The ABC's of RTP's
Why Retainable Transit Packaging is the solution for your business.
Transit packaging can be classified as either Single Trip or Returnable. The former denoting packaging that can be disposed of once it has been unpacked at its final destination, while the latter refers to reusable packaging that is unpacked at the final destination and then returned to the starting point of the packaging loop.
Returnable transit packaging is typically used in a very well organised supply chain and includes such packaging as; reusable pallets, racks, bulk containers, hand-held containers and dunnage. This form of packaging is made of durable materials such as metal, plastic or wood and is designed to withstand rough logistical handling. However, in order to have returnable packaging, you first need a returnable pack. Generally, this is any form of vehicle that goes to a point of destination and then comes back, like a delivery vehicle. This returnable pack will transport containers which hold returnable packaging. Once it has delivered its goods, the returnable pack will return to the destination from which it was dispatched. This form of cyclical transport is a perfect fit for returnable packaging. When implemented correctly, returnable packaging can earn substantial savings both in term of cost and time since companies cut down on material waste, as well a s total costs, by recycling packaging rather than just using it once.
1. The Business of Returnable Transit Packaging
Packaging manufacturers, product marketers and retailers are therefore becoming increasingly aware that the use of Returnable Transit Packaging (RTP) is not only a more environmentally friendly approach to packaging, it also makes economic sense.
Through the use of RTP’s, companies can improve their supply chain operations in a number of ways. The most obvious benefit is the lower total cost of ownership of a durable package that can easily be returned and reused, which in itself is often enough to convince organisations to adopt and RTP solution. However, there are also numerous other benefits:
- Increased productivity
- Custom designing units that are easier to pack, handle and transport
- Improved protection of products
- Lower operating costs, measured in ratio of number of trips / cost of package
- Higher capital use effectiveness
Sustainable Supply Chain Practices
RTP’s have also gained traction due to the role it can play in creating sustainable supply chain practices, the most obvious of which is in its more positive environmental footprint. Making the choice to ship products in reusable plastic crates, rather than disposable cardboard cartons, can mean less waste in landfills and better use of both renewable and non-renewable resources.
This more environmentally friendly approach has the benefit of not only meeting societal expectations, but also potentially lowering the total cost of ownership. In addition, sustainable supply chain practices also have a compliance component which is enforced to varying degrees by the respective industries being serviced. These regulations often include very specific requirements, such as expectations to ensure that all RTP’s used are non-reactive, nontoxic and are able to be properly cleaned between re-uses, in order to protect their contents and its handlers from leaking or contamination.
2. Benefits of Returnable Transit Packaging
2.1 Storage and Transportation
Plastic crates and pallets will not only cost less to use, but they will also reduce the cost of storing and transporting goods. The packaging can be stacked or collapsed when empty to make storing and returning them for another use more efficient. They take up less space in the warehouse, and on lorries, reducing the cost of transporting them back to the depot. Stanford University Medical Center (SUMC) receives large amounts of medical and surgical supplies on a daily basis; receiving, repacking and distributing supplies from numerous vendors to SUMC’s more than 300 stocking stations. This required the storage of large volumes of packaging material for recycling and disposal as well as being labour intensive. SUMC switched to standardised reusable plastic lugs to facilitate “just-in-time” shipments of small of small custom orders, delivered directly to each stocking location. This has drastically reduced packaging waste, solved space constraints and freed up Clinicians to focus on patient care.
2.2 Operational Optimisation
A recent Case Study on the Bay Area Newsgroup, in San Francisco, found that by replacing the traditionally used wooden pallets for distributing their newspapers, with durable plastic pallets, they were able to garner the following savings and show clear ROI in a 12 month period.
- 37 tons of wood waste was prevented, including the associated disposal costs
- Saving $ 46 000 on Labour, previously needed to repair and handle broken pallets
- 125% Return on Investment for the project in the year period.
