenario 2 requires that a larger number of products are shirt-folded. These changes would lead to that some activities become more time consuming. Today, the transport cost is based on shipped cubic meter, irrespective of the number of cartons. Though, if the manufacturing sites and 3PLs need to load a larger number of transport cartons into the containers, the activity becomes more time consuming, which could increase costs. Moreover, today manufacturers do not charge extra for shirt-folding, even though it is more time consuming than half-folding. If the majority of the products needs to be shirt-folded, this might change. In addition, to change the actual set of the transport carton sizes would require changes at the DCs to optimize the storage and pick locations for the new set of cartons. The actual implementation cost of a potential change, has not been accounted for in the model and would probably a↵ect the total cost savings that could be captured if the set of carton sizes were reduced.
7.2.3 Supply chain units’ impact on the total carton flow cost
Based on the results of the evaluated cases, it was clear that transport costs constitute the largest fraction of the total transport carton flow cost. The second largest fraction was the DC costs and costs related to the manufacturing sites constituted the smallest fraction. These results indicate that seen from a holistic cost saving perspective, the transport carton sizes should foremost be selected to optimize for transport, followed by the DC.
However, as mentioned in Section 6 all activities related to the transport cartons in the transport carton flow were not included in the model, as they were not requested by H&M and due to the short time frame of the thesis. The exclusion of activities a↵ects the total transport carton flow cost and potentially the distribution of the total cost per unit in the transport carton flow.
Some activities in the manufacturing sites were not included in the model, which were the activities of collecting the transport carton, adding master polybags to the carton and folding garments into the transport carton. These activities would probably not a↵ect the outcome of the cases significantly, nor the relation between them. An additional argument to why the excluded activities at the manufacturing sites would not have significant impact on the total costs, is that they often are performed in low wage countries. However, even though the excluded activities would not a↵ect
76 7. DISCUSSION the final result, they would naturally add costs to the total carton flow.
The activities from the DC that are not considered in the model are deconsolidation and VAS, which are performed on a small fraction of the incoming cartons and garments. Thus, even though these activities add costs to the total transport carton flow, these costs will not impact the overall distribution of the total costs to such a large extent that the DC costs would exceed the transport costs.
In summary, as some activities in the manufacturing sites and the DCs were excluded, the dis- tribution of the total costs per unit in the transport carton flow could somewhat di↵er. If these activities were accounted for in the model, the cost fractions related to the manufacturing site and the DC would become larger than what was found in Section 5.3. However, the transport costs will most likely still be the largest fraction of the total cost. Having this in mind, the transport cartons should foremost be optimized for the transport business unit seen from a cost perspective.
77 7. DISCUSSION
7.3 Opportunities for further improvements
7.3.1 New definition of fill rate
H&M defines fill rate as the number of products per carton. Thus, low fill rate imply that a carton contains few products. This definition is misleading as cartons containing a small number of products not necessarily have low fill rate. As product characteristics varies heavily, the product volume di↵ers. Logically, it fits fewer knitted garments than t-shirts in the same carton, as the volume of knitwear is larger. Despite that it fits a smaller number of knitwear in a carton, the fill rate could be high if the carton is fully utilized, indicating that the current definition of fill rate is problematic and should be changed.
7.3.2 Improved data of product unit item quantity and change of folding method
Interviewees argued that if products are shirt-folded, the fill rate in the transport cartons becomes higher than if products are half-folded. However, the data analysis in Section 5.2 did not reinforce that claim. When comparing the product unit item quantity packed in store and online orders, store orders were packed in larger quantities for the majority of the product categories. This result was surprising as online orders are shirt-folded to a larger extent and should thus, according to interviewees, have higher fill rate than the store orders which usually are half-folded. However, even though the data indicated that shirt-folding not necessarily have positive impact on the fill rate, our perception is that shirt-folding should be favorable as the products then can be adjusted to several carton sizes and packed into two stacks, which is better for garment care and reduces the need for a large set of transport carton sizes.
