Packing Rental and Pooling Models in Perishables

Editor’s Note:  The follow article has been authored by Jon Kalin, RPA Immediate Past Chairman (ex officio) and Sales and Marketing Manager, Rehrig Pacific Company

The supply chain for moving produce from field to supermarket has become so efficient and far reaching that consumers take for granted the availability of previously-hard-to-find produce year round in their grocery stores. Moving these highly perishable items long distances with minimum spoilage requires a fast moving and sophisticated supply chain. In order to address these challenges, many companies are using reusable plastic containers (RPCs). And in order to meet their unique seasonal and sanitation demands of the industry, many companies contract with third-party poolers, while others choose to rent RPCs when peak demand requires additional containers.

In closed-loop applications, many companies purchase their reusable containers. They move the containers with their goods from point A to point B, empty the contents, and then return them to point A for re-use, keeping control of the containers and the process throughout the supply chain. However, the long shipping distances and seasonality associated with the produce industry make it better suited to a rental or pooling model. For example, when a carrot grower in Bakersfield, California ships its product to upstate New York, it would be difficult and costly for them to get their individual crates back. In addition, growers need a large amount of RPCs for only limited times, such as during peak harvest periods. Renting or pooling additional packaging during these peak times gives them the quantity they need without having to outlay more capital or store the unused assets during low-volume times.

Even if a company decides to purchase a core amount of RPCs for year-round shipping, it is likely they will use a third-party renter/pooler to provide additional reusables to supplement peak demand, or provide container related services such as cleaning, tracking and/or repair.

Packaging pooling model

With packaging pooling, companies provide a complete packaging solution on a pay-per-use basis that includes some or all of the following services:
• Single use rental of packaging
• Packaging delivery
• Packaging tracking
• Packaging pick-up
• Packaging cleaning and maintenance
• Offsite packaging storage

A packaging pooler takes on the complexity and provides the infrastructure necessary for the produce supply chain. These services include container cleaning, tracking, reverse logistics, storage, and management. The pooler’s role is to ensure that a company always has the right container, in the right place, at the right time so the company can focus 100% of its energy on its core competencies.

Here is a typical scenario of a pooling model within the produce industry. First, RPCs are placed at the grower/shipper. Tomatoes, lettuce etc. can be harvested in the field and placed directly into an RPC. These RPCs with the produce in them can be sent through the produce cooling and processing facility at the grower. From there, the produce is sent to the retail distribution center (DC) in full unitized loads or truckloads. Because reusable produce containers offer improved ventilation that removes field heat faster, there is less product spoilage during shipping. At the DC, a number of different commodities are picked and stacked into a truck and then sent to a designated store location. At some stores, workers place the produce-filled containers directly on display. This display-ready tactic is being explored by more retailers today.

After the store is done with the RPCs, workers easily collapse, fold and store the empty containers. A reverse logistics provider picks up the collapsed RPCs, along with pallets, shrink wrap, and other packaging that the stores no longer need, and sends them to a Reverse Logistic Center (RLC) where the staff checks the RPCs and removes damaged ones from the cycle. All RPCs are washed and sanitized according to industry standards, like AIB, and then reintroduced into the system, and the cycle repeats. The produce industry’s strict sanitation standards are another reason that pooling is especially effective in this market. It would require a substantial investment for a single company to build and manage its own washing facility. It makes more sense to leverage a pooler’s economies of scale and efficiencies as opposed to building that competency in-house.

Although poolers can offload some of the complexities of using RPCs, there are still considerations that must be addressed by the produce supplier. These include labor implications for setting up and staging the RPCs at the grower/shipper level; packing and handling the RPCs, changes to pallet utilization, and configuring loads according to the retailer’s specifications for efficient movement into the store. Other touch points to be considered are at the warehouse and receiving center. Will labor be increased or decreased? Will there be changes in the rejected load rates and what are the associated cost implications? If it’s something that weighs out, what is the impact of the weight of the container versus traditional packaging? Or if it’s something that cubes out, how can you maximize the amount of salable product that you get on a truck? These are just a few of the changes that will result from implementing reusables. Although it will require careful and thorough planning, most companies report significant savings that well outweigh the preparation that was required.

