Editor’s Note : The con­tent of this arti­cle was orig­i­nally deliv­ered as part of the Reusable Pack­ag­ing Asso­ci­a­tion work­shop at PACK EXPO Las Vegas in 2011.

By Andrew DeWitt, Senior Busi­ness Ana­lyst, TOSCA Ltd., and Reusable Pack­ag­ing Asso­ci­a­tion Member

Reusable pack­ag­ing can deliver cost sav­ings, increased mate­r­ial han­dling effi­cien­cies and reduce a company’s envi­ron­men­tal foot­print. How­ever, the imple­men­ta­tion of reusable pack­ag­ing will have a sig­nif­i­cant impact on many inter­nal processes as well as those of sup­pli­ers through­out a sup­ply chain. The changes that result from con­vert­ing to a reusable pro­gram can touch many peo­ple and the work they do. From work­ers on a line who fill the reusable con­tain­ers with prod­uct, to sup­pli­ers who inter­act with the con­tain­ers, to trans­porta­tion staff. If a com­pany decides to man­age the clean­ing, repair­ing and sort­ing of the reusables in house, there will be new processes and pro­ce­dures to cre­ate and sup­port. Because reusables require new processes in mate­r­ial han­dling at many places along a sup­ply chain, a com­pany must under­take care­ful plan­ning and thor­ough train­ing in order to be suc­cess­ful. This arti­cle will help you:

• Map and review an exist­ing sup­ply chain
• Map future sup­ply chain with reusable pack­ag­ing
• Test and refine the new busi­ness model
• Pre­pare for suc­cess­ful implementation

The first step is to clearly define the goals for chang­ing from an expend­able pack­ag­ing sys­tem to a reusable pack­ag­ing sys­tem. For exam­ple, is the pri­mary goal to reduce prod­uct dam­age, or to make the mate­r­ial han­dling process faster? Or per­haps it is to reduce trans­porta­tion or over­all pack­ag­ing costs. After the goal has been well iden­ti­fied and defined, you will under­take a thor­ough input gath­er­ing process to deter­mine whether con­vert­ing to reusables will achieve your objective.

Map and review exist­ing sup­ply chain

Most com­pa­nies already have their sup­ply chains thor­oughly doc­u­mented. How­ever, take the time now to make sure that the map is cur­rent and com­pre­hen­sive. As you revisit your cur­rent sup­ply chain, look for the areas that impact your objec­tive the most. For exam­ple, if your objec­tive is to reduce prod­uct dam­age, then high­light areas in the sup­ply chain where prod­uct is being damaged.

The biggest impact of reusables is the need to cre­ate reverse logis­tics: get­ting the con­tainer back for re-use. As you review your cur­rent sup­ply chain map, look for exist­ing oppor­tu­ni­ties to reclaim the con­tain­ers. If you deliver your end prod­uct to numer­ous retail out­lets, it would be cost pro­hib­i­tive to go to each site and pick up the con­tain­ers. But per­haps there is an exist­ing process where your cus­tomers are return­ing mate­ri­als to a cen­tral dis­tri­b­u­tion cen­ter that could also accom­mo­date the return of empty con­tain­ers. Dur­ing this review, also pay spe­cial atten­tion to the phys­i­cal flow of prod­uct between your sup­ply chain part­ners and pin­point where and when reusables would be exchang­ing hands.

Within inter­nal oper­a­tions, note all processes that would be impacted by a new con­tainer. Detail the cur­rent process for fill­ing and emp­ty­ing con­tain­ers and the amount and type of prod­uct going into them. When and where is prod­uct being processed or stored? Think broadly and con­sider who else within the sup­ply chain han­dles the container.

All of this infor­ma­tion will be used to estab­lish your base­line in costs and cur­rent processes to com­pare to a new reusable pack­ag­ing sys­tem and its asso­ci­ated processes and procedures.

