Cisco's Packaging Diet: Just How Sustainable is It?

Cisco's Packaging Diet: Just How Sustainable is It?

Packaging is too often a manifestation of excess and waste. All that extra cushioning. All of those individually wrapped parts. Not to mention packaging that is not easily recycled. Product manuals and accessories that are often just thrown away.

Eighteen months ago, I reported on the packaging problem and encouraged vendors to go on a "packaging diet." My two-part series focused on best practices for packaging reduction. One of my case studies in the series, Cisco's promising pilot program, was highlighted in the Esty / Simmons sequel The Green To Gold Business Playbook.

Since the easy part is often in the early stages with many diets, I wanted to learn how Cisco was doing over the long-term. Glenn Nomi, Cisco's program manager of green technologies and Oleg Kolosov, manager of Cisco's packaging team, met with me and provided an update.

The top-line takeaway: The packaging diet is working: Cisco has saved nearly $40M in two years, eliminated 10 million pounds of packaging in addition to shifting to more sustainable packaging materials.

Cisco continues to expand its program to more products while refining its packaging practices. The program applies to both shipments to Cisco's customers as well as Cisco's internal shipments to its manufacturing partner sites.

Cisco's green packaging program uses three strategies:

  1. Remove items that are not wanted from a shipment,
  2. Reduce packaging, and
  3. Replace with more environmentally friendly packaging

Let's review the details and specific examples for each strategy.

1. Remove

Cisco, like most in the industry, shipped complimentary accessories that would support the installation of its product such as tools, cables, and power supply blanks. The intention was good, but most customers had outgrown this approach. Yet Cisco still wanted to support those customers that used these accessories.

Cisco had to determine when to assume that customer prefers to forgo accessories and when to assume that customer would be best served by providing accessories automatically.

Cisco reviewed its product ordering patterns to determine if customers were ordering any of the related accessories. Nomi explained, "If a large percentage of customers who order a particular router or switch don't order its related accessory, we then made that accessory opt out [i.e., they don't include that accessory]."  

Cisco also took into account the maturity of the product. Nomi continued, "If a product has been shipping for a few years and customers are used to seeing it a certain way, we will generally opt in [i.e. they do include that accessory]. Whereas on a new product launch, depending on the ordering patterns for the previous generation product, we will generally opt out."

Cisco alerts customers when accessories are no longer automatically included in the shipment documentation. Customers may order any accessories still required.

This approach is considered ideal by behavioral psychologists and documented in the book Nudge, by Thaler and Sunstein. The premise is that most of us, even with good intentions, never get around to making a change, so the biggest impacts are possible when the changes we would like to make are made for us.

Another consideration in Cisco's case is that many companies build product shipments based on the belief that their customers aren't be experts in installing a given package, so they choose to include all the accessories "just in case." Cisco is obviously taking the opposite route -- which Thaler and Sunstein conclude is the best approach: Make the desired behavior the default while allowing different choices should the customer specify.

2. Reduce

To reduce its packaging, Cisco considered the packaging materials, the transportation footprint and the product itself.

With its line card packaging, Cisco reduced the volume of foam cushioning used. It was then able to reduce the size and weight of the outer corrugated box. This change alone is expected to save over 180 tons in materials.

Trimming packaging by even a bit may impact transportation since a smaller footprint allows more items to ship together. Kolosov states, "Since the environmental impact from transportation and logistics is higher than the material use, you can reduce a unit's environmental impact by increasing its space/cube efficiency."

Transportation costs are typically the largest single component of the packaging benefits, so space optimization is an excellent area to focus on when going on a packaging diet.

Another technique to optimize transportation footprint, Cisco shifted from single packs to multi-packs whenever possible. Wood pallets were also eliminated. The space savings are often dramatic as shown in the "before (right) / after (left)" photo for routers.

Cisco also changed from individual units to shipping the products already assembled and configured. For one high-end router, the goal is to use a single carton to replace 13 separate packages. The packaging weight will be reduced more than 60 percent.