Another example of the positive impact Returnable Transit Packaging (RTP) is making on business is Ghirardelli Chocolate on the US West Coast. The company gradually introduced RTP, first switching from cardboard boxes (used to move chocolate inside the factory) to plastic lugs, thereby avoiding the purchase and disposal of 660 tons of cardboard per year. In addition, a further saving was also secured by preventing 800 tons of waste resulting from crushed chocolate / boxes. A further innovation was the prevention of 50 000 to 75 000kg’s of waste per annum resulting from product dropping off the production line (but now netted in special lugs) which amounted in a payback exceeding $520 000, after a payback period of just over a year.
2.3 Hygiene Maintenance
Hygiene levels within packaging, especially for the food, drink and pharmaceutical industries, are extremely important. Wooden pallets and crates are more prone to problems due to damp, mould, water and insect infestation. Plastic pallets are resistant to all these issues, making the packaging more hygienic. They can be easily and thoroughly cleaned following use, making them suitable for a wide range of goods.
Figure 2: RTP Washing Bay
Worker Safety & Product Protection
One of the most important benefits brought by RTP is the positive impact it has on worker safety. Worker safety is among the key arguments for a transition to reusable transport packaging. Veritable Vegetable, a provider of organic fresh fruit and vegetables in San Francisco, CA, switched from wood pallets and disposable plastic pallet wrap to reusable plastic pallets and pallet wraps made from durable mesh material. With over 100 pallets of produce received and shipped out daily, repetitive movements such as bending and pulling to wrap pallets in several layers of plastic film are hard on workers’ backs. Veritable’s new user-friendly reusable wraps reduce the physical burden as well as time needed to get the job done. The new practice also eliminates the recurring purchase of some 700 miles of plastic film wrap per year.
Environmental Impact Reduction
As part of the Packaging Waste Directive, companies are encouraged to keep the amount of packaging used to a minimum and re-use items where possible. The use of RTP helps companies to abide by these guidelines. Plastic reusable packaging is better for the environment in a number of ways. As they can be used for multiple trips, they produce less waste for landfill, reducing both damage to the environment and the cost to the business of disposing of the rubbish. They also require less energy consumption. Rather than manufacturing more and more wooden packaging, one plastic crate can be used time and time again. Combined with the fact that they're not recycled, there's less energy used in the overall process. Studies have shown that reusable containers generate 29% fewer GHG emissions, 39% lower energy consumption and generates 95% less solid waste than single-use packaging, even when that packaging was recycled at end of life. A case in point is in motor manufacturing. Tesla Motors in the USA, replaced disposable packaging for their Model S windshields with returnable racks. In addition to effectively eliminating all waste generated by windshield packaging, the RTP packaging also helps solve space problems and enables workers to spend less time handling packaging materials while also reducing the company’s environmental footprint.
Decreased Product Damage
One of the issues with wooden packaging is that it's not always robust enough to securely transport goods. Often items can be damaged in transit, meaning they're returned when received by the customer. RTP is a more rigid and durable option which provides additional protection for the goods. This makes them extremely beneficial for food, perishable goods and high-value items, where the cost of returns could have a significant impact on the business.
Product protection is of particular importance for the distribution of perishable goods. Reusable plastic containers (RPCs) are becoming more commonplace in fresh food supply chains, because they hold up against moisture and allow for ventilation, dramatically reducing spoilage during processing and shipping. In 2010 Safeway Inc. began transitioning to RPCs for their wet-pack produce — fruits and vegetables kept on ice until they reach the store. In California’s Central Valley, produce now travels in RPCs all the way from growers to Safeway’s distribution center in Tracy, CA, to the chain’s stores in the region. Besides reducing spoilage, Safeway’s initiative has eliminated the use of more than 17 million pounds of corrugated boxes and prevented 37,518 metric tons of GHG emissions so far.
