Simple, standardised packaging can help achieve increased container fill, flexibility and safety.
The globalisation of automotive supply chains has prompted many changes in the packaging of automotive parts. Most parts moving in markets across Asia are shipped in expendable packaging, as are parts shipped across continents. There are some signs that this is starting to change, but progress is slow.
The push for standardisation is also long and plodding, even in developed markets. But increasingly, manufacturers are working with their suppliers and packaging providers on adapting simplified, standard designs that allow for maximum container fill, are stackable in transport and built to sufficiently safe standards. In developed markets, OEMs face the challenge of enforcing standards among their suppliers rather than rewriting new ones.
Finally, the management of containers – the returnable plastic and metal racks rather than the 40ft kind at sea – remains a challenge across OEMs and tier suppliers, including minimising loss, damage and empty returns. While manufacturers use different approaches – from in-house management and ownership to rental services with container pooling providers – few seem to be fully satisfied with the current outcomes. Nevertheless, progress is being made, from tracking containers to managing pools across regions and countries.
Container and capacity shortages
The market for packaging assets and services is particularly strong in some parts of the world, such as North America and China. According to Eric Schweers, senior engineering and process manager at packaging consulting firm Surgere, based in Green, Ohio, production increases are putting pressure on OEMs’ packaging assets. “Most auto manufacturers are running at capacity or above, which places a lot of strain on the container fleet,” he says.
Strong growth at the Chrysler Group, together with an older fleet of containers, has led to shortages. Stacy Schmidt, head of container and material logistics management, says that container scrap and repair demand has been increasing. Chrysler is responding by buying larger, returnable containers by the end of 2012, according to Schmidt. This purchase will also reduce the ratio of expendable containers in Chrysler packaging. In many cases, Schmidt says, the number of containers allocated to suppliers has doubled to accommodate the true system requirement.
North America is also among the fastest growing markets for packaging supplier Orbis Corporation, according to Dan Roovers, vice-president of automotive sales. “More large tier one suppliers are outsourcing their packaging due to their increase in volume and the consolidation of the supply base.”
China is another of Orbis’s most significant markets as it converts from expendable to reusable packaging. Surgere’s Schweers also points to emerging markets as having the largest opportunity to define and comply with packaging standards, even if it is not happening quickly. “India and China are struggling to adopt their own standards; they stand to benefit the most,” he says.
Enforcing standards
In emerging and developed markets alike, manufacturers say that encouraging standards in size and stackability would be the best way to improve cube utilisation for packaging. At Lear Corporation, for example, Matthew Siakel, electrical power management systems global packaging manager, says the supplier is currently working on establishing a standard, stackable pallet that can improve cube efficiency for both domestic and international shipments. “We are in the infancy stage and are rolling it out to our supply base and Lear facilities globally,” h e s ays. “We are concentrating on Europe first. The challenge is that the Euro pallet cubes out for domestic trailers but not sea containers. We are trying for a 47 x 44-inch (1,194 x 1,118mm) pallet in order to optimise domestic and sea containers for the US, Europe, and Asia. Our cartons, totes, etc, would also need to be slightly modified.”
Brian Bold, logistics manager at Toyota Motor Engineering and Manufacturing North America (TEMA) says that one area of focus is to maximise packaging efficiency at the pallet-to-trailer level. “We are doing this by improving packaging inter-stackability through standardisation,” he says.
Chrysler’s Schmidt admits that part dimensions, weight, ergonomics, and manufacturing requirements sometimes drive unique packaging requirements. But Chrysler is working to reduce the complexity of its standard container sizes by eliminating some of the low usage container sizes.
Schweers points out that since most mature markets have fairly well defined standards, the best opportunity in these areas is to enforce them. “In a practical state, the goal for companies is 95% container standardisation. The remaining 5% of containers hold parts that originate from another industry, such as electronic components, that might not have the same standards as the automotive sector,” he explains.
For Surgere, Schweers estimates that around 80% of shipments by volume in the United States are standardised, but he estimates that 15% are non-standard because of a lack of enforcement.
Johnson Controls reports a similar compliance rate. According to Mark Klenczar, SCM packaging engineering manager, the company’s inbound suppliers need to meet the standards of a handful of container sizes, and about 85% do, according to Klenczar. The tier one then tries to deliver the same container to assembly lines, but the ability to do so varies depending on the amount of kitting and sequencing that is done with the parts. “We try to deliver the same container to the line. At the same time, the processes of kitting and sequencing have been increasing since late 2011, which has the advantage of reducing floor space requirements on the line,” he says.
Ready to redesign
As well as establishing standards, a more complete view of the logistics chain could reveal ways that packaging racks can be designed or works flows reengineered to improve delivery costs. For instance, Toyota has changed how it manages its packaging fleet. “Currently we are focusing on enhancing our packaging management and handling processes both internally and externally,” s ays Bold.
For example, TEMA recently faced a challenge with packaging its rear bumper subassembly for the Tundra model. “The sub-assembled bumper and tow hitch had very low pack efficiency. Therefore, we separated the components, which increased the pack efficiency and reduced the transportation cost. We divided the four parts into a component rack and handheld totes,” says Bold.