Now review the num­ber of con­tain­ers that you use. Take into account whether the quan­tity fluc­tu­ates sea­son­al­ity or other fac­tors. Also con­sider the length of time that prod­uct is in cur­rent con­tain­ers, and the “dwell time” at cus­tomer sites. Dwell time is the total amount of time a con­tainer is “out there” being used, wait­ing to be used or wait­ing to be shipped back. Both of these fac­tors could tie up reusable con­tain­ers and impact the quan­tity of con­tain­ers needed to sup­port a reusable sys­tem. The answers to these ques­tions will help you deter­mine the num­ber of reusable con­tain­ers you will need.

Here is a quick exam­ple using 100 con­tain­ers filled per day as an example:

Loca­tion of reusable con­tainer per use                             Num­ber of days
Wait­ing to be filled at your facil­ity                                                     2
Filled and put into stor­age at your facil­ity                                       2
Tran­sit to customer’s DC                                                                  1
At customer’s DC                                                                               3
Tran­sit from customer’s DC to their store                                     1
At store with prod­uct in the con­tainer                                             3
Wait­ing at store to be returned to DC                                             3
Tran­sit to DC                                                                                       1
At DC being accu­mu­lated for return                                               2
Tran­sit to your start­ing point                                                            1
At your facil­ity, con­tainer being cleaned etc                                  1
Total num­ber of “dwell” days in this exam­ple                             20

In this sim­ple exam­ple, the total num­ber of days the return­able con­tainer takes to get from fill point back to fill point (one use) is 20 days. You can look at it as if the con­tain­ers turn 18.25 times per year (365 days / 20 days). To sup­port this exam­ple of using 100 con­tain­ers a day, your sys­tem needs 1,825 reusable con­tain­ers, on aver­age. Of course you have to allow for vari­ance within the sup­ply chain over time and adjust the num­ber accordingly.

Next, move on to a fis­cal review. Doc­u­ment the cost to pur­chase, set up, tape and label your expend­able pack­ag­ing. How many pal­lets are you using and what is their cost? How much space does your cur­rent pack­ag­ing and pal­lets require? How much labor is needed to break down and pre­pare the boxes for a land­fill? Include trans­porta­tion and dis­posal costs as well as all costs involved in han­dling cur­rent pack­ag­ing and the dam­age cost due to pack­ag­ing failure..

Map future sup­ply chain with reusables

Now it is time to put all the data you have gath­ered to:
• Design and select poten­tial reusable con­tain­ers
• Design new sup­ply chain mod­els
• Do eco­nomic modeling

Before you begin to design a future sup­ply chain that incor­po­rates reusables, revisit your objec­tives. By clearly map­ping your cur­rent state in the ear­lier exer­cise, you iden­ti­fied the areas in the sup­ply chain that are impact­ing your objec­tive, such as oppor­tu­ni­ties to reduce cost. Now, step back and take a broad view of the changes you could make to meet your objec­tives. This is the fun part of the task, the “what if?” exer­cise. For exam­ple, what if you went from a hand­held con­tainer to a tray? Or put more or less prod­uct into a dif­fer­ent type of box? What if your con­tainer was dis­play ready? Don’t limit your­self to think­ing merely about replac­ing an exist­ing box with a sim­i­lar size and shape reusable. Think how you can change cur­rent pack­ag­ing con­fig­u­ra­tion to improve the cost and processes in the sup­ply chain.

Also take into account all that good data you col­lected ear­lier about the phys­i­cal require­ments of the con­tainer. After weigh­ing these fac­tors, start research­ing exist­ing reusable pack­ag­ing and try some out. Include poten­tial ven­dors in your deci­sion mak­ing; they can pro­vide con­sid­er­able expe­ri­ence. If you can­not find an exist­ing con­tainer that might meet your needs, ask your sup­plier to develop a prototype.

After you have selected a poten­tial con­tainer, put it through a process we call a “pack out”. In the pack out, you put the con­tainer through some ini­tial paces in the sup­ply chain. Place your prod­uct into the con­tainer and gauge how well it fits and its ori­en­ta­tion. Place the con­tainer into dif­fer­ent parts of your sup­ply chain like con­vey­ors and fill­ing machines and con­sider its ben­e­fits and limitations.