Returnable packaging has proven to accrue significant cost savings when compared with traditional single trip packaging and for this reason RTP is treated as a capital investment rather than an expense. Financial benefits of outsourced plastic crates and containers:
Enjoy greater revenue by reducing product damage, loss or waste through more efficient handling and product protection.
- Inbound/Outbound efficiencies = Better logistical efficiencies from broad acceptance of our equipment
- CAPEX reduction - We take care of the ownership of pallet, container and crate assets
- Reduced empty miles - Improved truck and container use by transporting empty pallets and containers for re-use
- Reduced pallet and crate costs - Reduced tracking, cleaning, routing costs associated with pallet and crate pool operation
- Reduced loss and damage - Reduction in one-way packaging waste management activities
Overall, RTP offers businesses greater efficiency over single-use materials. They produce a cleaner and safer environment, minimising clutter from cardboard cartons and providing a safer workplace. With the growth of modern technology, including electronic tagging, RTP is needed to ensure goods can be easily tracked and traced.
Returnable Transit Packaging is ideal for Fresh Food
The total packaging costs driven by moving, storing and protecting your fresh food through each stage of the supply chain can really add up. We've made it our mission to help customers focus on the most common issues, to reduce their total packaging driven costs. These are typically:
1. Source of Production:
- Handling inefficiencies - Double handling created by non-standard or damaged packaging
- Transport inefficiencies - Caused by poor load units or truck / pallet / crate use, or issues on inbound loads
- Storage inefficiencies - Inability to rack or stack equipment high enough, mixed packaging types, footprints or carrying capacities
- Product quality (inbound) - Damaged packaging or product, spoiled product, hygiene issues
- Packaging ownership issues - Administrative costs of managing suppliers or manufacturer owned equipment, the cost, hassle, waste and emissions associated with one- way packaging.
2. Deliver to Consumption
- Transport use - Truck and container issues, as well as load containment and stabilisation
- Downstream acceptance issues - Retailer and wholesaler reluctance or non-acceptance of pallets
- Packaging ownership issues - Costs associated with managing manufacturer owned equipment, along with the cost, hassle and waste associated with one-way packaging and associated administrative issues
- One-Way packaging waste- Handling and waste management issues created at the receiver's end
Figure 3 - RTP in Fruit Growing Industry
3. The right RTP solution for growers, producers and retailers:
- Advice on choosing the right equipment for your individual supply chain needs
- Standardised handling platforms allowing for increased transport, handling and storage efficiencies across the supply chain
- Platforms and accessories that help reduce preventable costs e.g. collapsible containers and crates to reduce the cost of reverse transport legs, engineered systems to ensure high value product isn't wasted
- Reduce double handling, administrative issues or empty miles from equipment return, by adopting our pooling system to facilitate the inter-company flow of pallets and containers across an entire supply chain network
- Reducing physical packaging waste by replacing one-way packaging to minimise C02 costs through improved truck use
- Ongoing support to reduce total packaging driven costs over time
Contracting with third-party poolers
Reusable packaging can require a more sophisticated logistics process, as materials must be returned for reuse. This can be especially complex in an “open loop” distribution system, such as Safeway’s, where containers don’t return directly to their origin but ship from one or many locations to various destinations. Fortunately, third-party poolers can help manage the process. These companies lease out standardized pallets and containers on an as-needed basis, often as a full-service package that includes container delivery, tracking, pick-up, cleaning, maintenance and storage. Ideally, all links in the supply chain use the same container types so that no repackaging is necessary, further reducing handling, labour and spoilage. With so many success stories and good arguments in favour of reusable transport packaging, who makes a good candidate?
As a rule of thumb, organizations receiving a lot of disposable transport packaging materials from suppliers or making repeat purchases of those materials for shipping will likely be able to increase their operational efficiency with reusable packaging. Recurring product damage, underutilized trailer or storage space and worker safety or ergonomics issues may all be resolved with reusable packaging.