Packaging rental model

A second model used by some growers is packaging rental, similar to car rental. For a daily fee, companies offer various standard sized containers on a short- or long-term basis (30 days to one-plus years). Typically, the customer is responsible for freight to and from the rental company, giving them the flexibility to rent what they need for the period they need it. The seasonality of harvests and associated need for a spike in the number of containers makes this market well suited to rental. This saves companies from a large capital expense for packaging that sits idle for periods of time. It also protects companies from volatile prices for raw material like wood, steel, or resin used in the production of RPCs; the rental company bears the risk.

In this model, the totes are typically used internally; either entirely within the packing facility or perhaps just from the field back to the packing house. The containers are not used to ship produce out to retail. Much like a rental car, the program ends when the grower returns it to the container rental company.

Reusables provide far-reaching benefits to produce industry
Whether you choose a pooling or rental model, reusables can provide significant benefits to the produce industry. The primary gains include:

• Reduced product damage and shrink
• Improved stability and unitization and cube efficiencies
• Field heat removed quicker
• Higher produce quality at store level
• Reduced labor costs at warehouse
• Better truck utilization to retail
• Possible use as “one touch merchandising”
• Cost efficient against traditional packaging
• Reduced disposal time at store level
• Reduced Workmen’s Compensation
• Reduced environmental footprint

Reduced product damage and shrink – The reductions in product damage and shrink in this market have been phenomenal. In most cases, the specialized design of RPCs results in fewer rejected loads and much better utilization all the way from the initial grower down to the consumer level.

Improved stability- RPCs are designed to interlock, creating stable columns that bear the weight of the containers, without transferring it to the produce. Often, produce is wet and this compromises corrugated boxes, causing product to fall out and over. With RPCs, product quality is improved and there are fewer rejections. The load-bearing ability of the RPCs also improves utilization and cube efficiencies. For example, the fact that all RPCs have the same footprint and are load bearing, workers can stack a heavy container of potatoes on top of a container of strawberries, without any damage to the berries.
Field heat removed quicker – Reducing cooling time to reach ideal temperatures quicker extends shelf life considerably. For example, field temperatures for grapes in Fresno, California are 90 to 100 degrees, and they need to be cooled down to 34 degrees. Reusable packaging can help remove that heat more quickly, making the product that’s going across the country just as fresh as product that would have been delivered at the source. This results in higher produce quality at the store and extended shelf life.

Reduced labor costs at warehouse – Reusables can have tremendous reductions in labor and handling. When wet, corrugated containers lose their strength and the produce within can be damaged as the box collapses. In some cases, a whole pallet might topple over. In order to prevent this from happening, DCs often downstack their pallets, which requires additional work and handling. In addition to creating product damage, collapsed corrugated containers become a safety issue when their wet contents tumble to the warehouse floor. In contrast, RPCs stack securely, reducing the likelihood that tall stacks will fall over. Their load-bearing ability keeps the workplace cleaner and safer, and protects the produce.

Better truck utilization to retail – The common footprint and load-bearing capabilities of RPCs also have a positive impact on truck utilization, not only to the distribution center, but specifically from the distribution center, then on to the individual stores. Because the containers stack well, they create very stable loads, and produce can be stacked as high as the interior of the truck. Neatly unitized pallet loads full of produce tailored to individual stores can be loaded very efficiently onto a truck. This is an extremely efficient, clean, and safe way to transport produce.

One-touch merchandising – Some retailers place RPCs filled with produce directly from the truck onto display. This “one touch” merchandising reduces labor at the store level.

Reduced disposal time at store level – RPCs are designed for easy fold down and secure stacking at the back of the store. Stores no longer need labor and equipment associated with collapsing and disposing of expendable packaging. This one benefit alone is very significant. It eliminates produce damage that occurs when corrugated containers are cut open. It reduces the time that store employees must spend returning boxes to the back room and waiting for their turn on the baler. And it reduces the time that unattended boxes of produce are cluttering up the store aisles while employees are dealing with corrugated boxes in a back room. RPCs greatly improve the experience for customers and store clerks.

Reduced workman’s compensation – The improved ergonomics of reusables over expendable packaging has resulted in reductions in workman’s compensation because of fewer injuries and use issues.

Reduced environmental footprint – The environmental benefits of reusables are indisputable. Some expendable packaging can be recycled for limited re-use. However, eventually it all ends up in a landfill much sooner than plastic containers. And when there is not an adequate supply of recycled corrugated material, then virgin wood must be destroyed to create new boxes.

Reusable packaging offers significant benefits throughout the produce supply chain. And rental and pooling models support the unique requirements of this demanding supply chain without a significant capital investment or creation of a complex infrastructure.