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 https://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 https://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.