Cisco is consolidating the packaging in two phases since the ideal requires more technical work before it is ready to roll-out. The planned progression may be reviewed in the table below. Cisco is currently shipping seven boxes and reduced the packaging weight of each shipment by 40 percent and costs by 55 percent.

figure 1

For new products, product engineers consider distribution during product design. By considering distribution early, downstream costs for packaging materials and transportation will be reduced. Kolosov specified that design guidelines include "Eliminating protrusions that require extra cushioning and larger box, reducing product size and weight while making the product sturdier."

3. Replace

After reducing the overall material used for packaging and eliminating unnecessary accessories, Cisco's packaging team then focuses on using greener options.

Documentation has been a long-term effort. Cisco first replaced its paper manuals with a CD, but followed that up with even smaller, and less resource-intensive, paper cards that serve as pointers to send customers online for documentation.

One added benefit for Cisco was gaining more time to prepare documentation prior to the launch of a product. Preparing physical documentation required longer lead times for the publication process compared to electronic. Additionally, if documentation needs to be updated, it is a simple online update and there's no need to discard outdated documentation.

Where possible, Cisco uses packaging materials with recycled content. Its corrugated cardboard is approximately 50 percent recycled content. Recyclable polyethylene bags are used for many purposes. Thermoformed cushions that are made from 100 percent recycled polyethylene have been rolled out in recent years.

Unfortunately, Cisco has not yet found a green option for every application. Thermoformed cushions are not suitable for every product and consequently some products still use foam cushions. Likewise, ESD (Electro Static Discharge) bags are still used. In those cases, Cisco minimizes the quantity and amount of material used and is also evaluating an internal reuse program.  

Cisco supports customer recycling by providing packaging that is made of a single material or easily separated for recycling. The ability of customers to recycle Cisco's packaging depends largely on the recycling processes available in their region. Nomi stated that "In regions with a robust recycling, customers should be able to recycle more than 99 percent of our packaging by weight."

Results

Cisco has realized significant cost savings as a result of their efforts. Projects implemented during the past 2 fiscal years have resulted in annualized saving of:

Year Total Savings Total Weight Savings Per Pound of Material Eliminated FY10 $19 million 6.4 million pounds $2.97 FY 11 $19.3 million 3.3 million pounds $5.85 TOTAL $38.3 million 9.7 million pounds $3.95

(Note: Cisco only includes savings for a product for one full year.)

Although the green goal is to reduce packaging materials, Cisco still needs to protect the product. Kolosov said, "A damaged product is bad for the environment, customer satisfaction and cost."

In my discussions with a variety of packaging engineers across different industries and companies, the challenge is shifting from an "old-school" approach where engineers single-mindedly design for product protection.

Cisco found that a balance can be achieved. To reduce both damage and materials, Cisco focuses its effort on designing packaging to prevent product scraping during transport. Nomi confirmed that, "We saw no increase in our damage rates with the new leaner packaging."

Cisco is constantly looking for opportunities for continuous improvements. Cisco's goal is to launch all new products with the packaging optimized.  But with any diet, there can be fallbacks. Nomi acknowledged, "It's clearly better to do it right the first time than to go back and fix it later.  That being said, there are instances where the product timeline requires us to go back to optimize packaging post product launch."

When we diet and succeed, we hope people notice our efforts. Industry colleagues and customers applaud Cisco's trim new packaging.

Cisco was rated #9 by Interbrand's Best Green Brands in 2011. Interbrand also recognized Cisco as highest in the "sustainable supply chain" category.

A sampling of customer feedback includes appreciation in the reduction in waste and time uncrating. As one customer said, "Not only is this great for the environment but it also makes the job of assembling the phones a little bit quicker."

One other customer observed, "You have improved environmental efforts (bulk-packs, reduced documentation, etc.) I'd like to see more." Cisco has made great reductions on their diet, but like most dieters, would still like to lose a few more pounds ... recognizing that the excess gets harder to lose the thinner one gets.

Top photo CC-licensed by tuxstorm.