The concept of skinny design—making product packaging smaller—has potential benefits for consumers, retailers, and the environment. This episode of McKinsey Talks Operations explores cost savings, sustainability, and the commercial advantages of reducing the size of product packaging, and discusses innovative solutions such as nesting products and honeycomb packing formats to reduce stockouts and improve sustainability and customer experience.
Additionally, we will highlight the importance of cross-functional collaboration in product design and the need for stakeholders to align incentives for optimized product development programs. Host Christian Johnson is joined by partners Dave Fedewa and Benedict Sheppard and expert Lea Kobeli from McKinsey’s Operations Practice. Their conversation has been edited for clarity.
Dave Fedewa: It’s sort of a classic win–win–win solution. There’s a consumer element, there’s a store stocking element, there’s a cost freight reduction element, and there’s a big sustainability benefit as well.
Christian Johnson: That’s Dave Fedewa talking about the benefits of skinny design, the topic of this episode of McKinsey Talks Operations.
Welcome to McKinsey Talks Operations, a podcast where the world’s C-suite leaders and McKinsey experts cut through the noise and uncover how to create a new operational reality. I’m your host, Christian Johnson. I’m the global Operations Practice executive editor, based in Hong Kong. Today’s guests are Dave Fedewa, a partner based in Atlanta. Welcome, Dave. Lea Kobeli, a design expert based in the Bay Area. Welcome, Lea. And Benedict Sheppard, a partner based in London. Welcome to you, Benedict.
What do we mean by skinny design?
Benedict Sheppard: Happy to start there. A skinny design is perhaps too complex a term because we’re simply saying make things smaller. And the reason why that’s so important in 2023 is it brings not one but four benefits. It means less material cost, it means less shipping cost, it means more product on the shelf, so fewer stockouts. And fourth, and perhaps most importantly, it means less environmental impact as well.
Christian Johnson: Thank you, Ben. So what I’m hearing is a big cost component, and I’m sure in the current environment, cost is a big deal. I’m also hearing a sustainability element, and it sounds like there are also some commercial elements. Walk me through this. What is the big reason why we want to get things smaller and still make them appealing to the consumer?
Dave Fedewa: I’ll walk through all three of those. I think there’s a big angle in terms of freight savings, an expense that has increased dramatically in recent years. And there’s an angle around the more of a product that I can get in the container or the truck, the less that truck costs per unit. And that’s often overlooked in the design process for the product. So that’s a big angle. There is also obviously an element around the less packaging I have, the less packaging material costs. So that saves money as well.
On the growth side, the more products I can get on the shelf as a retailer, the less I stock out. And stockouts are a common thing. In fact, it’s getting harder to stay in stock in many cases. So even an increase of 5 or 10 percent of products on the shelf can have a meaningful impact on sales. That’s the growth side. And then sustainability, coming back to the freight and packaging elements: obviously, less packaging is good, but also less CO2, diesel—those kinds of things—as I get more products on the truck.
Benedict Sheppard: An example to bring that to life could be something as simple as shampoo. Shampoo is 90 percent water. Today, manufacturers build a big bottle, they fill it with 90 percent water and a few chemicals. They put it on pallets, send it around the world, again, mainly shipping water, and then put it on a shelf in a Walmart or equivalent where most of the space is water. You may have noticed that water word coming up a few times. Imagine a different world. Imagine a world where instead you said, “Let’s send out a dehydrated powder in much smaller packaging.” Less material creates less impact on the planet. We put it onto smaller transport vehicles, creating less impact on the planet. We put it into a store where it takes up less space. And then still when you use it at home and you go into the shower, it foams up and the experience is still a luxurious one. So no hit on the consumer experience, but better on cost and certainly better for the planet. Just one example to make that’s a bit more real.
Christian Johnson: That gets to a question I had when I heard the word smaller. How do we make this a good deal from the consumer’s perspective?
Lea Kobeli: I think this is interesting because with e-commerce becoming so much more prevalent with big packaging and big canvas, you could have a big advertising space to communicate your brand. But now with more e-commerce shopping, a good picture online and a good review might be more important than big branding space on a big product. So there’s an opportunity to even go, to some degree, brand agnostic. You would really have to prove that your product is good, and that’s an opportunity to shrink it and still create appeal.