Finally, any business or brand deriving value from its commitment to sustainability may want to consider reusable transport packaging — not only from an environmental perspective, but also as brand protection. After all, who would want their hard-earned reputation as a sustainable brand tarnished when that very brand is displayed on cardboard boxes in a customer’s or supply chain partner’s garbage dumpster? While there’s little control over the fate of one-way, expendable packaging, a transport system using reusable packaging has the return of — and return on — the materials built in.
The Costs of RTP’s
There is no doubt that RTPs help organisations save time and money, improve productivity, protect the environment and also comply with regulatory and contract requirements. However, probably the single most important factor in ensuring that these benefits are realised is proper management. Since, just as sure as RTPs can save money, they also carry their own costs which need to be managed to ensure profitability is optimised at all times. The size of the range needed for a given operation – and thus the size of the initial investment – depends not only on the volume of goods to be transported, but on how frequently the product or product mix will change. RTPs are available in a nearly unlimited variety of specialized shapes and sizes, including: Meat containers, Pallets, Dairy crates, Returnable product containers, etc.
Costs are generally tied to the number of container variants that are needed and the complexity of the distribution process. Fixed product lines, such as dairy operations, utilise one or two types and sizes of containers and are fairly simple and low in cost. Other product lines, like those of automotive component suppliers, are often very wide in scope and require frequent product line changes and the need to manage a large range of customized RTPs comprising a selection of very different types and forms of containers. Essentially, the more variable the range of product that must be moved, the more complex and potentially expensive the RTP fleet will be.
Another cost associated with a durable asset, such as an RTP container, is the ongoing need for repair and maintenance. In a perfect world RTPs should be in near-constant movement which can complicate the planning of scheduled maintenance to damaged containers or to ensure routine cleaning. Proper maintenance is however not just the smart thing to do, in many cases it is essential. One industry where this is a non-negotiable is in the Food industry. It is not only unhygienic, but also potentially dangerous to transport different foodstuffs in the same container without properly cleaning it first.
Transporting hazardous materials is another case in point. If two otherwise safe chemicals have a violent reaction when they are mixed, a RTP used to transport one of these chemicals must be properly cleaned before it is used for the other.
Clearly, any asset inventory will require periodic replenishing of units as they are damaged, lost or retired, but RTPs especially can be subject to significant shrinkage. This is most clearly understood in RTP cycling; which is how containers move, who moves them and how this entire process is managed.
Cycling and RTP Shrinkage
A survey of the automotive industry found that 14% of annual container budgets are spent just to replace missing RTPs, while the US Postal Services estimates a loss of as much as 20% of its RTP containers per annum. The reasons for these tremendous loss levels become more apparent when we look at how RTPs cycle and who participates in the process. While there are many variations in RTI cycle models, they can be considered as belonging to one of three broad categories: closed loop, open loop and pools.
The Closed Loop Model
The simples cycling system for Returnable Transport Packaging is the Closed Loop Model, where containers are exchanged between two parties whom are both members of the same organisation, for example when parts are moved out of stock holding to the manufacturing facility. In a closed loop cycle, RTPs either remain within a single facility or they move from one site to another. In both cases, the Supplier is the point of origin for shipped goods, responsible for packing and delivering loaded RTPs while the receiving site is responsible for returning empty RTPs to the point of origin. Here, the parent entity typically owns the RTP stock which is managed by swapping a number of loaded RTPs for an equal number of empty RTPs at each delivery.
Challenges of the Closed Loop Model
The biggest challenge in a closed loop model is the fact that the partners (departments) are in a dependent relationship with each other. If one side does not fulfil its responsibility, the other side cannot either. This may result due to RTP units not running empty at the same rate as they are filled, uncertainty regarding what containers are available prior to the containers being ready to load and because the RTP traffic and ownership is internal, sometimes making correct stock control and management a lower priority.
