EAST LANSING, Mich. — Michigan State University’s annual returnable packaging seminar took a spin back to its automotive roots.
The seminar by the university’s School of Packaging was started several years ago at the request of General Motors. At that time the automaker was looking for a high-level, in-house program to educate employees on both expendable and reusable packaging. In subsequent years the seminar’s focus became exclusively reusable packaging, but it broadened in scope to other applications, such as the food industry and others.
This year, however, the emphasis was predominantly automotive. “We used to call it returnable packaging,” said Dr. Diana Twede, director of the seminar. “But more and more, it doesn’t go back to where it started,” she said, alluding to the growing trend toward container pooling. ‘Reusable’ packaging was perhaps more appropriate than ‘returnable,’ she suggested.
The seminar drew about 40 participants from as far away as South Korea. Students from the school of packaging, which has about 600 undergraduate and 50-100 graduate students, also attended as their schedules permitted.
Unlike the grocery industry, the auto makers seem to be opting for self-management of container control rather than going the third-party route. Third-party lead logistics providers still are often used for such services as sorting, storage and return to suppliers.
New developments in container testing and computer assisted container design were showcased. Another highlight of the seminar was an address on cost justification by Charles Parsons of The Packaging Department; he also provided an informative overview of the new European Union restrictions on imported wood packaging. Diana discussed the state of reusable packaging in general, and Dr. Paul Singh gave an interesting presentation on the status of returnable plastic container (RPC) usage in the produce supply chain.
The reusable packaging seminar provides a clear snapshot of trends in alternative materials and other innovations in containers and pallets. In the automotive supply chain, wood containers and pallets are definitely in the minority. It is such a huge industry, however, that even 10% or 15% adds up to a lot of volume.
Where’s the Wood?
The seminar group toured Comprehensive Logistics, a third-party lead logistics provider to a GM plant in the Lansing area. At its 270,000-square-foot facility, Comprehensive receives components from GM suppliers and checks these inbound parts against the ASN (advanced shipping notice) to verify the correct item, labeling, and packaging. The logistics provider sequences parts and builds kits for delivery to the assembly plant.
Annual throughput is about 2.6 million containers annually. These containers appear to be mainly pallet-containers rather than handheld ones. If reusable packaging is not available, the supplier is required to have a similar sized expendable container.
Empty containers are returned to the logistics center where they are sorted and staged until required at a supplier. Comprehensive ships empty containers back to suppliers as required to fill new orders. Empty containers for up to 10 suppliers are loaded onto trucks for ‘milk runs’ to return them. Comprehensive makes about 57 of these ‘milk runs’ daily as well as some direct full loads back and forth from assembly plant to supplier.
Wood pallets and expendable corrugated cartons were used for a minority of inbound product, perhaps less than 25% of the loads viewed by the tour group. The rest of the packaging was a wide array of reusables, ranging from some well-used rigid wall wire containers to several types of collapsible pallet containers and thermoform pallet and corrugated sleeve combinations.
The plant handles about 40 or 50 types of standard reusable containers, including SC (standard clean) and SD (standard dirty). Wood pallets are more common on parts coming the greatest distance.
The adoption of reusable packaging in automotive has been overwhelming. The evolution of the seminar towards reusable packaging in many ways parallels the shift of automotive packaging itself in this direction. GM, for example, has spent $1.4 billion on reusable packaging since it began in the mid-1980s. At one panel discussion, representatives of the ‘Big Three’ and Toyota were asked to estimate the percentage of parts and components that are shipped in reusable packaging. The results were as follows: GM – 70-75%; Daimler-Chrysler – 80-85%; Ford – over 90%; Toyota – 99%.
Chrysler and GM have tended to own their returnable packaging while Toyota leaves ownership to its suppliers. At the beginning of this year, Ford changed its policy to start shifting container ownership of handheld containers to its Tier 1 suppliers; it plans to retain ownership of larger racks.
In spite of the wide adoption of reusable packaging, there have been some pockets of resistance. Some automotive suppliers are reluctant to use reusables for reasons similar to problems that have been reported in the produce industry. Their automated packing lines may require expensive conversions to facilitate changing, or reusables may take up too much room on the shop floor. Last year the automotive industry created a standard for handheld fastener containers, but seminar attendees indicated that full implementation still has not been achieved; there has been some resistance because of highly automated packaging processes at fastener plants as well as the need to wash containers used with some coated fasteners.
At the end of day, however, reusable is still the system of choice. Diana asked members of one panel if they ever had “cardboard envy” and wanted to go back to an expendable packaging system. “It would make life easier,” said Tom Teagan, who is responsible for container control for GM, “but I don’t think we would save money.” Tom Ballard of Toyota cited reasons favoring reusable containers. “Cost issues, safety issues, quality, stackability,” he said. “We really like them.”
Where Are the Containers?
One of the key messages — and a significant focus — of the seminar was that container control and repositioning of empties can be a considerable challenge. None of the automotive companies wanted to get into specifics about loss rates, but Ford acknowledged a 1% to 15% loss rate, depending on the part. (At another seminar several years ago, one auto company manager suggested that losses were in the range of 15% to 18% annually.) One participant said that he was reluctant to write off containers as lost because they would invariably pop up some place. Overall, he felt that container control gradually is improving with new systems being introduced.