Interviewees further argued that a reason to why the data indicated that online orders are packed in less quantities than store orders, could be due to that online orders are packed into polybags, which occupies space in the transport carton. However, the volume of the polybags should not have much impact on how many products that fit into a transport carton and thus the argument is perceived rather weak.
Another explanation to why the data analysis did not cohere with the qualitative findings, could be that the data analyzed was not su ciently detailed. If the analyzed data included product unit quantity for every unique product type, and not only the product category, the result would have been more credible. Instead, the analysis was done at a more general level analyzing the average product unit item quantity of product groups such as knitwear which includes several subcategories of di↵erent types of knitwear. The subcategories of knitwear most likely have di↵erent product characteristics and it is thus reasonable to assume that they are packed in di↵erent quantities. However, as the analysis was done on a large volume of data and H&M has a large variety of product subcategories, it is arguable that the indication of the average product unit item quantity should be fairly accurate. Since fill rate is such an important aspect, our suggestion is that H&M should strive to improve the data related to fill rate to enable credible analyzes at an overall level,
78 7. DISCUSSION without having the need to check individual orders. A suggestion could be to use several levels of subcategories, categorizing similar products with each other depending on product volume. This would simplify analyzes of how packing varies between manufacturing sites, which in interviews was said to be a common problem.
7.3.3 Improved order information by increased standardization
Despite that the manufacturing sites pack cartons di↵erently, findings showed that documented data about the orders varied between the manufacturing sites. One of the shortcomings related to the data was that mixed cartons were not always classified correctly. This conclusion was drawn after analyzing the number of store and online orders sent as mixed cartons. The data was filled out di↵erently for store and online orders, thus mixed cartons that should be classified in the same way irrespective of channel, store or online, were not. Moreover, a packed carton should be defined as either solid, assortment or mixed. These packing types include subcategories with more specific descriptions about the content. For example, a mixed carton can either be assortment mixed or solid mixed. Two problems with these categorizations were however found. First, store orders were classified as solid, assortment or mixed but online orders were only classified as solid or assortment and thus lacked cartons defined as mixed even though mixed online orders still exist. Second, both store and online orders were defined as solid mixed under the category solid, although solid mixed is a subcategorization to the category mixed. These findings limited the trustworthiness of the data and no conclusions could be drawn from orders categorized as mixed in general. If ignoring the category mixed, and only taking the orders defined under the subcategories to mixed into account, the initial perception was that the number of mixed cartons would be representative. However, the data indicated that a very small fraction of the store orders were shipped in mixed cartons, which is not in line with the reality. To discover and overcome deficiencies of this kind, stricter follow-ups on the documented order information are required.
That packing and documented order information varies between manufacturing sites, could be a consequence of the fact that the manufacturing is outsourced. According to Sen (2008) outsourc- ing is associated with trade-o↵s such as impaired communication within the supply chain. Thus, standardization of packing and documentation across di↵erent manufacturing sites could be chal- lenging to achieve. Standardization of packing is important to ensure fill rate and packing quality as the manufacturing sites are instructed to pack garments in specific cartons with specific fold- ing methods. Standardization of documentation about order information is important to ensure reliable data analyzes. One suggestion of how to improve the fill rate and the quality of the data is ‘test-packing’ samples of orders at the manufacturing sites, to ensure fill rate, before the whole order is distributed. Except of improving the fill rate, test-packing would possibly lead to that deficiencies related to packing and documentation of information could be noticed in an earlier stage of the supply chain, making it easier to correct it as soon as possible. Moreover, the packing instructions that exist today could be improved and updated based on the sample tests. If the packing instructions are simplified and improved, the packing across manufacturing sites would probably become more uniform.
79 7. DISCUSSION
7.3.4 Change order strategy to order per carton
A common problem across the manufacturing sites is low fill rate in so called last cartons. Today products are packed into as many full transport cartons as possible, and if needed, an additional last transport carton is allowed. The purpose of a last transport carton is that it should ensure high fill rate for the last pieces of an order, if the number of pieces is not su cient to fill a full carton. The last carton should be of lower height than the rest of the full transport cartons. However, a prevalent problem with last transport cartons is that the manufacturing sites take cartons with the same height as the full transport cartons, which often lead to that last cartons have low fill rate. Occasionally, only a handful of pieces are shipped in a transport carton.
