Reducing Reusable Packaging Losses Using Smart Logistics

‘Why is a beer truck here to pick up our old computers?’ and other reports from the frontline.  ReturnCenter offers tips for efficient reverse logistics of reusable packaging.

 

Shawn Stockman of ReturnCenter, speaking at ProMat. He shared examples from the field.

Shawn Stockman, director of business solutions for ReturnCenter, talked about the company’s website and services as well as customer case histories. The topic of his presentation was ‘Cut Reusable Packaging Losses Using Smart Logistics.’

ReturnCenter (www.returncenter.com) is a website operated by OnePak Inc. and is used by businesses to ship computers, medical, and office equipment in reverse through the supply chain — commonly for returning leased equipment. OnePak is a licensed freight broker that arranges shipping through one of its preferred logistics providers. Behind the ReturnCenter site is a system that secures qualified logistics companies at volume-based prices, determines efficient routing, provides custom packaging materials and labels and deploys trained professionals to pack onsite and transport.

At the outset of his remarks, Shawn referred to the moon walk, the dance move made famous by Michael Jackson that gives the “illusion of moving forward when you’re really moving backwards.” The same can hold true in the business world, he suggested. Working hard does not always set you up for success, as he explained in the following case study.

Manual tracking of reusables can be heroic, but not necessarily very successful. A system helps

He spoke about a company that developed a pool of beer kegs that were leased to distributors. Overall, there are about 10 million beer kegs in circulation in the U.S, according to Shawn. Each year, 500,000 are lost or missing, industrywide. The client’s pool of kegs was equipped with RFID tags to maintain control over them. The business quickly flourished and In fact began running out of kegs due to business demand.

In order to expedite keg return, the company relied on a single employee who made phone calls to 200 distributors, asking if they had empty kegs that could be retrieved. She also would call to get quotes from logistics providers for pick-ups. She managed these tasks with spreadsheets and by relying on her memory.

“They thought they were moving forward,” said Shawn, but the “weak link” was the way the tasks were being performed. “She was doing a good job,” he added, and working hard. However, “What she needed was a system.”

Getting control of logistics to stop paying for returns of the wrong products

“What we’re talking about today is using a system to go a little beyond the superficial problems,” said Shawn, who called OnePak and its ReturnCenter a “systems company” with roots in the information technology business. Client companies use it to manage, track and improve the processes of retrieving goods. It helps client companies ship about 2 million pounds of goods per week, he said. He offered several examples of client applications in the information technology industry but noted the services are comparable to and can be applied to the reusable packaging industry.

For example, a customer business was using Goodwill Industries to retrieve used or damaged electronic goods to meet state recycling mandates. There were 100 collection sites around the country. The manufacturer was paying Goodwill to take them, collect them, and for the logistics involved in the recycling process. Electronic recycling companies, who were in charge of logistics, would pick them up from Goodwill; they would take a load and send a spreadsheet to the manufacturer. To the surprise of the manufacturer, an audit revealed that the recyclers were including unrelated goods included in the company’s agreement with Goodwill, but the manufacturer was inadvertently paying for it because they had no control over the loop. “They had holes in their collection program,” said Shawn, in their “reverse logistics bucket.”

“There needs to be a third party with a system,” said Shawn, that enables the original equipment manufacturer to control where the goods move, who moves it, and how the steps in the reverse logistics process are reported. “That’s lesson number one.”

Optimize routing to improve performance, but be clear what you want to optimize (eg. cost, speed, miles)

In an example involving reusable containers, Shawn’s company was approached by a business in the food industry. It was using a loop of returnable crates to transport product from packers to supermarkets, back to a distribution center to be washed and sterilized, and then deployed back again into circulation. The business, which had six locations, wanted to explore ways to optimize routing.

Optimizing routing can mean different things, noted Shawn. It depended on what the company was trying to achieve. Did it want to save money? Transport products to market faster? Reduce the distance for transporting products to market?

