- Reusable automotive packaging holds the potential to power big data analytics for the automotive supply chain as more OEMs and Tier suppliers embrace related projects.
- Magna anticipates saving $25 million in 2015 resulting from the early stages of its reusable packaging transition, demonstrating that management heroics can make important initial improvements in reusable packaging systems, even without the aid of leading edge tracking technologies.
- Longer, more complex supply chains have created challenges for automotive packaging regarding management and returns, as well as tradeoffs between logistics and line side presentation.
- There is no ‘one size fits all’ in the global supply chain as automotive looks to combine proprietary and pooling packaging approaches towards optimizing their supply chains.
Big data and reusables
It is a time of profound change for automotive as well as a new opportunity for automotive packaging, according to William Wappler. Wappler, President and CEO at Surgere. He spoke at the Automotive Logistics Supply Chain Conference 2016 in Atlanta, Georgia. “We are in a completely new dynamic,” he said.
“I would submit that we are about to go through a change in supply chain that will be more important than anything else in automotive,” Wappler continued, talking of course about the emergence of the big data transformation. He told the audience that there will be 50 billion interconnected devices by 2020. “Think about that,” he added.
Automotive supply chain will achieve visibility soon
“The same thing is going to happen in your supply chain. We are surrounded by data gathering activity. Automotive isn’t quite ready, but it is coming fast. My prediction is that it (the automotive supply chain) is going to be fully visible and it is going to be optimized.”
Wappler feels that the importance of real-time data will become more prevalent as devices continue to become interconnected. “Automotive is about to embrace that,” he said, stressing that automotive is not leading the wave. “Others have gone before.
Accountability without data “sucks”
One reason that supply chains are not optimized is the lack of data, resulting in a lot of guesswork in the decision-making process. “Accountability without data sucks,” Wappler observed. “We are all working on assumptions.”
For the better part of two decades, some reusable packaging suppliers have argued that the benefits of data generation through RFID can make reusable containers and pallets invaluable for companies. The results have been spotty. To this point in time, the data collection capability of RFID-equipped assets has not been a significant catalyst in the growth of the reusables market.
The tide is shifting
Wappler noted that there have been challenges – mostly historical. He observed that most companies have experienced failure in tests. A second barrier has been the fear of the unknown. Without successful applications, the case studies are not available to help potential customers build successful business cases – an issue I addressed a few years ago. How do we get funding without a business case and how do we build a business case without case studies? he asked.
The tide is shifting, however, Wappler believes. In the last six months, Surgere has launched projects at four OEMs and eight Tier Ones. The challenge, he noted, is not about the cost of the technology, saying that devices today are ubiquitous and inexpensive. It is also not about data analysis, thanks to products such as Llamasoft. The real challenge, he concluded, is how to use the data to transform your business.
Magna on track for $25 million cost reduction as it rolls out its reusable packaging program
Magna is a large, decentralized automotive supplier that is in the course of transitioning from predominantly expendable packaging to reusables. Worldwide, it has over 300 plants, including 130 in North America, The numbers are staggering. It starts production of 1,000 new parts every month, and requires 8,000 trucks per day, having tripled the number of parts it is moving over the last nine years.
Magna is transforming its packaging system, and it is doing so without the benefit of a significant management budget, according to Bridget Grewal, Packaging Continuous Improvement Manager at Magna International. Instead, it is relying on both internal and external resources, including a collaborative effort of its plants. The company is identifying synergies among its North American locations that will allow it to pool reusable packaging among plants, thereby reducing reverse logistics costs and improving packaging utilization.
Wake up and smell the reusables opportunity
Until now, Grewal stated, Magna has been “so busing looking at manufacturing that they hadn’t had a chance to look at optimizing packaging and transportation,” Grewal is developing a Magna pooling model. This work is familiar ground, having undertaken similar assignments at Ford and Chrysler.
“I am telling my company, which is very decentralized,” Grewal said, “that if we can work together and we can make a plan, then we are going to be better.”
Pooling model is still immature
Achieving the container management responsibility and discipline needed is still a work in progress, according to Grewal, not surprising given the company’s focus on expendable packaging, and its decentralized structure. She estimated that approximately one-quarter of the North American Magna plants are relatively mature in reusable packaging management discipline. She said that for the pooling model to work, everyone “needs to be on the same page.”
Grewal’s approach involved soliciting support of those plants, and developing a management system based on readily available resources. For example, the system relies on information from ASNs and EDI, approaches that are already used in the company. Containers are physically counted and recorded in SmartTrak(™) packaging management software supplied by ORBIS RPM. Magna is using an aggregate tracking approach.
Local champions still matter
The Magna program also relies on people at the plant level to act as local champions on a part-time basis, as needed. Grewal is relying on people at the plant level to be able to “nudge the system along” if there are static containers, and they need to be pushed along to eliminate unnecessary dwell time. Building discipline into the system is essential. For Magna, she sees it as a necessary first step before adopting a more automated approach to tracking.
With the information generated from Magna’s tracking system, it became apparent to Grewal that an internal reusable packaging pooling system was not going to work in all situations, and that one-way challenges also existed. As a result, the company has partnered with CHEP and NAL. “Those are the companies helping us with the outliers,”
Those are the companies helping us with the outliers,” Grewal stated. “There is the cream of the crop (for internal pooling) and all of the rest. Without data, we would not be able to optimize.”
What comes first, container management behavior or tracking technologies?
When it comes to the chicken and the egg argument of what should come first, the sensors and related technology which provides visibility or the discipline required to prevent asset loss, Grewal clearly falls in the camp of discipline first. She stressed that it is important to establish maturity around container control discipline first, “otherwise things will go crazy out of the gate, and you may lose credibility and support.”
Grewal investigated RFID but saw it as being too risky, although she has implemented such systems at Ford and Chrysler. “We are going to wait for a little while for the system to mature, and then we will look at it again.”
The next steps for Magna are to expand the pool to include their suppliers.
Manual counting leads to errors and significant losses
While a manual tracking approach is delivering savings for Magna, Wappler cautioned that better technology can reap rewards.”We’ve got a client that thought they were losing 4 percent of their containers per year, but it was more like 20 percent, with 50 percent going to Mexico and back.”
Manual counting can be prone to error. “We have our people counting, we have suppliers counting,” Wappler said, “Guess what, they are busy. They have to load trucks. And they are wrong,” Given the throughput involved, he noted that errors can quickly escalate. He stated that one OEM is losing $200 million per year.
Stopping the bleeding, big data home runs, or possibly both
“It isn’t just mitigation of loss anymore,” Wappler concluded. “What they are really saying is that if we really can serialize every piece of moving asset, and learn everything about that movement, then I can heat map every truck in real time. If you want to jump up a few points in fulfillment, what better way to do it than to have actual real-time data. We are starting to see people enact the technology because they are imagining the outcome. They are paying for it through loss reduction, but they are really trying to get to where we have been talking about.”
Some interesting dialogues took place in Atlanta. They underscore the opportunity for management heroics and collaborative efforts to reap multi-million dollar improvements to reusable packaging programs, as in the case of Magna, and the possibility for strategic opportunities, which as Wappler suggests, can be funded through asset loss reduction, but with the potential for transformational change. There were other comments around packaging standardization that I will address in a separate piece. Suffice to say there will be gains made towards standardization and pooling over time, although it is very much a work in progress. Stay tuned.
Bridget Grewal and William Wappler spoke at the Automotive Logistics Supply Chain Conference 2016 in Atlanta, Georgia