When there is a lack of visibility and management, reusable packaging can’t deliver on ROI commitments. A managed reusable packaging solution will reduce wasted costs — such as packaging loss, misplacement, mishandling, unnecessary transportation, and manufacturing disruptions. When effective container management practices are used, ROI targets are more likely to be achieved.
“Just Missing Out on a Few Things” Can Make the Difference for ROI
There is a lot to like about reusables. The benefits of reusables cover the gamut of improved worker safety, reduced solid waste, improved quality, compatibility with automation, reduced environmental impact, cost reduction and more. But for an attractive ROI to be realized in many supply chains, however, effective management is the key ingredient.
“A company will create an ROI,” stated Phillip Biga, Senior Manager, Marketing Strategy, ORBIS RPM., “and it bases it upon certain assumptions.” After it implements the solution, however, most of those assumptions can go out the window if a container management system isn’t established.
Companies can find that their implementation doesn’t look at all like they had modeled. “When this happens, management can make the mistake of saying, ‘This just isn’t working for us,’” Biga continued. “(They say) ‘Let’s go back to cardboard.’ When I see organizations do this, it’s because I feel that they’re just missing out on a few things.”
The Maddening Complexity of Reusables
While the dividends of using reusables pay off handsomely, some simple requirements are needed to manage the outbound flow of empty containers. But for those who have leaped into reusables without a control system, the process can seem daunting. “It’s been termed as the maddening complexity of a reusable packaging system,” Biga continued.
He observed that the automotive sector, for example, uses a lot of reusable packaging. Plants focus intently on managing the inbound part flow, but may not necessarily give adequate attention on the outbound side, especially regarding getting empty reusables back to the right trading partner. “That,” he said, “is where the issues really starting knocking away at ROI.”
In Biga’s experience, dock time is at a premium so trailer loading and unloading efficiency is the focus. Without a process focused on accurate tracking of empty reusable containers, mistakes are made, creating a lack of accountability and trust between shippers and receivers.
When reusables are shipped to the wrong location, the result is a cascading series of inefficiencies. “They may sit there and not be used, they may get sent to the wrong customer, or they may get thrown away,” he said. “I’m not using the reusable in the way that I assumed or I budgeted, so that erodes my ROI.” Reallocation of reusables, expedited shipments, the emergency use of expendable packaging as well as the perceived loss of containers can also result when containers are missing or in the wrong location.
As a result, plants that had decided to eliminate corrugated altogether now find it inadvertently re-entering their facilities. “Now I have cardboard coming in, so now I have to manage the cardboard again,” Biga commented. “Now I have safety issues, and now I have to dispose of it, again. Collectively, it whittles away at that perfect scenario that we all set up for the ROI on the reusable packaging. It drives management nuts.”
Container Management Needed to Prevent ROI “Erosion”
On the other hand, Biga stressed, if a container management system is put into place, 90% of the ROI “erosion” issues can be eliminated.
When first launching a reusables program, companies can make the mistake of just swapping out the containers and simply alerting their employees to the change, assuming that the transition will be smooth. For a successful switch, attention to variables such as the correct identification of various reusables is important. “Attention to sorting is needed to ensure you’ve got the right packaging going back to the right place at the right time,” he cautioned. Container differences can be subtle. A lack of training or attention can result in packaging being sent to the wrong supplier.
Record keeping is another area of reusable packaging management that is often neglected. Many companies tend to rely on spreadsheets or notations from bills of lading. Additionally, bill of lading information may not be entirely accurate in terms of count and correct container identification. The bill might report dunnage, but not accurately specify the different reusable packaging on the shipment.
When the reusable asset control system fails, Biga says that it is probably because the right changes haven’t been made. “You probably haven’t addressed the resources required to manage both inbound and outbound,” he said. “Companies can overlook those things and assume that it’s just going to happen.”
Tracking Technology Alone Can’t Secure an ROI
Sensor technology has been touted as a cure-all for asset management success. Biga, however, urges reusable packaging users to take a broader view. “I think sensor technology is great,” he said. One provider he has worked with made the point that “a lot of people do RFID but not many do it well.” In other words, people understand how to use technology to collect data, but may not be adept at using that data to improve their asset management system.
“If you don’t dedicate resources to take the data and make process improvements, the investment in technology will not yield the intended benefits,” he remarked.
The frustration, he continued, comes with the assumption that introducing RFID alone will reduce asset loss without assigning resources to make improvements based on the information collected. It is similar to failed expectations experienced when companies switch to reusables without putting a management system in place to protect their ROI. Biga’s recommendation is to have a vision for how you want your technology investment to guide the process improvements.
Third Party Container Management Versus In-House Management
From Biga’s perspective, whether containers are managed in-house or by a third party, the same basics need to take place in terms of accurate sorting and return. Using a third party may offer savings in terms of labor cost, but the main advantage is in terms of resource allocation. In day-to-day operations, it is often all too easy to divert resources away from reusables management to concentrate on core business activities. The cumulative effect of resource “poaching” by the core business functions can be crippling for ROI.
Through a third party relationship, customers may be able to reduce their labor commitment. By entering into such a relationship, customers can ensure that they have invested in the resources necessary to consistently support activities such as cleaning, repair, sorting and return, thus reducing container loss and better protecting ROI. A specialized provider can also help improve recordkeeping, eliminating the distraction of in-house employees bouncing back and forth between the MRP system and separate management software for reusables.
Additionally, by ensuring better management of reusables, elements of the “maddening complexity” such as cardboard purchase and disposal, container shortages and extra transport charges can be eliminated. And if logistics issues do emerge, they are addressed by the third party management provider rather than the customer. “So it cuts down some of that noise,” Biga said.
Dramatic and sustained improvements are possible through third party, according to Biga. ORBIS RPM has successfully managed reusables for a large truck manufacturer for over 20 years, eliminating their need to purchase replacement containers due to loss.
In a more recent case, ORBIS RPM began working with a Tier One automotive customer. “They were in a state of constant shortage for one container type,” he said. ORBIS RPM analyzed their flows across Mexico, Canada, and the United States and put a management program in place. “Once we made sure that the right containers were going back based on demand, they haven’t had a shortage since the beginning of the year. And they’ve been more than excited.”