 

Shawn’s associates looked at “the bigger picture.” They found that for the client’s Illinois location, full truckload average linehaul miles were about 830; other sites averaged 200-300. Optimizing strategically, if the company put another location in Poughkeepsie, N.Y., it could reduce linehaul miles 75 percent and save 217,000 full truckloads miles per year. “The lesson is…to get to the heart of it, you have to look at it strategically,” said Shawn.

Do you have a return shipping cost problem, or is it a business process problem? 

Another client thought it had a shipping cost problem. The business had remote employees and equipped them with leased laptop computers. However, as contracts were due to expire, workers failed to send them back or would not use the UPS packaging they were provided. “They had more problems than just shipping cost,” said Shawn.

With ReturnCenter, an employee could request a new laptop and a shipping kit for the old one at the same time. The packaging used to ship the new laptop doubled as the shipping kit for the one to be returned, and it arrived with a pre-paid label. With the change, the business began receiving the old laptops on time.

“More importantly,” said Shawn, the client company now could see who ordered a new laptop and shipping kit. It also had information about whenthey shipped the returned laptop shipped, when it arrived and when it was processed, so the lease could be terminated. The client spent more on shipping because they also were providing employees with the shipping kit, but it still saved money because it avoided late fees that it paid in the past because laptops were not returned on time. “They thought it was a shipping cost problem. It was a business process problem.”

“It’s one thing to think about reducing shipping costs,” said Shawn. “It’s another to think about the function of shipping or logistics. Think about shipping strategically.”

Organizing reverse logistics milk runs to generate full truckloads

ReturnCenter also worked with Goodwill in the Atlanta region, where Goodwill had 33 locations to process electronics returns for recycling. Each store was given a supply of reusable Gaylord boxes for shipping returned merchandise it collected for an original equipment manufacturer, and the store manager could independently decide when to ship returns. Each month Goodwill was shipping 10-15 single pallets of returns 300 miles to be recycled, and the original equipment manufacturer was paying for it — for 10-12 individual less than truckload (LTL) shipments per month.

With the ReturnCenter, now Goodwill schedules a truck to pick up the goods when the stores reach capacity, and they are picked up from multiple stores on the same route to make a single full truckload. “So the immediate effect was huge,” said Shawn.

However, the real lesson came from the different way of handling the reusable Gaylord containers. In the past, Goodwill took 10 for each location — 330 total empties. As it turned out, each store’s capacity was four, so they were issued five. The move reduced by half the amount of reusables needed in inventory. Goodwill reduced its logistics costs and also saved on containers. “What they thought was an inventory problem turned out to be a little deeper,” said Shawn.

Looking beyond the numbers

OnePak monitors the performance of logistics providers for ReturnCenter clients. It tracks key performance indicators against metrics, such as making pick-ups on time, returning goods on time, damage to goods, and other factors, and only uses logistics providers that continue to meet metrics and perform well.

“There is a beer truck here to pick up our old computers.”

“Extreme vetting applies here,” said Shawn as he related a somewhat humorous incident. His company received a call from a Toyota dealership, and the caller expressed concern about a beer truck that had arrived and said it had been dispatched to pick up computer equipment. It turned out the logistics provider had sold the side of the vehicle for advertising to generate more revenue, and it had been purchased by a beer distributorship. The lesson learned from that experience, Shawn recalled: “Just when you think you know everything, you have to look beyond the statistics.”

Clear communication about business processes and among trading partners is essential, noted Shawn, who recalled the line from the 1967 Paul Newman film, “Cool Hand Luke.” The prison camp warden famously told Newman’s character, “What we’ve got here is a failure to communicate.”

“If you think about it,” said Shawn, “so many business problems, particularly in logistics, are a failure to communicate. Things get dropped along the way.”

“The whole communication thing is crucial,” he added.