Christian Johnson: Thank you, Lea. Let’s also take a look from the retailers’ perspective. One of the things that Dave mentioned before was about stockouts, for example. Let’s walk through one of these products and think about what’s the stockout problem we’re facing right now and how that gets solved by creating a different package. And maybe even one where it’s not a package, and it’s not a question of removing water. Maybe it’s something where you’re actually shipping water itself, but you’re changing the shape of the package. That’s where I’d like to understand some of the trade-offs and some of the potential benefits for different stakeholders.
Dave Fedewa: We could start with water as an example. Water is one that’s gone through an evolution recently, and I think continues to. Obviously, bottled water is a popular beverage, and it started out in a larger, thicker bottle that was largely packaged in a matrix format. It has evolved over time—depending on the brand and the price point and things—into a smaller, thinner, lighter-weight bottle packaged in more of a honeycomb format. You may have noticed how they’re offset. And that can be an increase of 10 to 15 percent in terms of cube efficiency or shelf-holding power, which means a lot.
If I’m the retailer, what does that mean to me? It means a couple of things. One, obviously, I have more on the shelf. If I have a delayed delivery, or all of a sudden, I have a spike in demand, I have 10 to 15 percent more on the shelf that I could sell versus what I would have had before. That’s a meaningful lift. The second is, as I go to stock that, the trip for the associate stocking the shelf is now 10 to 15 percent less, because I’m getting more on that pallet jack as I go to stock. So it has an impact there as well.
Benedict Sheppard: And for those of you who are mathematics geeks, this is the time to go back to high school, because you’ll remember circles. They have about 78 percent packing efficiency, whereas squares and triangles can be 100 percent. So there might be a moment to go back and create something that is triangular, which actually stands out from the competition, and allows 100 percent packing efficiency. And because triangles are such a strong shape, you also have fewer things damaged when they’re being shipped. So let’s all go back to high school geometry.
Dave Fedewa: I’ll take your three sides and go up a side. People have seen—and I’m sure some of the listeners have seen—square bottles. And that’s both interesting and different, but also a lot more cube efficient. That’s one of the angles that some of the manufacturers are taking. I would add one other interesting one. I think what everyone’s seen are the cool skinny cans. And they’re 12-ounce cans—so, same size. There’s potentially a connotation to if I’m drinking a skinny beverage, it might make me look skinnier or help me get skinnier. The human brain works in funny ways. But for sure, there is a benefit in terms of cube efficiency. And again, it’s on the order of 10 to 12 percent—that skinny can—you just get more in a smaller space than the traditional 12-ounce can.
It’s a classic win–win–win. There’s a consumer element, there’s a store stocking element, there’s a cost freight reduction element, and there’s a big sustainability benefit as well.
Christian Johnson: Thank you, Dave. I’d like to probe a little bit into some of the kind of nitty-gritty trade-offs in thinking about how companies need to change their mindset in the real estate that they have on packaging for marketing. How can less real estate end up being higher value for a company?
Lea Kobeli: I think that’s a really good question. Especially the skinnier you go. If you have interior and exterior spaces, you can create additional canvas for communicating or engaging with customers. You’ve been seeing a lot of QR codes. I think that’s an interesting idea and can work on some products to engage with customers. On the other hand, for companies, that might mean that they need to upkeep content, and is it worth doing that for the potential visits they see from customers? So it’s looking at what are the best opportunities? And then the third one is about claims. What kind of claims can companies make if the real estate is sparse? And in terms of sustainability, we’ve learned that the more claims we can credibly make, the better—it’s not greenwashing, but they can claim that this is fair trade, ethically sourced, and we’re using sustainable packaging. That has a big impact on consumers, and we’ve seen a growth rate on that as well.
So there is an opportunity to create more messaging, create QR codes, and create ways to tell a distinctive story—and where the outside now has become maybe brand agnostic. You might see it with concepts like the Nike shoebox. One box is looking at not printing any logos on the outside, making a stealthy exterior—a strategic choice for security. They don’t want [the box] stolen from a porch. But when you open it up, there is real estate to engage with your customers to tell that story and have a point of differentiation.
Christian Johnson: That raises a question for me, because if you’re talking about shoeboxes, I walk into a standard retailer and I see every shoebox is the same. Whether I’m wearing my size ten and a half men’s shoe or I’m buying something for someone who’s much smaller than me. How do we balance the standardization versus reducing the packaging?