Now apply your “what if?” approach to the over­all exist­ing sup­ply chain. What would hap­pen if you changed a part of the process? What if you changed the way the prod­uct is placed into the pack­ag­ing? Review the con­tain­ers you are con­sid­er­ing to gauge their impact on inter­nal processes. Will they improve ergonom­ics and worker safety? Will they work on your exist­ing con­veyor sys­tem? These are just a few exam­ples of the types of ques­tions you will need to ask yourself.

In this stage, you must also map out your new processes for reverse logis­tics. At this plan­ning phase, be sure to include your qual­ity assur­ance and trans­porta­tion teams as well as any out­side par­ties that con­tribute to your sup­ply chain. Of course, if you have a closed loop sys­tem, this is all much eas­ier to man­age than if your sup­ply chain includes third parties.

Qual­ity assur­ance and trans­porta­tion staff must be brought in because, unlike expend­able pack­ag­ing, reusable pack­ag­ing comes back. This change in process will impact trans­porta­tion and qual­ity stan­dards for the pack­ag­ing. Reusable con­tain­ers will need to be cleaned, repaired and han­dled and made ready for reuse. You might need to cre­ate new ser­vices or facil­i­ties as well.

Ear­lier, you doc­u­mented your trans­porta­tion processes and its asso­ci­ated costs. Now con­sider the impact that reusables would have in this area. Reusables gen­er­ally weigh more than expend­ables, how­ever, you might find that the con­tain­ers cube out before they weigh out and fewer trucks will be required. Or you might actu­ally get more of your prod­uct on each out­bound truck. On the return trip, the empty con­tain­ers will weigh less and, if you chose a col­lapsi­ble con­tainer, will take up less space. But you still need to get them back so you need to cal­cu­late the reverse logis­tic costs.

Also con­sider how you will track and trace your reusables. The cost of track­ing, as well as the cost of lost reusables, is impor­tant to your finan­cial model. Within a closed loop, the loss rate is very low. How­ever, if your loop includes mul­ti­ple third par­ties, your loss rate likely will be higher. Deter­mine whether it is more cost effi­cient to absorb the loss or spend more on track­ing sys­tems to min­i­mize the loss number.

As you design your reverse logis­tics, con­sider whether you can man­age these ser­vices in house or whether it would be bet­ter to out­source them. Cost is only one part of the equa­tion in this deci­sion. Equally impor­tant is the abil­ity and will­ing­ness of your com­pany and staff to take on this new area of ser­vices, and whether it is cost effec­tive to sup­ply your own labor.

Now that you have iden­ti­fied poten­tial con­tain­ers, mapped out the nec­es­sary changes in processes includ­ing reverse logis­tics and doc­u­mented cur­rent and future costs, it is time to cre­ate an eco­nomic model.

To help you con­duct an ini­tial assess­ment and cost ben­e­fit analy­sis, the RPA has cre­ated an eco­nomic cal­cu­la­tor avail­able at http://reusables.org/library/calculators. Using this tool, you will enter pur­chase price, dwell time, num­ber of turns, return logis­tics and other inputs you have gath­ered to come up with a total cost per use for reusables ver­sus expend­able pack­ag­ing. While this model is at a high level, it will give you insights on how to build a cost model spe­cific to your needs.

Dur­ing this cal­cu­la­tion, you will also weigh whether to pur­chase reusables out­right, or enter into a cap­i­tal or oper­at­ing lease, and whether to use a third party, like Tosca, for your reusable pro­gram. To help you con­sider and weigh these impor­tant deci­sions points, the RPA has cre­ated an in-depth pre­sen­ta­tion on the topic. You can read it at http://reusables.org/fundmentals-of-reusable-packaging.

