The Chinese Auto Industry Could Reduce Packaging Cost by 35 Percent Through Reusable Packaging Pooling

The pooling of reusable automotive packaging can deliver significant savings for Chinese and global automotive sectors.

sidebar grayThe Chinese auto industry can reduce its packaging related costs by 35 percent on average by utilizing a shared resource or pooling approach to reusable packaging, according to a CHEP official at 11th annual Automotive Logistics  China event.

Sharon Gray, Global Director – Key Accounts at CHEP, spoke at Automotive Logistics China 2016 this April in Chengdu. She emphasized that the amount companies budget for expendable packaging might be a much smaller number than the overall cost of packaging-related inefficiencies resulting from suboptimal packaging choices.

“Packaging is not the cost of the box,” Gray stated. “It is so much more than that.”

The expendable packaging price is only 20 percent of the total packaging cost

Gray discussed the case of one supplier. CHEP found that the budgeted packaging cost was only about 20 percent of what the company was paying for packaging and other expenses such as damage, handling, waste disposal and unrealized cube utilization opportunities.

CHEP determined that the packaging expenditure was just the beginning, with another 39 percent of the cost impact coming in the form of poor space utilization in transport.  Product damage resulted in another 13 percent, with repackaging of product into containers acceptable to the OEM generating a further 15 percent. Lost space in storage added three percent to the total cost impact, while the packaging waste stream resulted in another ten percent.  The bottom line, she reiterated, is that the total cost of ownership is much greater than the price of the containers.
sidebar 4Gray said that there are three typical supply loops in the Chinese automotive industry. These include domestic supply, regional Asian lanes, as well as global supply lanes.  CHEP has been active in domestic and regional loops, and is now working actively to supply global pooling solutions.

Pooling offers a simple solution for a complex supply chain

Several presenters at the conference, including Gray, emphasized the complexity of the Chinese supply chain and the problems it poses for supply chain efficiency. Noting the variety of packaging currently being used, she suggested that the multitude of solutions adds to that complexity.

Rather than starting with the part as a basis for packaging design, Gray suggested that it makes sense to look first at optimizing fit inside the sea container. “We currently have one standard that is used globally, and that is the ISO sea container,” she said.

Gray stressed that pooling offers benefits domestically and regionally as well as globally. She called it a simple solution for a complex supply chain, cautioning, however, that “It can only happen if we share resources and focus on core competencies.”

Pooling customers benefit from the avoidance of capital expenditure and reverse logistics costs, as well as by having enough packaging available when needed for peak production, without having to use emergency packaging.  With a pay-per-use model, users avoid paying for unneeded inventory, while reducing repackaging requirements.

“We have to think bigger than our budgets to see everywhere the supply chain is touched,” she concluded.

See Sharon Gray’s presentation on Youtube as part of the Automotive Logistics China 2016 series. 

 

Further Reading

Big data, reusable packaging management heroics and automotive: what’s next?

Using RFID to manage RTIs: case studies from automotive and agriculture

Daylight at the end of the RFID hype cycle tunnel?

OEM increases usage of reusables while reducing expenditure by $16 million

CHEP Automotive interview with Evi Shulz

An introduction to reusable packaging and pallets in automotive