John Deere: Tracking Reusable Packaging in a Global Assembly Manufacturing Supply Chain

Still a very useful case study, this story was posted in 2012. Written by Jerry Wel­come, former Reusable Pack­ag­ing Asso­ci­a­tion Pres­i­dent, with input from Lyle Schmitt, Man­ager, Global Pack­ag­ing and Qual­ity, John Deere; and mem­ber, Reusable Pack­ag­ing Association.

Whether you’re a farmer or an occa­sional week­end gar­dener, almost every­one rec­og­nizes the green and yel­low col­ors asso­ci­ated with John Deere. The com­pany is the world’s lead­ing man­u­fac­turer of farm equip­ment, and pro­duces and mar­kets North America’s broad­est line of lawn and gar­den trac­tors, mow­ers, golf course equip­ment, and other out­door power prod­ucts. In addi­tion, John Deere pro­vides irri­ga­tion equip­ment and nurs­ery sup­plies to landscape-service pro­fes­sion­als across the United States, and is a major man­u­fac­turer of con­struc­tion and forestry equip­ment in North America.

Many John Deere prod­ucts are large and heavy. Con­se­quently mov­ing ser­vice parts, com­po­nents for man­u­fac­tur­ing, and fin­ished goods through­out the world is a daunt­ing logis­ti­cal chal­lenge. Deere has man­u­fac­tur­ing oper­a­tions in Rus­sia, China, India, Brazil and other coun­tries, as well as over a dozen loca­tions in the US. Reusable pack­ag­ing is used pri­mar­ily for man­u­fac­tur­ing com­po­nents, but also for ser­vice parts and small fin­ished goods such as lawn and gar­den tractors.

Deere is one of the top 30 man­u­fac­tur­ing com­pa­nies in ton­nage of global imports/exports. Because logis­tics is so crit­i­cal to the enter­prise and because global ambi­tions included expand­ing man­u­fac­tur­ing to dif­fer­ent parts of the world, the Depart­ment of World­wide Logis­tics was orga­nized in 1999 as a core com­pe­tency of the com­pany. Cen­tral­ized man­age­ment of reusable con­tain­ers was part of the ini­tial strat­egy. Today, Deere owns about 1,500,000 reusable con­tain­ers that are used to ship every­thing from nuts and bolts to hoods and engines.

Deploy­ment and Track­ing of Reusable Con­tain­ers
We define “return­able” as a cus­tomized special-use con­tainer that must be returned to its point of ori­gin, so obvi­ously reverse logis­tics is crit­i­cal. We define “reusable” as a generic con­tainer that, once emp­tied, has no defined return-to loca­tion. The chal­lenge is to quickly and effi­ciently relo­cate the empty reusable to a nearby point of need. The goal is to min­i­mize the dis­tance to the next point of use with­out endur­ing too much dwell time wait­ing for a need to develop.

To effec­tively man­age our reverse logis­tics, we have devel­oped a sophis­ti­cated and inte­grated track­ing sys­tem through­out our global sup­ply chain. Our 1,500,000 con­tain­ers each have some sort of track­ing tag affixed to them and are tracked through an internet-based track­ing sys­tem. An abil­ity to track con­tainer assets is essen­tial to effec­tively man­ag­ing a global net­work where con­tain­ers are con­stantly mov­ing some­where 24 hours a day. With­out a track­ing sys­tem, the prob­a­bil­ity of shrink­age increases as geog­ra­phy expands, to the point that it under­mines the finan­cial via­bil­ity of invest­ing in reusable con­tain­ers. An inte­grated tracking/management sys­tem pro­vides the strongest and best value propo­si­tion by har­vest­ing numer­ous ben­e­fits from the same infrastructure.

Our returnable/reusable con­tain­ers come in many forms. At the high-cost end, we have $500 cus­tom racks to trans­port high appear­ance parts such as trac­tor hoods that can­not have any con­tact with other parts or with pack­ag­ing mate­r­ial, except for spe­cific points of attach­ment. Next, we have stan­dard generic bulk con­tain­ers that con­tain per­ma­nently affixed cus­tomized dun­nage, so these units must also be returned to their point of ori­gin. Our great­est quan­tity of con­tain­ers is generic, and might never travel the same route twice. The value of the con­tainer and the nature of its route deter­mine the type of track­ing tag used.