It is questionable whether the pieces that are shipped in a last carton are favorable or unfavorable when the product quantity is low seen from a holistic perspective. Several stakeholder units sug- gested that Buying O ce should place orders per carton and adjust the orders so that they fit into X full cartons, instead of order per piece, which would remove the need for the last cartons. This order strategy would facilitate work for stakeholders such as International Freight & Transport, Garment Care and Warehouse Logistics, which are a↵ected negatively if the fill rate in the cartons is low. However, Buying O ce and Sales were negative to this initiative as their objective is to ensure product accuracy to markets and DCs, which, according to them, could be impaired if orders are placed based on transport carton sizes. Though, the qualitative findings indicate that even if Buying O ce orders per piece as they do today, the quantity to markets and DCs is recurrently inaccurate. Time constraints lead to that transport cartons that should be deconsolidated and split to di↵erent markets and warehouses, are not. This leads to incorrect product quantity to markets and warehouses despite that Buying O ce project what product quantity that should be distributed to each market. Having this in mind, the argument against placing orders per carton is only su cient if it is possible to ensure that the correct quantities of products can be distributed to markets and DCs.
As mentioned, to ship cartons with low fill rate, which is common for last cartons, are costly and have negative e↵ect on supply chain e ciency which further strengthens the argument to why the last carton could be disregarded. On the other hand, to not have right product quantity in store could have negative impact on soft factors such as impaired brand image. A decision of what is most important and thus should be prioritized must be taken as none of the stakeholder’s goals are achieved today. Due to that last cartons commonly have negative e↵ect on supply e ciency and costs, it could be di cult to motivate the advantages of distributing the last cartons’ products, seen from a e ciency and cost perspective.
80 7. DISCUSSION
7.4 Generalizability of the findings
As the findings in this thesis are based on a single case-study, the findings may not be applicable to all companies using transport cartons to distribute its products from manufacturing sites to distribution centers or warehouses. However, according to Collis and Hussey (2013), findings from case studies can to some extent be generalizable in similar contexts. As H&M’s supply chain is similar to supply chains described in previous literature, H&M’s supply chain is considered to be rather representative for other fast fashion retailers using transport cartons to distribute a large volume of products with varying characteristics from foreign manufacturers to DCs. Further, the findings are only generalizable for retailers whose product designers do not consider the design of the packaging solutions when designing the products.
Moreover, the cost estimation model is based on activities and resources identified from H&M’s transport carton flow, and could thus not be used to draw statistically significant conclusions. However, if the cost estimation model is applied on a company operating in the same context as the studied case company, the level of generalizability is, as mentioned, increased. The model’s generalizability is further increased as the costs for resources and activities as well as assumptions can be changed and adapted to the particular company to which the model is applied. In addition, cost items can be added. However, to add resources or activities that have not been taken into account when constructing the model, would in some cases require the user to manipulate the calculations to be applicable to the company. Nonetheless, even though the cost estimation model is considered to be analytical generalizable for organizations with similar product characteristics operating in similar industries, it must in the end be considered relatively low as it is based on data from only one company.
7.5 Discussion of sustainability
Today, economic e ciency and sustainability are two sides of the same coin (D’heur, 2015). With that in mind, it is important to consider the findings of this case study and its impact on sustain- ability. United Nations (2015) divide sustainability into three aspects; economic, environmental and social. The findings implications in relation to these three aspects are discussed below.
