The hardest part of building a reusable packaging pool is managing and tracking the assets once they are deployed. Everybody knows this job resembles being an air traffic controller at the world’s busiest airport.
Asset management and control was a hot topic recently at the Reusable Packaging Association (RPA) Forum held in Chicago. Some of the brightest minds in the pooled pallet world discussed how to effectively plan to prevent leakage and control asset flows.
The problem is that most companies put so much focus on deploying a pool that they don’t realize they have a control problem until it is too late. They look around and ask, “Where did all of our pallets or containers go?”
The real world of reusable packing management is full of partners who don’t take their responsibility to safeguard packaging assets seriously, and there are large numbers of scavengers in rusty pickup trucks who scour back alleys and business parks looking for stray pallets.
Where in blazes do the reusables go? The reality is that lost, stolen or stray assets is an expensive problem indeed. Kevin Marrie, vice president of business development at RFID Enabled Solutions, outlined the losses that have been experienced in recent years, and why tracking is important. He pointed out that a 2010 survey by the Auto Industry Action Group pegged the cost of replacing “lost” reusable packaging and pallets in the North American auto industry at $750 million per year.
The U.S. Postal Service loses about 20% of its pallets annually. Deloitte determined that the loss for pallets and lids in the automotive sector is about 15-20% annually. Before introducing RFID, Mission Foods, a leading taco and salsa producer, lost 100% of its reusable containers annually, at a cost of $3.5 million.
When should you use barcodes and when should you use RFID? Marrie provided the example of thousands of bread trays moving through a bakery on a daily basis in comparison to a watermelon shipper who moves perhaps 150 pallets per day and they can be easily scanned by the clerk at the scale without slowing him down. The former, in spite of the lower value, is a great candidate for RFID because there are too many to cost-effectively scan, while the expensive bulk container used for watermelon can be adequately tracked by barcode.
“In the past, asset tracking was more of a luxury,” said Keith Schall, director, IT global containers BRM at Brambles (CHEP). Now, with increasing regulatory requirements in the form of Food Safety Modernization Act, Sarbanes Oxley customs, and international customs requirements, tracking is increasingly a requirement. Should you be RFID tagging new assets even if you do not plan to leverage such technology immediately? Schall believes one should. “You can retrofit and tag old containers, but is better to purchase with tags in the first place,” he stated.
Kaley Parkinson, director, applied technology sales and business development for Rehrig Pacific, stressed the importance of adopting new technologies. “We are committed to challenging the status quo of how goods and ideas move,” he stated. “Unfortunately, the status quo in the reusable world is a giant black hole in terms of assets and information. We send them out and don’t think about them until we lose them.” Disappointingly, he observed, that is the status quo of many loops out there today.
“It seems folly to think you can put it out there and have it work effectively without some kind of feedback loop (control system), and that’s what we see time and time again,” Parkinson added. In order to validate its approach, Rehrig Pacific RFID tagged and tracked 300,000 beverage containers across seven production facilities. The result was a very promising 25% reduction in replacement crate purchases.”
“Asset loss is a solvable problem,” Parkinson stated. “If a company as large and old as Pepsico can experience meaningful change, so can everyone in this room.”
Willy Lai, vice president of asset management for iGPS, spoke to the real world environment of asset recovery. He explained that iGPS pallets have RFID and bar codes in every unit, while some pallets have GPS and temperature sensors. “We know that pallets are not going to stay in the primary supply chain,” he observed. “There are going to go to the secondary market.”
The aggregate plastic pallet and container theft problem in the United States is an issue in the range of $800 million to $1.5 billion annually. “Specifically,” he said, “plastic pallet theft is a $500 million problem in the United States.”
Lai follows three principles with respect to asset management. The first is visibility, knowing where your assets are. That, he added, is easier said than done. Secondly, he stressed the importance of having rules, contracts and laws in place to determine “who is going to foot the bill when the assets are identified as lost.” And third, Lai stressed, is the need for enforcement. “Without enforcement,” he said, “your contract doesn’t matter. And the guys who know you are not going to prosecute, they will drive around in their pickup truck, go in behind stores, go in behind fields somewhere, and take the plastics. If the grinders know you are not going to prosecute, they will buy all the bins and totes and pallets they can get their hands on, and sell the regrind immediately. And that is why iGPS is investing heavily in this.”
In the question period, participants generally stressed that it is more cost effective to manage assets than chase them once they spring loose, and that it is worth investing in tracking technologies. A question was asked about how much should users be willing to invest in a tag, and if it depends on the value of the asset. Schall asserted that he would be willing to buy a dollar tag for a dollar asset, and Parkinson stated that they have applications where they put a $20 GPS tag on a $20 pallet. Lai pointed out that while a GPS tag may be expensive, in their case, a single GPS tagged pallet may lead iGPS to another 50 or 100 missing pallets that are not, therefore providing great overall value. Ultimately, the consensus seemed to be that it comes down to the supply chain value that the data provides, along with better visibility that prevents loss.
Tracking technology can only be part of the solution because RFID is only as good as your last scan. And if you don’t have the right agreements in place and ensure that they are followed, you can deploy all the technology in the world and not prevent the leakage.
The RPA Forum was an impressive event, backed by a wealth of information from the panelists (also including Paul Koleske, director of logistics & asset management at TOSCA). The only concern that I left with, was wondering why no one addressed the really fundamental questions of how we can get retailers to stop leaving assets exposed in unsecured locations, or how to prevent the wrong drivers from taking away proprietary assets. It seems to me that if we got fundamentals such as this right, a big piece of the puzzle would be solved.
