Automotive Looks to Rationalize Use of Reusable Packaging

This Autumn, the automotive industry held a “Returnable Containers Call to Action and Best Practices Summit” at the AIAG (Automotive Industry Action Group) headquarters in Southfield, Michigan. AIAG host Morris Brown had a full house of over 100 people, plus another 40 or so attending via an Internet connection for the half day event.

As keynote speaker, Dr. Diana Twede of Michigan State School of Packaging said that there are trends that favor the growth of reusable packaging growth. These include increasingly sophisticated supply chain management, growth of automated ID capture, more and more 3rd party providers offering full service management of reusables, pressures to reduce solid waste, and compelling results of Life Cycle Analysis studies.

Those trends aside, the current economy has caused the automotive industry to take a brutally hard look at their approach to reusables. For many years, several of the major assembly plants wouldn’t even let disposable packaging into their facilities. Parts arriving in disposable packaging or wooden pallets were repacked at nearby off site locations for kitting or sequencing for delivery in steel racks or plastic packaging to the production line.

Now, however, all bets are off. According to participants from Ford and Chrysler, each part is analyzed on its own merit, and if a cost savings cannot be identified by switching to reusable packaging (especially for low volume or globally sourced components), then in some situations these are now delivered to the line in disposable packaging.

Presenters from Ford and Visteon, a major automotive supplier, stressed the importance of flexibility when selecting reusable packaging, in order to postpone the obsolescence of containers in the rapidly evolving global automotive marketplace.

“Visteon, for those of you who read the news, is bankrupt, so we don’t have money for new containers,” Timothy Nickel of Visteon commented dryly. Previously, Visteon operations had made their own purchases at the plant level, and the result had been excessive “mountains” of obsolete containers and storage charges associated with them. When he put up a slide showing a yard area cluttered with a smorgasbord of different plastic pallets and containers, many in the audience nodded in agreement. It seems that the stockpiling of old containers and pallets is a common problem.

With this in mind, containers at Visteon were shifted from a plant owned to a corporate asset in order to harmonize operations. An internal web portal was built, and plants are required to check existing corporate inventory before purchasing new containers. In 2008, Visteon avoided over $1 million in new container purchase by reassigning and reusing existing containers, while 150 truckloads of obsolete containers were sent to regrind. New containers are still purchased where there is a cost justification, such as a newer design that allows more densely packed parts and hence logistics savings.

In a session on container and pallet tracking, Bill Hoffman of Hoffman Systems asked attendees what were their pain points when it came to container tracking. A clear consensus came from the audience that their biggest tracking challenge came from trying to control their plastic pallets and lid systems. One of the challenges is that the pallets and lids are similar in design, but always compatible. So if one supplier is requesting pallets back, there is a tendency to send unsorted pallets. In essence, the automotive industry pallets function as an informal pool, but a lack of standardization clearly hampers efficiency and painful pallet shortfalls among users. Other tracking issues raised were frustrations around lack of visibility, poor communication and issues about data collection. “Do you have it; do you trust it?” Bill asked.

Dr. Twede pointed out that while the automotive industry does an exceptional job of tracking the inventory of parts shrouded in darkness within the reusable containers, there is a lot of pain around the management of the reusable containers themselves. Several attendees pointed out that it is a matter of economic incentive. There is typically no value or deposit attached to them, and limited tracking, so for trading partners there is no great motivation to get them back to their rightful owners.

Dr. Twede raised the idea of formally pooling the pallets and lids, and pointed out other successful industry cooperative pallet pools such as CPC in Canada and the Svenska Retursystem in Sweden.

The meeting finished with a call from Bill asking if there was for interest from AIAG members in forming a reusable container committee. “If you don’t help create the solution you have to live with it,” he said. He encouraged participants to submit a New Work Proposal to AIAG in order to get the process rolling. Overworked and understaffed like most everyone else these days, we’ll have to wait and see if those participants have enough gas in the tank to collectively address their nagging issues with respect to managing reusable packaging. My thanks go out to Morris Brown and the other members of the AIAG team for putting on a very well run and informative meeting.