Taking aim at a large opportunity: IBC usage and pooling well positioned for market growthIntermediate bulk container (IBC) manufacturers and poolers are seeing new trends driven primarily from manufacturing competition and developments affecting the industries they serve. Packaging Revolution recently spoke with Justin Bean, a Business Development Manager at Reusable Transport Packaging, and Drew Merrill, the Vice President and General Manager of CHEP Pallecon Solutions and CHEP Automotive & Industrial Solutions in North America.
Reusable Transport Packaging is a custom manufacturer, reseller, and distributor of reusable plastic packaging, while CHEP Pallecon Solutions and CHEP Automotive & Industrial Solutions provide reusable containers to customers on a rental basis, commonly referred to as pooling.
These industry experts are seeing a broad range of trends from increasing requests for lightweight environmentally friendly containers and pooling services, to the use of contract manufacturing and a stronger focus on food safety.
Weight Reduction, Thinner Walls
“We’re seeing a lot more lightweight containers, with less plastic,” said Bean. “Now manufacturers are providing containers with thinner walls, primarily to reduce their costs.” That trend holds for items such as large harvest bins to collapsible knock-down containers.
According to Bean, “the main, driving factor in using less plastic is to be more competitive on cost. You have someone making a more affordable container; it drives other people to compete.”
Reduced weight is also a factor in transportation costs, especially with air freight. Thinner walls allow manufacturers to keep the interior dimensions of the container the same, while the exterior dimensions are smaller. In some cases, this may allow more containers and product per truckload, resulting in fewer shipments and therefore lower transportation costs.
The trend toward lighter containers and pallets crosses multiple industries, suggested Bean. He sees it in agriculture, heavy manufacturing, retail, and grocery.
“One of the important things about plastics is they provide a consistent platform every time,” Bean said.
That’s one of the things that adds value for the customers. You know what you’re going to get.”
IBCs in Automotive: Growing Interest in Rental
One of the large industries using intermediate bulk containers is automotive manufacturing, specifically related to shipping parts and sub-assemblies. While many companies own their fleet of IBCs, Bean mentioned, “we’re seeing more people interested in pooling.”
“There is definitely a shift taking place in the industry from the ownership model to something where you just pay per use,” agreed Merrill. He compared it to buying and owning a car versus using the Uber service for rides.
In the automotive arena, Original Equipment Manufacturers (OEMs) are looking more holistically at the supply chain when making packaging decisions. Historically, Merrill noted, it was limited to line-side presentation optimization and the lowest cost of packaging. With extended supply chains, OEMs are taking a wider view to include logistics impacts like cube optimization of trailers to ensure the lowest total cost of ownership when evaluating packaging choices.
The Impact of Lighter Automotive Parts and International Supply Chains
Another factor influencing the use of packaging in the auto industry is the change in weight and composition of automotive parts. As OEMs continue to remove weight from vehicles to improve gas mileage, automotive components are also becoming lighter. Automotive parts which were previously too heavy to be shipped and stored in plastic are now able to leverage the benefits of intermediate bulk containers.
The most significant trend in the North American auto industry is increased assembly in Mexico, explained Merrill. By 2023, economists expect Mexico to produce more than 5 million cars, a 45% increase from 2016. Of course, everybody is watching the ‘Trump effect’ to see how the new administration may impact the growth of imports.
With more automotive manufacturing moving to Mexico however, some automotive component suppliers in the U.S. need to ship longer distances to support Mexico-based OEMS. In this case, the pooling model shows its true benefit, because shared containers can be utilized by another party on the return trip, rather than backhauling empty containers to begin the loop again. The opportunity to eliminate such empty miles presents a significant cost and environmental saving.
In contrast to CHEP Automotive & Industrial Solutions, CHEP Pallecon Solutions primarily serves customers producing liquefied food products or ingredients as well as liquid products used in personal care consumer products, such as shampoo. Ingredient suppliers utilize CHEP’s IBCs to ship liquids in bulk to their end-user manufacturers who produce retail size containers.
A noticeable trend in the food supply chain is the move toward ‘green’ initiatives to ensure products, packaging, and shipping practices are environmentally friendly. Merrill explains, “customers now want to see sustainability metrics, and we’re seeing interest in leveraging green initiatives further up the supply chain.”
Food Safety and Traceability, Contract Manufacturing and the Importance of Liners
The Food Safety Modernization Act (FSMA) heightened awareness regarding the need for sanitation and control in the food supply chain, granting the FDA power to regulate how foods are grown, harvested, and processed. This legislation, prompted by incidents of foodborne illnesses, cost the food industry billions of dollars in product recalls, lost sales, and legal expenses connected to tainted food. The intent of FSMA is to make the food supply chain safer, ensuring a firm, documented chain of custody from farmer to finished grocery product.
CHEP Pallecon Solutions’ unique service includes tracking technology that allows food and beverage manufacturers to electronically record the status of their product as it moves throughout the supply chain.
“Our technology is very important. If there’s a challenge, such as a contaminated food product, customers have to be able to pinpoint the issue and walk it back to the source very quickly,” explained Merrill.
Another trend impacting transport packaging suppliers is the increase in contract manufacturing. A plant producing a well-received food product might enjoy extended, indefinite success. However, as consumers’ tastes increasingly evolve, grocers have begun more frequently leveraging contract manufacturers to address products with shorter lifespans. As a result, investing purchase a fleet of containers for some products becomes risky, making container pooling a more attractive option.
Liners used to hold liquid inside the IBCs continue to advance, positively impacting the food supply chain. They may be manufactured with five or six different film layers and various properties based on the product requirements. In fact, as liner technology has evolved, food processors have been able to transition from shipping frozen product in 55-gallon drums to the larger IBC format (typically 275-330 gallons). This packaging conversion provides efficiencies including more product shipped per pallet space, reduced material handling and the elimination of labor and disposal costs associated with drums.
From comments above, we catch a glimpse of an IBC market that is vibrant and innovative, one which increasingly delivers better value to customers through pooling/rental programs, tracking technologies, and product design improvements. The IBC is becoming the container of choice for a greater range of applications as it demonstrates its worth vis a vis other commonly used options such as the 55-gallon drum or the corrugated gaylord. It is a product with a huge upside for usage growth as its benefits become better understood in the marketplace.
Tim Cox is a Virginia-based communications specialist. To explore communications programs, assignments or other opportunities with your company, reach Tim at timdcox@comcast.net.