The findings in this thesis suggests that H&M can improve its supply chain e ciency and lower costs and resources consumed by reducing its number of transport carton sizes and improve fill rate, which could improve business performance, and subsequently, economic sustainability. Further, the reduction of resources leads to decreased environmental impact, as for instance CO2 emissions are decreased as a result of a lower total volume of transport cartons. The findings moreover indicate that a smaller set of carton sizes with improved fill rate could lead to less damaged cartons, which in turn implies less damaged products. As the largest environmental impact comes from manufacturing, H&M should strive to avoid damage of garments, that cannot be sold in stores and thus are disposed. Moreover, the life-cycle of the transport cartons that have been analyzed in this thesis, ends after the cartons are emptied and recycled at the distribution centers. Thus,
81 7. DISCUSSION due to the short life-cycle of the used transport cartons, they have a relatively large environmental impact. Seen from an environmental perspective, reusable transport cartons would be preferred. However, today transport to and from destination markets and manufacturing sites constitutes a large fraction of a company’s environmental footprint, leading to that the positive environmental impact due to reusable totes would not outweigh the disadvantages.
Seen from a social sustainability perspective, the proposed cost savings are partly obtained by reducing the need for some activities in the DC, which could imply that the number of employees will be decreased, which could have negative impact on social sustainability. However, instead of decreasing the workforce in the DCs, the time saved on some activities could be used on other activities.
82 8. CONCLUSIONS
8 Conclusions
This section presents conclusive remarks and the answer to the research question evaluated in this thesis. Moreover, opportunities for further research are discussed.
8.1 Answer to research question
The purpose of this thesis was to evaluate transport cartons impact on supply chain e ciency and supply chain costs from a holistic perspective. In order to fulfill this purpose a case study at H&M was conducted where H&M’s current set of transport cartons was evaluated. The following main research question was formulated; ’How does a set of transport cartons impact supply chain e - ciency and supply chain costs?’. To be able to answer the main research question four sub research questions were formulated, which can be seen in Section 1.2. Together the sub research questions formed the conclusive answer to the main research question which is presented below.
RQ: How does a set of transport cartons impact supply chain e ciency and supply chain costs?
This thesis found that several business units’ operations are a↵ected by the transport cartons, which ultimately a↵ect the supply chain e ciency. Furthermore, the business units have di↵erent objectives considering the transport cartons, which makes it challenging to find a set of transport cartons that satisfy all stakeholders to the same extent. To find a transport carton solution that is optimal for H&M seen from an e ciency and cost perspective, a holistic approach is necessary.
Moreover, the findings of this single case study indicate that the disadvantages with a large set of transport carton sizes exceed the advantages. Thus, a reduced number of standard cartons that fit the majority of the products should be selected. A reduced set of transport cartons would be favorable for several nodes in the supply chain, including the manufacturing sites, transport and the distribution centers. If the set of transport cartons was reduced, it would simplify the selection of an accurate transport carton at the manufacturing sites, improve space utilization in the transport containers and at the DCs, as well as facilitate the transport carton handling at the DCs. Thus, a reduced set of transport carton sizes could improve supply chain e ciency.
The data analysis confirmed that a reduction of the set of transport cartons should be possible due to mainly three reasons. First, the analysis showed that the carton usage di↵ered between store and online orders. Online orders are packed in the main standard carton to a greater extent than store orders, and in less di↵erent carton sizes in general, indicating that it should be possible to use less di↵erent carton sizes. Second, there was no clear relationship between carton size and product category. Garments of the same product category were packed in di↵erent carton sizes, which implies that more than one carton could be suitable for a product and further motivates that a reduction of transport carton sizes should be possible. However, a smaller set of transport carton
83 8. CONCLUSIONS sizes could require that garments need to be shirt-folded to a larger extent as garments then easier can be adapted to several carton sizes. Third and last, findings from interviews and data analysis indicated that fill rate could be ensured despite a small set of transport cartons.
