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Developing a cost estimation model for packaging material - Based on a multiple-case study within the food packaging industry

Peterson, Jacob LU and Dahlström, Mathias LU (2013) MTT920 20131
Packaging Logistics
Abstract
Background: Historically, the use of packaging has often been regarded as a necessary evil, associated with unnecessary costs, but needed to enable distribution of goods. Today many companies have begun to realise that the packaging can have a major impact on the supply chain. For Tetra Pak, it is of great importance to be able to offer deeper insights to the costs incurred by their packages, thus being able to increase the value proposition towards their customers.

Problem description: As of the current situation, Tetra Pak has limited insight into the costs that their packages incur for their customers in terms of the material used in the packages. The models in use at Tetra Pak today cannot be used to identify the costs incurred by... (More)
Background: Historically, the use of packaging has often been regarded as a necessary evil, associated with unnecessary costs, but needed to enable distribution of goods. Today many companies have begun to realise that the packaging can have a major impact on the supply chain. For Tetra Pak, it is of great importance to be able to offer deeper insights to the costs incurred by their packages, thus being able to increase the value proposition towards their customers.

Problem description: As of the current situation, Tetra Pak has limited insight into the costs that their packages incur for their customers in terms of the material used in the packages. The models in use at Tetra Pak today cannot be used to identify the costs incurred by Tetra Pak’s products specifically in the material inventories of their customers.

Purpose: The purpose is to develop a material inventory cost estimation model for packaging material used for liquid food and beverages, which is able to estimate the cost of handling and storing 1000 units of packaging material in material inventory.

Objectives: The objectives of this thesis are to identify and define the process undertaken in material inventory, map the process to visualise and create an understanding of the material flow, develop a general cost estimation model and to draw conclusions from the findings of the study.

Method: The study is performed as a descriptive qualitative multiple-case study where mainly quantitative data has been used. The inductive approach was used, i.e. empirical data collected through observations during the case study.

Conclusions: The cost estimation model can be used to calculate the total cost as well as the cost per activity for 1000 units of material, enabling the user to identify which activities have greater or less impact on the total cost. However, when calculating the cost per 1000 units the consumption period of 1000 units is not taken into consideration which could lead to a misleading result. Another factor that affects the result is the usage of different measurement units of the materials which make some of them hard to compare. The multiple-case study has also shown that the activities’ impact on total cost differs both when comparing the same activities between cases and between different activities within the same case. Since the study is based on three cases the model cannot be used to draw statistically significant conclusions. However, since the model is to be used within the same context as the conducted case studies, chances are increased that the level of transferability is sufficient to fulfil its purpose. The authors believe that the cost estimation model can assist Tetra Pak in getting deeper insights into the costs incurred by their own packages in material inventory, enabling them to increase the value proposition towards their customers. (Less)
Please use this url to cite or link to this publication:
author
Peterson, Jacob LU and Dahlström, Mathias LU
supervisor
organization
alternative title
Utvecklingen av en modell för beräkning av kostnader i materiallager - Baserad på en multipel fallstudie inom livsmedelsindustrin
course
MTT920 20131
year
type
H2 - Master's Degree (Two Years)
subject
keywords
Cost estimation model, material inventory, packaging material, Activity-Based Costing, multiple-case study, packaging logistics, process mapping
ISBN
978-91-980817-1-8
language
English
id
3802976
date added to LUP
2013-05-31 08:28:38
date last changed
2013-05-31 08:28:38
@misc{3802976,
  abstract     = {Background: Historically, the use of packaging has often been regarded as a necessary evil, associated with unnecessary costs, but needed to enable distribution of goods. Today many companies have begun to realise that the packaging can have a major impact on the supply chain. For Tetra Pak, it is of great importance to be able to offer deeper insights to the costs incurred by their packages, thus being able to increase the value proposition towards their customers.

Problem description: As of the current situation, Tetra Pak has limited insight into the costs that their packages incur for their customers in terms of the material used in the packages. The models in use at Tetra Pak today cannot be used to identify the costs incurred by Tetra Pak’s products specifically in the material inventories of their customers.

Purpose: The purpose is to develop a material inventory cost estimation model for packaging material used for liquid food and beverages, which is able to estimate the cost of handling and storing 1000 units of packaging material in material inventory.

Objectives: The objectives of this thesis are to identify and define the process undertaken in material inventory, map the process to visualise and create an understanding of the material flow, develop a general cost estimation model and to draw conclusions from the findings of the study.

Method: The study is performed as a descriptive qualitative multiple-case study where mainly quantitative data has been used. The inductive approach was used, i.e. empirical data collected through observations during the case study.

Conclusions: The cost estimation model can be used to calculate the total cost as well as the cost per activity for 1000 units of material, enabling the user to identify which activities have greater or less impact on the total cost. However, when calculating the cost per 1000 units the consumption period of 1000 units is not taken into consideration which could lead to a misleading result. Another factor that affects the result is the usage of different measurement units of the materials which make some of them hard to compare. The multiple-case study has also shown that the activities’ impact on total cost differs both when comparing the same activities between cases and between different activities within the same case. Since the study is based on three cases the model cannot be used to draw statistically significant conclusions. However, since the model is to be used within the same context as the conducted case studies, chances are increased that the level of transferability is sufficient to fulfil its purpose. The authors believe that the cost estimation model can assist Tetra Pak in getting deeper insights into the costs incurred by their own packages in material inventory, enabling them to increase the value proposition towards their customers.},
  author       = {Peterson, Jacob and Dahlström, Mathias},
  isbn         = {978-91-980817-1-8},
  keyword      = {Cost estimation model,material inventory,packaging material,Activity-Based Costing,multiple-case study,packaging logistics,process mapping},
  language     = {eng},
  note         = {Student Paper},
  title        = {Developing a cost estimation model for packaging material - Based on a multiple-case study within the food packaging industry},
  year         = {2013},
}