High-cost con­tain­ers in multi-stop, long-distance loops war­rant active RFID, fea­tur­ing auto­mated ver­i­fi­ca­tion of arrival and peri­odic mon­i­tor­ing of dwell in each loca­tion. It is com­mon to query active tags in each loca­tion every 5 min­utes. Pas­sive RFID is deployed on con­tain­ers that nat­u­rally flow through a cen­tral loca­tion. One exam­ple is con­tain­ers sent to deal­ers from cen­tral­ized part dis­tri­b­u­tion cen­ters. Another exam­ple is Enviro-crates; reusable, stack­able, steel, fold-down, con­tain­ers used to ship lawn and gar­den trac­tors to deal­ers and to mass mar­keters such as Lowes and Home Depot. Pas­sive RFID read­ers auto­mat­i­cally ver­ify that each con­tainer has returned to the DC from its lat­est deploy­ment. Man­ual scan­ning of bar codes is still the most com­mon input into our track­ing sys­tem, espe­cially for small inex­pen­sive totes used for fas­ten­ers and fit­tings, but man­ual scan­ning is more labor inten­sive and less reli­able than RFID. All bar-coded tags pur­chased in recent years also con­tain RFID chips, so over time the per­cent­age of man­ual scans will dimin­ish as our RFID infra­struc­ture is expanded.

We do not yet put a $10 active RFID tag on many con­tain­ers. We deploy active tags when it is impor­tant to con­tin­u­ously know where a con­tainer is; within the supplier’s facil­ity or at any other loca­tion in the sup­ply chain, such as an inter­ven­ing stop for paint­ing, plat­ing, or sub­assem­bly. We put pas­sive RFID tags on all other reusable bulk con­tain­ers. We do not believe man­u­ally scan­ning bar-codes will ever pro­vide the level of accu­racy we need to sup­port con­tin­u­ous improve­ment. Note that both pas­sive and active tags also fea­ture bar­codes and human-readable print­ing, so all tags can use lesser tech­nol­ogy when appro­pri­ate.

Regard­less of the source of track­ing input, all infor­ma­tion flows into an inte­grated sys­tem wherein this infor­ma­tion is used for plan­ning, per­for­mance met­rics, and mon­i­tor­ing cus­tody of reusable con­tain­ers. One such per­for­mance met­ric is accu­racy in deliv­er­ing the right prod­uct to the right cus­tomer. Deliv­ery errors were essen­tially elim­i­nated by installing stop-and-go lights on the dock doors of a DC for Turf Care prod­ucts. Prod­uct ser­ial num­bers are asso­ci­ated with that of the spe­cific deliv­ery crate used to pack­age units at the end of the assem­bly line. The ser­ial num­ber of the deliv­ery crate is read as it enters each truck and trig­gers a green light only after being ver­i­fied as correct.

An inte­grated tracking/management sys­tem pro­vides the strongest and best value propo­si­tion by har­vest­ing numer­ous ben­e­fits from the same infra­struc­ture.

I ear­lier men­tioned that “reusable” con­tain­ers, as we define the term, have no iden­ti­fied next des­ti­na­tion once they are emp­tied. Our goal is to relo­cate empty con­tain­ers to a point of need that is much closer than the point of ori­gin of that cycle. “Return­able” con­tain­ers, by def­i­n­i­tion, must travel a mile empty for every mile full. The ratio of empty miles to full miles is a mea­sure of how effec­tively reusable con­tain­ers are man­aged. Almost all empty con­tain­ers flow from fac­to­ries to pro­cess­ing cen­ters which are strate­gi­cally located close to major fac­to­ries. Four of the pro­cess­ing cen­ters are in USA; oth­ers are in Ger­many, Spain, and Mexico.

Finan­cial jus­ti­fi­ca­tion
Ben­e­fits derived from deploy­ing reusable con­tain­ers can be loosely cat­e­go­rized into non-quantifiable and quan­tifi­able sav­ings. Non-quantifiable sav­ings are very real and impor­tant, but dif­fi­cult to capture.