The Open Loop Exchange Model
Open loop exchange is a Model that involves two or more companies working together as trading partners. An example is when a manufacturing facility ships product to regional distribution centres who then in turn deliver product to retail customers. The RTP containers are owned by the manufacturer who depends on the regular return of empties through the supply chain. In order to manage and control the process, and the RTP containers, Management requires a record of the type and quantity of RTPs delivered to each customer and a way to ensure that the same number is returned each trip. In many cases, in an effort to facilitate this process, containers are marked or branded to help ensure their return.
Challenges of the Open Loop Model
It may be very difficult to get the right number of RTPs returned from end-of-chain users since the systems are often not properly balanced and Suppliers often don’t know what RTP stock is available before they are ready to load. In order to avoid running out, Producers over-stock RTPs during peak shipping periods which increases the overall level of inventory and also slows down circulation of RTPs.
The sorting, counting and storing of RTPs, on the Retailers’ end, is based not on ownership or cycle times, but by size, colour and the way the container folds and stacks since these goods recipients may have limited back-of-house space. This contributes to ‘lost’ RTPs that have simply been misplaced. Other challenges are that process and data are not synchronised between players which makes the rapid exchange of information and the exchange of RTPs more difficult. In addition, it is a simple reality that the various role players are not equally invested in protecting the RTP assets, making non-owner customers less vigilant to return empty containers.
Pooled Exchange Model
In a pooled exchange, a pool operator owns the RTPs that cycle between a number of players. Here the Operator matched RTP quality to the supply chain partners’ requirements and the quantity to their traffic needs. This provides some options for accounting since the RTPs can be pooled between a number of customers and manufacturers.
Variable Pools enable operators to track the volume of RTPs issued and returned, charging the user per unit circulated. Dynamic Pools provide each supplier with a dedicated, often uniquely branded, pool of RTPs at a fixed price. Additional per-unit charges may be charged for special services from the pool operator, such as: washing and logistics management. Pool Brokerages operate either as variable or dynamic pools. Suppliers are directly invoiced for the RTPs they load, with customers paying a commissioned contribution to operating costs. One way rental sees the Operator charging suppliers a variable price on a ‘per trip’ basis, with the Operator being responsible for collecting empty units after delivery.
Challenges of the Pool Model
Only when he receives the assets can the Pool Manger check their condition and availability, which makes it very difficult to anticipate and prepare for; the number and type of RTPs that will need to be cleaned or repaired, demand-side variations (when a product sees a sudden or seasonal increase in demand), supply-side variations (such as weather dependent harvests). All players in this system are independent, so their processes and data are not synchronised and they are unequally invested in protecting RTP assets.
Challenges Common to All Exchange Models
There are a number of across-the-board challenges that affect RTP asset management which go beyond the model-specific issues. Members within the exchange generally tend to keep RTPs longer than they are needed, resulting in longer cycle times and unnecessary high stock-levels. Audit and tracking processes for RTPs are typically manual, relying on paper documents that are prone to input errors, which may result in poor inventory control. RTP tracking is a low priority for most users since the goods are what is perceived to be important, not the packaging. The cost and value of RTPs are often not understood or appreciated by users. Keeping users accountable for units in their possession and the loss and damage thereof is a constant struggle, making the efficient management of RTP containers not only difficult but essential.
How you can make reusable packaging work for your company:
1. Calculate closely how many assets will be needed.
In order to determine your asset requirements, it is important to not only know how many shippers are in the system but also the cycle time of the assets. You need to be clear on how long will it actually take to get reusable containers or pallets back from the end users? How many should be returned at one time? Is it worthwhile retrieving five or six containers or pallets, or should the return be postponed until a full truckload is built? Other questions that you need to consider the consistency of packaging volumes and whether there's a peak season for the packaging. Understanding all these factors will ensure the right amount of containers or packaging units are on hand, and avoid the need to pay for expedited shipping from Supplier.