Process automation for returns authorizations

Citing another example, Shawn described a leasing company where employees in six office cubicles spent their day sending emails to customers for return authorizations. The authorizations approved shipping equipment to an address by a specified date. The workers sent out 100-200 emails per day. The operations were thrown into chaos when one employee was out sick. The company began receiving calls that only she could respond to, and no one else was able to access the various emails on her office computer. “The phone was ringing off the wall,” said Shawn.

His company was asked to provide a solution. “We were asked to automate the sending out of return authorizations,” he said. That was accomplished via the ReturnCenter.

“Then we realized that was just the beginning, the tip of the iceberg,” recalled Shawn. They quickly learned the client also needed a system of confirmation emails after orders for logistics were placed. And individuals needed shipping labels for the item they were to return, with additional labels available to the logistics provider in case the customer lost theirs.

OnePak automated the process. The client went from a way of operating in which a thousand emails went out in one direction to an integrated business system. “When you automate and plug all the holes,” explained Shawn, efficiency increases because triggers launch other steps and processes, and there is complete visibility among staff and between staff and management.

“Communication is a great thing,” said Shawn, but in the aforementioned example, when employees are completing tasks manually, it limits visibility. “Automate it so that everybody in the loop knows what you’re doing.”

Key performance indicators are helpful in organizing and implementing these kinds of business processes, he noted, just as they are in establishing accountability in logistics.

Lessons learned from digging deeper into logistics processes

Once it digs deeper for clients, OnePak uncovers more problems it can readily solve. In the case of the company that sought to optimize routing, OnePak also learned the business was shipping a lot longer distances than needed. It was shipping a lot of less than truckload, which takes considerably longer because cross-docking and additional stops are required compared to a full truckload. The customer experienced a lot of issues for on-time delivery because it was shipping less than truckload. “If they waited longer,” Shawn noted, “they could send a truckload,” and delivery would be faster.

In the case of the beer keg pooling client, a little more digging by OnePak helped uncover some more ways to improve efficiency. Beer kegs are stacked three pallets high, noted Shawn. “What you’re paying for (in shipping) is the footprint of the pallet.” Whether it’s one pallet (high) or three, You’re paying the same amount.” OnePak educated distributors so they would wait until they could ship in increments of three, rather than calling for a pickup of a single pallet, which would not fully utilize the pallet footprint on the trailer. That simple step “paid off quite a bit,” said Shawn.

OnePak frequently has helped clients by providing a solution of bundled services to solve a problem that at first glance may appear to revolve around one issue. Shawn described the case of a business that was a manufacturer of large panels of glass. One of the company’s customers was a fabricating business that purchased glass sheets to make patio doors. The manufacturer shipped glass on steel racks that cost about $1,000 each; the fabricating business used the same racks when it sent its finished patio doors to customers like Home Depot.

The manufacturer put RFID tags on the racks to help track them and eventually knew that it was not recovering racks it had shipped to the fabricating business. “RFID is great,” said Shawn, “but it only goes so far.” Once the rack was shipped, there was no telling where it was or where it may end up. “What was needed here was a tracking solution that went a little beyond RFID,” technology that enabled the manufacturer to know where racks were located.

OnePak provided a bundled solution of services to track the location of the racks and to recover them. “You think you have one problem, to solve it you need a bundled solution that ties all that stuff together,” said Shawn.

He compared the client experiences to an iceberg. Typically, only a small portion of an iceberg — the tip — is visible above the surface of the water; a much larger portion is hidden below. “People are looking at the surface,” he said. They only see the problem that is above the water, so to speak.

He compared it to his company’s ReturnCenter website. “What you’re seeing,” he said, is the part that is visible to the customer. The technology for it is below the surface — 10 years and development costs.

“That’s how you solve for x,” said Shawn. “You go below the surface. You dig a little deeper. You need to look at the bigger picture,” and figure out what systems you need.

 

Tim Cox is a Virginia-based freelance writer, editor and marketing communications practitioner.

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