Lea Kobeli: This might be less of a consumer’s pain point, but I think when companies look at shoe brands, they look at a variety of boxes, from a sandal type to a big work boot. And they have to accommodate all the sizes from a 25 to a 42. And you would think, OK, you want to create as little headspace for each of the shoe sizes as possible so that you’re not shipping extra air, but then it becomes a huge inventory, SKU management, and a nightmare of managing all these different boxes. There’s a trade-off between what is the right consolidation amount of boxes for inventory to keep within the acceptable headspace. So there’s that kind of fine range where you have to figure out what the sweet spot is between how many boxes can you make and how much to keep headspace in check.
Christian Johnson: The question that comes to my mind is, why haven’t we already seen a lot more of this? Why aren’t more companies doing this?
Benedict Sheppard: If you think about the example of the shampoo, that touches a lot of people. You’re looking at the engineers, you’re looking at the designers, you’re looking at people from a procurement point of view, from a supply chain point of view, from a logistics point of view, and from a sales point of view. All those people have pretty different incentives in many organizations today. Therefore, one of the challenges is how do you get cross-functional incentives so that everyone feels a sense of responsibility to deliver great material cost, great customer quality, and also consider logistics. Easy to say, hard to do. And we’ve seen examples of companies being very bold in terms of changing senior-management incentives. The challenge is to find a balance between customer satisfaction and material cost and ESG impact. There are very few world-class examples to point to today, and I think that’s an exciting area for the next two or three years.
Christian Johnson: Thank you, Ben. What do we think is different about companies that have been able to do this? What are they doing differently now?
Dave Fedewa: I think, to build on Ben’s comment, they’re looking at the end to end and saying, “How do I make this better, not just for me, but for my customer?” And maybe I’m two or three steps down the value chain, so maybe it’s my customers’ customer. And then how do I also make it better for the world, right? I have to care deeply about sustainability. And I think companies that are asking, for example, “How do I make a real impact on sustainability,” very quickly arrive at the conclusion that if I don’t actually get into the product itself, it’s going to be hard for me to move the needle in a real way on my total footprint. Then they start looking into the product and say, “OK, how can I do that?” And then they take an end-to-end view and say, “Well, that includes freight. And that includes what happens to the retailer. And that includes what happens to the customer.” And ideally, with a completely circular view, they end up with a different answer.
Christian Johnson: If you think of a manufacturer on the one hand, a retailer on the other, where does the value tend to go? Who tends to get more value out of this sort of an effort? Who’s got the immediate incentive to undertake this?
Benedict Sheppard: This is often a no-brainer for the retailer because they often don’t have to do too much. A really proactive supplier will say, “Right, we’ll do the exercise. It reduces costs and has ESG benefits. And by the time it reaches stores, you can put more on the shelf.” No one is going to say no to that.
Christian Johnson: Terrific.
Lea Kobeli: Yes, probably the brands are wanting to claim more space next to their competitors. There’s also this price premium: the bigger the package, the more price I can ask for. So if it’s stacked next to my own products or competitor products, there’s still probably that issue that needs to be solved.
Benedict Sheppard: Balancing that with ESG and other demands beyond just profitability and usability is a very difficult piece. And this may sound like a simple suggestion, but every company could just start by coming together at the beginning of a new product brief and saying something like purpose, people, profit, planet.
Purpose: Why are we doing this at all? People: Does this deliver a better experience for our customers and their end users? Profit: Does it make financial sense to do this? And planet: not only does it leave us in the same neutral position, but let’s set a higher bar; let’s set these in a better position. Those are the types of questions that the new generation of designers can and should be challenging their organizations with.
And I say that to say, I don’t think we should wait for policy changes; I don’t think we should wait for ESG mandates; I think there’s an extraordinary ability for the next generation to start having impact immediately as they enter the workforce this year.
Lea Kobeli: I think that goes also with cross-functional working: making sure that designers aren’t designing in isolation. For example, just the packaging for something that’s already been designed, and they have no input in the product itself. For instance, there are ways to nest products, ways to disassemble products and ship them stacked into each other. So how you actually design the product for shipment might really impact the CO2 emissions you’re putting out there versus packaging it tighter and getting more optimization with container utilization, etcetera.
I think there’s an opportunity to think about how we redesign the product to make the packaging better as well and work across teams to standardize things where there are similar sizes.