2. Conduct a lifecycle analysis.
It would be short-sighted to automatically assume that RTP containers will be cheaper or greener for your business. Accordingly, and in order to be sure you are making a prudent decision, a detailed eco-analysis needs to be conducted, tailored to your specific enterprise.
3. Get supplier/customer buy-in.
There are some cases where companies are only using RTP containers to ship between their own facilities. Most of the time, however, the items are being shipped back and forth between the company and one or more of its suppliers or customers. In such a case, make sure suppliers or customers are on board with your RTP initiative. One way to get partner buy-in is to show how reusable packaging will help them reduce overall costs. Another possibility is to point out how reusable packaging could support any objectives they may have, such as complying with legal requirements. It may also be an idea to, before selecting a type of packaging, getting your customer and/or supplier's input on how they would like to implement a reusable program. Ask them how they'd like to receive the packaging and return it and how they'd like their employees to pick out of the asset or place items into it.
Manage the assets.
Reusable packaging is a valuable asset and in order to get the most from these assets, companies must have processes in place to track, return, clean, repair, and eventually recycle or dispose of the material. A pooler can help with the nuts and bolts of tracking and maintaining the assets. For example, many poolers will provide their customers (and their customers' partners) with scanners and systems to track assets. They will also ensure the assets are returned in a timely manner and that they are cleaned and repaired. However, take care to not step away from the operation; customers still have to be actively engaged in the process. "You need to understand [exactly] how you're going to be charged and who is responsible when one of these valuable pallets goes outside the system or is broken. It is also critical that your suppliers or customers play an active role in managing the fleet of assets. Don't allow them to sit on inventory and make sure you have detailed exactly how much they are allowed to keep on hand. Without that, you can get into a situation where your suppliers or customers are just building up buffers of packaging, and you find that your fleet is not turning over as fast as it could be.
5. Train, train, and train some more!
To get the most out of the investment, employees must be properly trained on how to use and care for the asset, for example, making sure associates know how to collapse and/or stack the items for maximum cube utilization when they are in return mode.
6. Periodically re-analyse your packaging needs.
Recognise that as business conditions change, you may also have to adjust your packaging. For example, a business that has recently automated its operations might find it has to switch to a different type of reusable packaging. Or as the type of product being shipped changes, you may need to switch to bigger or stronger containers. The important thing, is to have procedures in place to ensure your program is re-evaluated on an ongoing basis. Companies with successful reusable packaging programs are continually "rightsizing" their packaging to make sure they are using the right packaging for the right application.
Summary of 8 Key Savings through Returnable Transit Packaging
✔ Equipment specification, ensuring the best equipment is used for the job
✔ Quality Assurance, ensuring all quality and hygiene standards are met
✔ Availability, always available when needed
✔ Single solution, savings in and optimisation of supply chain
✔ Risk Management, keeping risks contained to a minimum
✔ Focus on Core, allows you to concentrate on what you are good at
✔ Cost Management, improved cash flow and lowest total cost
✔ Environmentally sustainable, reducing carbon emissions
Returnable Transport Packaging with MPACT
Mpact Plastic Containers offer a fresh and modern approach to plastic packaging, moving away from outdated, single-trip disposable packaging. We have developed a wide range of multi-trip, re-usable containers that constitute the broadest offering of Returnable Transit Packaging (RTP) systems in South Africa. With the obvious cost advantages of moving away from raw materials, not to mention the dramatic reductions in packaging waste, improved product protection and superior logistical efficiency, it is no wonder that the RTP market has been experiencing such consistent growth, which Mpact Plastic Containers is now perfectly poised to build on.
Combining these benefits with the added advantages of improved safety in transport storage, less maintenance and traceability through RFID tags, companies can no longer afford to overlook the long-term benefits of RTP containers over disposable packaging, with applications in almost every commodity industry, including, but not limited to agriculture, automotive, baking, food processing, manufacturing, logistics, pharmaceutical, poultry, retail, waste collection and containment, as well as the wine industries.
To find out more, visit www.mpcsa.co.za