Further, this thesis found that the cost for the carton flow in a fast fashion company can vary heavily depending on the number of di↵erent transport carton sizes. Moreover, the total carton flow cost could possibly be reduced by decreasing the number of di↵erent carton sizes. This conclusion was drawn after comparing the carton flow cost of H&M’s current set of transport cartons with two cases consisting of a limited number of di↵erent transport carton sizes. The cases were evaluated for two di↵erent scenarios based on the same number of pieces As-Is. Scenario 1 was based on that the same transport carton volume is distributed, while Scenario 2 was based on that the same number of pieces that fits into today’s larger main standard carton, SC4, could fit into some of the smaller transport carton sizes if products are shirt-folded. In both cases and both scenarios, the total carton flow cost was lower than the actual cost for the carton flow today. More specifically the results indicated potential cost savings of 0,5-2% and 19-25% in Scenario 1 and Scenario 2 respectively, compared to the current carton flow cost. The total cost was especially reduced due to lower transport and DC costs, further highlighting the advantages with having a limited set of carton sizes.
To conclude, the set of transport cartons impact supply chain e ciency and supply chain costs as it a↵ects operations throughout the entire supply chain. A small set of transport carton sizes could lead to improved supply chain e ciency as it facilitates the selection of an appropriate transport carton size in the manufacturing sites, leads to more e cient container loading and last, facilitates handling and storing at the DCs. Further, findings show that a small set of transport cartons could lead to significant cost savings mainly due to improved space utilization in the transport containers and at the DCs. Thus, seen from a cost perspective, transport cartons should be selected to optimize for transport and handling at the distribution centers.
8.2 Opportunities for further research
In this case study two main aspects were identified as most important related to a company’s transport cartons and its impact on supply chain e ciency; the set of transport cartons and the fill-rate of the transport cartons. During this research, largest focus has been devoted to evaluating the set of transport cartons, taking fill rate into consideration as a subordinated parameter. An opportunity for further research is thus to evaluate how fill rate could be improved more thoroughly. Moreover, the research resulted in a model taking the total carton flow cost into consideration depending on the set of transport carton sizes. Thus, it would be interesting to compare the cost savings of a reduced set of transport cartons which was found in this thesis with potential cost savings coming from solely improved fill rate. Another interesting approach would have been to analyze the environmental impact resulting from the transport carton flow, from manufacturing of the cardboard box to recycling.
84 9. REFERENCES
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10 Appendix
10.1 Appendix A - First round interviews
Garment Care 2019-02-01 What criteria a↵ect what carton sizes that are ordered? Garments? Geographical market? Is there a transport carton strategy? What factors decide what transport carton size products are packed into? How does the carton sizes vary between online and store orders? What are the standard carton sizes? Why are di↵erent standard carton sizes used? Why does it exist many variations of the standard carton sizes? Are all variations needed? What are the requirements of the transport cartons in the di↵erent supply chain nodes? Could you describe the transport carton ‘life cycle’ – in detail? What is the price for di↵erent transport cartons? Does the price vary depending on size? How often are each carton size used? Is the packing instruction, which is created on the order placement day, used at the manufacturing sites?
Warehouse Controlling 2019-02-06 What is the transport carton’s ’life cycle’? What are the requirements on the transport cartons in the supply chain? In the warehouses? What is the lead time from manufacturing sites to the warehouses? Month, weeks, days? How often is each carton size used? Are the automated warehouse systems the same in every warehouse, in all countries? What is most cost e cient to optimize for? How many cartons are incoming to the warehouses in Eskilstuna and Bor˚asper day/week/month? Are the variations of the standard carton sizes problematic in general? Is any specific transport carton size problematic? How does the usage of transport carton sizes di↵er between online and store? What fraction of the incoming cartons are handled by the automation today? Which carton sizes can the grip arms at the warehouses handle today? How much would it cost to widen the precision span of the grip arms used at the warehouses? Which carton sizes can the conveyor handle today? How are cartons that cannot be handled by the automation handled today? What are the KPIs that are used most frequently? How long does a warehouse employee walk each day? What’s the cost distribution at the warehouses? What’s the average cost per employee per day at the warehouse?