Dave Fedewa: There is an interesting lesson to be learned from the pure e-com players to some degree. Some of these are kind of arcane products, for example, on Amazon, where they do see the end-to-end impact, at least financially, right? But some are aware of the sustainability element. But certainly the growth and cost elements that we talked about earlier, they are well aware of. And they see the full end-to-end because that’s the way the pure-play e-com supply chain works.
I’ll give a funny example. We have a dog, and we ordered a pooper scooper recently. Just think long handle, scoop at the bottom kind of thing that you go to the hardware store and see lots of those kinds of products, right? But in terms of e-com, it doesn’t ship very well.
This pooper scooper is designed so that the handle folds. There’s a hinge in the middle of the handle that allows it to fold in half. Most of the market would say, “I don’t really need a folding pooper scooper.” Why are you adding the cost of that hinge and everything else? It’s fine, there are no tools. It doesn’t bother me. I just unfold it the first time, use it, and I’m good to go. It locks in, right? When you understand the implications of the end-to-end costs and growth implications of being able to stock more of those because the handle folds in half, then you understand why you have a folding pooper scooper. And I give that example because that is, in some ways, at the forefront of what we’re talking about being led by a smaller niche of players who are very aware of the end-to-end impact.
Christian Johnson: Thank you, Dave. Let’s also take a look beyond fast-moving consumer products, because this has an application in a lot of other examples as well, right?
Dave Fedewa: Absolutely. Another example, from the world of hard goods, would be lawn mowers. Especially as mowers have made the transition to electric, which is great for a whole variety of reasons, they are increasingly shipped from overseas. And as you do that, obviously, the cost of freight becomes more important to manage.
As recently as a year ago, there was a very visual example of this. In one of the big retailers, where one competitor had four mowers in a stack underneath the beam on the shelf, the other competitor had a very similar mower stacked up with the same price point. Only three mowers fit onto the shelf. And the trick was how the handle nested with the body and how the wheels were assembled. And you could have probably put 15 mowers under that shelf if you made people assemble it from scratch. The problem with that is that’s a terrible customer experience.
What you end up with in many cases in that world is adding cost to the bill of material because I need to make it a very easy no-tool assembly, less-than-five-minutes kind of thing. So I’m not hurting the customer experience, and I more than recoup that added cost. I get a multiple on that and freight. But the trick to being able to do that is to have the accounting visibility to say, “I can give you that added cost in your bill of material. And you can spend it out of the freight savings that you’re generating.” And that is uncommon for many companies today to be able to do that.
Christian Johnson: Based on that, it sounds like one of the key stakeholders who needs to be involved is the CFO, right? To get these incentives aligned and make sure that the accounting process supports this?
Benedict Sheppard: The answer is absolutely, on paper. In reality, what it means is cross-functional working. It means even if you didn’t have a CFO when they were on holiday, you should have the people who are sitting in the logistics department, the people who are sitting in material cost, and the people who are sitting in design working together. And one of the things that we saw is those working together in a town hall-like fashion versus in ivory tower isolation, regardless of the incentives that finance put in place. If you have good collaboration, a lot of it will be solved operationally on the ground anyway. It’s a nice enabler, but it’s an “and” rather than the solution.
Lea Kobeli: And if there are multiple brand owners within one big company, you have to make sure that all the brands are aligned on this as well and want to support and work cross-functionally and share some of their findings as well to be applied across maybe multiple brands, both the learnings and the savings from that.
Christian Johnson: I think this is crucial. You’re not only speaking of the internal stakeholders, but you’re also trying to get the voice of, if you’re a manufacturer, your retailer, the voice of your logistics partner; all of those partners need to get involved, right?
Benedict Sheppard: That’s exactly right. And some of you will have noticed that about four years ago, the Business Roundtable, which is a collective of the most senior CEOs in the US, came together to redefine what a company is. And for a long time, the old adage had been we were there to maximize shareholder value. I think everyone has now realized what a myopic definition that was. And as they were looking at the definition, they were saying, “No, we have a responsibility to our employees, to our customers, to our suppliers, to broader society.” And I think that onion-like thinking for people doing design work is absolutely critical.
Christian Johnson: Excellent. Thank you to everyone today.
Dave Fedewa: Thanks, Christian.
Benedict Sheppard: Thank you, Christian.
Lea Kobeli: Thank you, Christian, and everyone.
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