Now it is time to com­bine all your input and develop some pos­si­ble future-looking mod­els. As you do so, weigh the trade­offs in costs and process times, make some refine­ments and design a solid model for test­ing a future state using reusables

Test and refine new model

Assum­ing that your eco­nomic model sup­ported the premise that reusables will decrease your costs in some way – either through labor sav­ings, decreased prod­uct dam­age, or over­all cost — it is now time to run a pilot with your selected con­tainer and new processes. Dur­ing the pilot, you are test­ing your inputs and assump­tions used in your model., This is also the oppor­tu­nity to see in real time how well your new con­tainer works. The pilot phase is nec­es­sary for unearthing any issues you might have missed. If there is a glitch, you might have to make a change in your process or con­tainer selec­tion and then ini­ti­ate a new pilot. It is not uncom­mon to go through two or three pilots to get the right system

Dur­ing the pilot, pay spe­cial atten­tion to these poten­tial pit­falls:
– Not con­sid­er­ing a sup­ply chain’s true cycle time
– Not hav­ing enough pack­ag­ing for peak pro­duc­tion vol­umes
– Inabil­ity to accom­mo­date indus­try stan­dards for clean­ing, espe­cially food and bev­er­age
– Pay­ing pre­mium freight for lack of con­tainer fleet vis­i­bil­ity
– Loss and dam­age rates

In my expe­ri­ence, these are issues that are some­times over­looked and later cre­ate sig­nif­i­cant prob­lems dur­ing a roll­out. Once you have con­firmed that your con­tainer choice and new processes are suc­cess­ful and will indeed meet your orig­i­nal objec­tive, it is time to undergo full scale implementation.

Pre­pare for suc­cess­ful Imple­men­ta­tion

Only min­i­mal mod­i­fi­ca­tions were made to your sup­ply chain dur­ing the pilot. Dur­ing the roll­out, how­ever, sig­nif­i­cant adjust­ments are made. Pos­si­bly you are replac­ing or adjust­ing fill­ing machin­ery or con­vey­ors, or adjust­ing pal­let quan­ti­ties to suit the new con­tainer. This process is time con­sum­ing, but take the time to do it well and thor­oughly. At this stage, an over­looked issue could result in lost pro­duc­tion time or sales.

The align­ment of your peo­ple and processes are even more crit­i­cal than the phys­i­cal changes to the plant. Poli­cies and pro­ce­dures for the new sup­ply chain and han­dling of reusables need to be doc­u­mented and shared before the roll­out. The RPA is devel­op­ing an arti­cle that will detail the path to suc­cess­ful align­ment, but I will touch on the high­lights here.

First, the impor­tance of train­ing and com­mu­ni­ca­tion can­not be under­stated. Han­dling reusables requires a new mind­set. The con­tainer will be re-used mul­ti­ple times. It needs to be han­dled dif­fer­ently than an expend­able, and it must be used only for its intended pur­pose. If employ­ees are mis­han­dling reusables, run­ning through them with a fork­lift for exam­ple, this will drive up your costs.

Some com­pa­nies fail ini­tially at the imple­men­ta­tion stage because they have not pro­vided enough employee train­ing. Remem­ber to include employ­ees and sup­pli­ers and who­ever else touches the reusable and sends it back. You might have new ser­vices and facil­i­ties for clean­ing and repair if you are man­ag­ing these tasks in house. Track­ing also will be a new func­tion even if a logis­tics provider is man­ag­ing your reusables. Take care to train work­ers on every shift and con­sider pro­vid­ing videos and posters to rein­force key points. Mon­i­tor the sup­ply chain very closely at the begin­ning and make mod­i­fi­ca­tions or pro­vide cor­rec­tive train­ing as needed. Logis­tics providers and reusable con­tainer pool­ing com­pa­nies can give you guid­ance on ways to ensure a suc­cess­ful roll­out if you don’t have the resources internally.

Prepar­ing for the imple­men­ta­tion of reusables is a com­plex process, but the ben­e­fits will pro­vide long term and last­ing ben­e­fits. And there are many other com­pa­nies that have been through the process already and are will­ing to share best prac­tices. The Reusable Pack­ag­ing Asso­ci­a­tion web­site at www.reusables.org is a great place to start.