92 10. APPENDIX
International Freight & Transport 2019-02-07 Do you pay for shipping per container? What does it cost to ship a container? What does third party logistics charge for? Per container? Per carton? Is International Freight & Transport or the third-party logistics responsible for on-loading of trans- port cartons into the containers? In average, how many times do you ‘lift’/’handle’ a carton? (Between production sites and distri- bution centers?) How is the relocation of cartons into di↵erent containers performed? Does container loading di↵er between production sites? Anything with the cartons that a↵ect the lead times? Better/worse? General opinions regarding cartons and carton sizes? What works good today? Why? What works bad today? Why? What can be improved? How frequent do H&M fill a container?
Sales 2019-02-08 How are your department a↵ected of what carton sizes the products are shipped in? General opinions about today’s carton sizes? What is good? What could be improved? What is bad? If we would to use the same standard carton size for store and online, would it have impact on your business unit? If yes, how? What are the biggest challenges for sales today regarding the carton sizes? How is the decision of which quantities that should be distributed to stores made? How important is it that the orders are ’exactly’ as sales want? Lead times?
Sustainability 2019-02-11 From a sustainability perspective – what is your opinion on the di↵erent carton sizes that exist today? If smaller carton sizes are used to a greater extent, to ensure high fill rate, would it be problematic seen from a sustainability perspective? What aspects are important related to the cartons from a sustainability perspective? Ex. Plastic, filling material, desiccants. What is good with today’s transport carton strategy? Why? What is bad with today’s transport carton strategy? Why? What could be improved with today’s transport carton strategy? Any comments regarding the shipping of the transport cartons? Other comments?
93 10. APPENDIX
Buying O ce 2018- 03-18 What is most important for Buying O ce when placing an order? What factors do Buying O ce take into account when ordering products? How do Buying O ce estimate what quantity that should be ordered to di↵erent markets? How accurate is the quantity that Buying O ce orders? Does the order process vary depending on market size? Does Buying O ce take how many DCs that exist in a market into account when placing an order? How important are the lead times for Buying O ce when placing an order? How is Buying O ce a↵ected if orders are held one week to ensure better filling rate in the trans- port containers. Have the orders changed over time? Smaller/bigger quantities? Do you think that the orders will change in the future? For example, smaller quantities and shorter lead times? How are Buying o ce a↵ected by the di↵erent carton sizes? Is it possible for Buying O ce to order ‘per carton’ instead of ’per piece’? What is good with today’s transport cartons? Why? What is bad with today’s transport cartons? Why? What would be an optimal carton strategy according to you? If it had been a common main standard carton size for online and store, i.e. SCX, how would it a↵ect your department? Pros/cons? How would the packaging be designed in ideal world? Has any container optimization project been done? Other comments?
Production O ce 2019-02-20 To what extent is the packing instruction followed? How flexible are the personnel allowed to be when choosing a carton? How do packing di↵er between di↵erent carton sizes (standard cartons)? I.e. SC2 and SC4? What are the biggest challenges for the manufacturing sites when packing cartons? How do di↵erent ways of folding a↵ect the Production O ce? Data regarding packing techniques, time, cost, experience, di culty level? What is good with today’s transport carton strategy? Why? What is bad with today’s transport carton strategy? Why? What can be improved? What are the biggest challenges for PO with today’s cartons? Other comments?
Warehouse Logistics - Automation 2019-02-21 What fraction of the transport cartons arriving at the distribution centers are handled by the au- tomation today?
94 10. APPENDIX
What measures can the gripping arms of the automation at the warehouses handle? What are the requirements regarding carton measures for the conveyors? How does the automation level di↵er between distribution centers in Germany and Eskilstuna and Bor˚as? Are there any di culties related to the carton sizes today, seen from an automation perspective? If so, what di culties exist? Are some of the carton sizes problematic to handle for the technique today? Which sizes? What is good with today’s carton sizes? Why? What is bad with today’s carton sizes? Why? What would be an optimal carton strategy according to you? How do you think that the distribution centers in the future will be organized/automated? How would new potential solutions for distribution centers a↵ect the carton strategy/carton sizes?
95 10. APPENDIX
10.2 Appendix B - Manual for cost estimation model
Figure 29: Manual for cost estimation model
96 TRITA TRITA-ITM-EX 2019:279 ISRN 46
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