This interest in management signals a considerable shift from the automotive packaging seminars over five ago. At that time, auto industry executives seemed to be more interested in container design and material selection than in controlling the container. Marti Morris of Logistics Insights, a lead logistics provider for Daimler-Chrysler, said that until recently the container was typically thought of as “the stepchild of industry, not given the intensity of parts or getting parts to the line.” Cost justification was a key topic in previous years, but allowances for container loss or management costs were inadequate.
Diana called container management one of the most difficult tasks facing reusable packaging programs, and a number of other speakers echoed her view. Michael Diaz, president of CAPS (Container and Pallet Services), which rents containers to automotive companies and other businesses, offered some refreshingly candid views on the challenge of container management. He has been unimpressed with radio frequency identification (RFID) tracking so far. “RFID has been a very big bust for us so far,” he said. “It is expensive and not very reliable.”
Last year, CAPS provided RFID tracking for part racks at a GM plant.
He was equally disappointed with the practicality of returnable dunnage. “Reusable dunnage screws up the economics of a reusable packaging program,” he said. “It can triple the repositioning cost.” The consensus at the seminar seemed to be that returnable dunnage resulted in special challenges. Some times it is discarded or put in the wrong container. It is hard to distinguish, especially if the dunnage it not labeled.
Michael also cautioned the audience not to underestimate the cost of repositioning empty containers. “The rule is that, almost without exception, it takes longer than planned to reposition containers,” he said. In one case, a 24-day turnaround was the agreement with the customer, but CAPS found the turnaround time took 47 days.
In-House Container Control
A highlight of the seminar was a panel discussion on container control by Daimler-Chrysler, Ford, GM and Toyota. The first three have launched — or are in the process of launching — integrated container tracking software; these companies have decided to manage their own containers, at least from a tracking perspective.
“Different companies have different philosophies,” noted Franko Bayer of Ford. “We chose to manage the containers ourselves.” Third party lead logistics providers such as Comprehensive Logistics often provide the actual hands-on management of sorting, staging and return, however.
Common to all of the new initiatives are features such as real-time inventory and a pull system that is integrated with production systems to generate requests for specific container shipments to specified suppliers based on planned production. Batch information on empty and full container movements are captured from ASNs, minimizing manual entry requirements. All of the systems have mechanisms to identify suppliers that have been shipped excessive containers in order to halt further shipments to them until they are needed. This prevents unauthorized use and build-up of containers. Likewise, if suppliers ship in expendable packaging, the tracking systems determine whether or not they should have reusables; if they should, charges for expendable packaging are not accepted by the assembly plant.
GM began rolling out its CLIPS (Container Logistics Information Planning System) about two years ago. According to GM, its mission is to “provide a tool that supports GM business practices by improving the ability to forecast, monitor and manage GM returnable shipping containers as a corporate asset.”
“We need to support the guy on the dock and provide him a reasonable way to do his job,” Tom said. With 154 million pounds of freight moving daily into 76 plants, Clips provides GM with a better way to track its containers in the supply chain and to allocate empties as needed to suppliers based on planned upcoming production. “We are looking at a change in culture out there to get people to look at containers in a different way.”
Daimler-Chrysler, which has 37 plants and 5.4 million containers, launched its new Container Management System in January. It is currently using it in its U.S. and Canadian plants, according to Karl Roberts of Daimler-Chrysler. Mexico and the company’s parts division have not yet been included. The system’s three main features include real-time container inventory visibility through the entire system, accurately identifying supplier empty container requirements with a pull system, and a dynamic tracking system for containers on a Web-based program.
Ford began pilot testing this year of its new container management and control system, Franko said. It will provide real-time inventory, ensure containers are returned as needed to suppliers, and provide information of empty and full containers on hand at assembly plants. “We want to treat containers like parts,” Franco commented. “We are focusing on real-time inventory. How many are in the four walls? How many are in the supply base?”
Toyota has a substantially different approach to container management. It does not track containers on an ongoing basis but engages in sample testing. For example, in a six week study last summer, it discovered that 99.3% of containers were returned and 0.7% were missing. About 0.5% of containers were found to be damaged, as were about 6% of pallets and top caps.
Toyota relies on its level production schedule, level ordering method, ‘milk run’ transportation system, minimum inventory levels, and visual controls, such as container ID and trailer diagrams, to ensure a steady flow of containers. Because inventories are lean, a shortage of containers itself becomes the warning signal. “One of our strategies is to have a small container fleet size so we will be able to see any bump or major problem,” Tom pointed out. Central to Toyota’s system is the Kaizen or continuous improvement approach. A problem is identified and better methods are developed to improve productivity. “Our focus is on making sure it doesn’t happen next time,” Tom said.
The seminar also included an update on RFID technology by Dr. Robb Clark of MSU, an overview by Bill Hoffman of Intermec of the rapidly developed RFID standard developed for tire manufacturers, and a session on packaging system design implications for rail transport. It concluded with an informative tour of the school of packaging laboratory, including demonstrations of testing equipment, as well as of RFID technology.
The reusable packaging seminar was a worthwhile event, highly recommended to pallet people wanting to upgrade their knowledge of reusable packaging programs, especially in the alternative materials arena.