• Safety is always a first con­sid­er­a­tion. While plas­tic and even steel con­tain­ers can fail, it is less likely than with card­board. Their strength remains con­sis­tent, even in moist envi­ron­ments. We do de-rate the manufacturer’s stated capac­ity by 25% for most of our appli­ca­tions. Wood tends to splin­ter cre­at­ing its own hazard.

• Qual­ity is improved. Mate­r­ial in con­tain­ers is less likely to be dam­aged dur­ing tran­sit and han­dling because reusable con­tain­ers are typ­i­cally more resis­tant to punc­ture and struc­tural failure.

• House­keep­ing also is an impor­tant con­sid­er­a­tion. Reusable con­tain­ers fall into a lim­ited num­ber of foot­prints, so they lend them­selves well to the time hon­ored adage; a place for every­thing and every­thing in its place.

• Being envi­ron­men­tally respon­si­ble is a foun­da­tional value of John Deere. An increas­ingly appre­ci­ated ben­e­fit of reusable pack­ag­ing is its less­ened envi­ron­men­tal impact. An envi­ron­men­tal study pub­lished by the Reusable Pack­ag­ing Asso­ci­a­tion con­cluded that land­fill require­ments decreased by 90 per­cent when using reusables. And despite requir­ing return trans­porta­tion, life cycle energy con­sump­tion and car­bon emis­sions were lower than those of expend­able pack­ag­ing. All of our end-of-life scrap is sent to one of our pri­mary sup­pli­ers to regrind into new con­tain­ers.

Most of our quan­tifi­able sav­ings, about 85 per­cent, are attrib­uted to lower expense for expend­able pack­ag­ing. For exam­ple, instead of pack­ag­ing light­ing brack­ets in two heavy-duty 24” x 24” x 36” card­board boxes ($21 each) on an $8 wood pal­let, the mate­r­ial can be packed in a 45” x 48” x 34” reusable con­tainer that costs less than $20 to cycle.

Other sig­nif­i­cant sav­ings result from reduced cost of dis­posal, and improved trans­porta­tion den­sity. While we attribute only 7 per­cent of our total sav­ings to greater pay­load of mate­r­ial trucked into our fac­to­ries, its poten­tial is much higher. Even though we man­u­fac­ture heavy equip­ment, we have enough light­weight mate­r­ial to often cube-out trucks before they reach allow­able weight. Stack­able con­tain­ers often enable addi­tional mate­r­ial to fit on a truck, thus get­ting a free ride.

The Future
The future of track­ing tech­nol­ogy is as unpre­dictable as any­thing else, but the trend of lower cost for high level devices such as pas­sive and active RFID tags sug­gests that automa­tion will soon elim­i­nate man­ual scan­ning. More pow­er­ful con­tainer man­age­ment soft­ware will bet­ter pre­dict the forth­com­ing needs of each sup­plier, for each type of reusable con­tainer, and will opti­mize cost by build­ing bet­ter loads and opti­miz­ing return routes.

Another level up is Wi-Fi tech­nol­ogy. Not long ago, the cost of a Wi-Fi tag was $50. They’re now about $30, sub­stan­tially less if pur­chased in high vol­umes, so that might be a track­ing possibility.

Whether it is Wi-Fi or other emerg­ing new tech­nol­ogy, we are con­tin­u­ally look­ing for new ways to reduce costs and con­tin­u­ally improve the effi­ciency of our sup­ply chain. Regard­less of the tech­nol­ogy, I believe that reusables will remain a con­stant in our operations.

 

Comments

  1. “1,500,000 reusable con­tain­ers each have some sort of track­ing tag” – Wow, thats quite a number, I wonder how do they manage to do all this stuff. Every single one with tracking tag? They must have quite a system and database to track this. Well, it’s a big company with a big bugdet, so they have all the resources they need for this kind of activities.

  2. Isabelle says

    Hi,

    I have found the same article but written by another author: “By Jerry Welcome, Reusable Packaging Association President, with input from Lyle Schmitt, Manager, Global Packaging and Quality, John Deere; and member, Reusable Packaging Association” who is the correct person to quote?

    Thanks

  3. Rick LeBlanc says

    Please attribute this article to Jerry Welcome.

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