RFID, Reusable Asset Management Featured in Wall Street Journal
Reusables find themselves in the spotlight. The Wall Street Journal recently ran a feature about reusables (Johnson Controls Unravels Mystery of Missing Crates). The story describes reusables as “worth their weight in gold” and the problem of lost reusables as a “plague” in the automotive industry. It touts the successful model of reusable container management at Johnson Controls as a best practice that will be followed by others. And why not? If you are going to invest in reusables, an investment in good control makes good business sense.
Johnson Controls, with annual sales of over $37 billion, was losing thousands of reusable containers each year. Some were hidden away at various Johnson Controls locations while some were misplaced at customer sites. One was found at a gun range in Michigan while another was being used to store bait on a fishing boat on the West Coast. (The small amounts are probably trivial in terms of the total loss, but always are a great attention getter in terms of pondering How did they get to where? I felt the same way the first time I saw a stack of U.S. postal pallets as props in Disney’s Indiana Jones ride at Disneyland.)
As stated in the article:
“At a time when automotive production is going to 18 million vehicles in the U.S., these crates are worth their weight in gold,” said Brian Kelly, director of supply-chain management at Johnson Controls, who helped run the investigation. “You can’t move parts without them.”
Back in 2012, the company began applying RFID tags to all of its 830,000 reusable assets and equipped RFID readers at all of its 37 plants and five distribution centers in North America. The result of installing the asset management system resulted in a substantial (but unspecified) reduction in assets. The article states that RFID accuracy has improved substantially (now 99 percent), and to date it has mainly been used in applications such as high-end retail. Implementation has been slower in industrial and for lower margin goods.
Noted Sven Dharmani, global supply-chain practice chief at Ernst & Young:
“Tracking containers is a plague across the auto industry,” he said. “The problem was no one wanted to go first and challenge the status quo. But with a supplier the size of Johnson Controls, you will see others in the industry begin to follow.”
While Johnson Controls purchased the tags and readers, itself, the tracking system is managed by Surgere Inc. Surgere also participated in tagging containers and installing readers at Johnson’s North American plants and distribution centers.
All in all, this mainstream story provides an important case study, one that provides an attention grabber for logistics professionals trying to get the ear of top management in regards to investing in reusable packaging management, or for reusable asset owners in exploring the possibility of third party management. The article speaks somewhat to the value of reusables themselves to industry (“worth their weight in gold”) and more so to the potential for effectively managing them. RFID may not yet always be the answer, but proactive management is.
Brambles to Divest LeanLogistics to Kewill for US$115 Million
Brambles Limited just got a little leaner, with the announcement it will divest LeanLogistics, the Group’s transport management software business to Kewill, a global leader in multimodal transportation software, for US$115 million. The transaction is subject to standard regulatory approvals and is expected to complete within 45 days.
“LeanLogistics is a leading provider of software-as-a-service (SaaS)-based transportation management systems that have grown strongly since its acquisition by Brambles in 2008, entering new geographies and adding key blue-chip customers,” stated Tom Gorman, Brambles CEO.
“Over the eight years that we have owned the business, LeanLogistics has generated significant value as a service provider to other parts of the Brambles Group, in particular, the CHEP pallet pooling operations. We are looking forward to continuing this relationship as a LeanLogistics’ customer for many years to come.
“Given the specialized nature of LeanLogistics’ business, as well as its size relative to the broader Brambles Group, we believe we have maximized the value we can contribute as its owner. We believe that in Kewill, and its controlling shareholder Francisco Partners, LeanLogistics has found the appropriate ownership under which to continue to develop and grow as an industry leader.
“I would like to take this opportunity, on behalf of everyone at Brambles, to thank the LeanLogistics team for the value they have delivered while part of the Brambles Group and for their professionalism during this sale process. We wish them every success for the future.”
Brambles will report LeanLogistics’ operating results within discontinued operations in its accounts for the financial year ending 30 June 2016 (FY16), and expects to recognize a pre-tax gain on the transaction of approximately US$53 million, after costs, within Significant Items. The divestment of LeanLogistics has no impact on Brambles’ guidance for constant currency growth in sales revenue and Underlying Profit of 8% to 10% in FY16.