Another example involved redesigning a rack for automatic transmissions. “Our West Virginia plant supplies robust and heavy racks that could not cube out a trailer,” explains Bold. Furthermore, damage occurred because the transmissions were not held securely. By contrast, racks received from Japan improved the ease of use and workability, but needed to be adjusted for the local market. “So, we designed a new rack that had the efficiency of the Japanese design and was also robust,” he says.
Bold believes that Toyota has improved its ability to develop packaging aligned with component part designs, which has helped to reduce packaging investment for new models as well as to reduce handling by suppliers and by Toyota.
Lear has also increasingly switched to using more of a specific container type with superior return ratios. It consists of a defined thermoform pallet and lid that is collapsible and nestable, and a plastic or corrugated middle sleeve. The collapsible ratio ranges from 7-10:1, compared to the standard ratio of 2.6:1.
At tier one supplier Key Safety Systems, which manufactures seat belts, steering wheels, and airbags, global lead packaging engineer Thomas Shannon says the supplier is working on achieving the highest cube possible across all modes of transport. “We also reduce our transportation costs by minimising the number of movements, brokerage fees and entry fees,” says Shannon.
Increasing a container’s velocity is also a process that can lead to inventory reduction, but requires coordination across the supply chain. “We need to optimise our internal logistics by reducing our labour costs, packaging inventory, and storage costs,” he adds. He recognises that minimising damage while lowering logistics costs can also be a challenge.
Packaging providers have also been engineering new products to improve fill ratios and flexibility. Roovers says that Orbis increased the number of parts per truck as a result of its introduction of a 48 x 44.5-inch container footprint, which has the same inside dimension as the standard 48 x 45-inch one. It increased the number of parts per truck by 7% and the number of empty containers on the return loop by 21%.
Peter Doyle, automotive business development manager at Schoeller Arca Systems, which is merging with sister company Linpac Allibert, says its Magnum Optimum Folding Large Container (FLC) introduced last year, folds to only 295mm high when empty. “Now eight can fit in each footprint of a standard trailer [1,200 x 1,000mm] instead of six,” he explains.
According to Pat Healy, European automotive key accounts manager at Linpac Allibert, the Magnum Optimum offers a reduction in weight and CO2 emissions and a 25% reduction in volume.
Returnable packaging and managing loops
An important focus among logistics managers remains the management of container assets and loops across an OEM’s production network. Most manufacturers have set objectives to increase the number of returnable containers that they use. Tier one supplier Johnson Controls has ambitions to increase its use of returnable packaging in North America to higher than 80%, compared to 50% returnable today, says Mark Klenczar. “In contrast to Canada and the US, where we use returnable packaging, a lot of our packaging from Mexico is expendable. There, we need a tracking system because our visibility is lacking,” he says.
Currently, Key Safety Systems uses about 60% returnable containers among its sister plants, although the ratio is lower among suppliers shipping to its plants, according to Shannon. The company has set targets of reducing corrugated container consumption.
Patricia Pelzer, head of logistics container management, logistics planning, at Volkswagen Group of America Chattanooga Operations, puts considerable packaging focus on reducing waste and having a “green plant”. That includes having direct flows from the suppliers to the production line and the use of reusable containers for all parts.
Having reusable containers is one thing, but using them effectively across a loop or pool is often another – this is an area in which many manufacturers complain that efficiency is lacking. OEMs vary in their approach to such loops, from in-house models where they own and manage the assets, to outsourced models where providers might own or manage their fleets (or do both). Volkswagen handles its container management in-house, for example.
“LISON, our internal system, which is also a global Volkswagen system, enables us to know how many containers each supplier needs for its shipments to our plant three weeks in advance. We also know in real-time how many containers are at the supplier’s facility,” s ays Pelzer.
Volkswagen aims for its container pools to be transferable from one model to another. “We review routing and the environmental conditions for each part and supplier in order to ensure that the packaging can hold up to changing temperatures as well as protect parts optimally. Our next step is to review how to minimise the number of handling steps for packaging returns.”
Key Safety Systems is currently collecting data for a study of a returnable container pooling system. “Our first phase would be to implement returnable containers for all of our inter-plant shipments within North America. Then, we would extend the service to as many of our component suppliers as possible. We hope later to implement the service internationally,” s ays Shannon.
At Johnson Controls, growth in the supply chain has driven demand for more returnable containers, leading the company to trial a new container management system to track containers at all times. “Our container management system is in the pilot stages now. The old system is labour intensive, inaccurate, not close to real-time, and not system-wide,” reveals Klenczar.
While Johnson Controls manages its containers in-house, Klenczar reveals that it is currently evaluating where and how to use third-party providers. One question the provider faces is the electronic tracking of the assets.
There are several visibility solutions on the market, including a real-time tracking system from Surgere, which alerts the user if its container flow is disrupted or becomes unbalanced. Both Chep and Surgere are among companies offering management and visibility services for container loops (see p12 for more on a new market entrant in North America, Palogix). Jason Rabbino, group president for Chep, says its reusable containers enable parts shippers and manufacturers to maximise their truck and container usage with no empty miles. Chep collects the reusable containers and pallets at the end of the delivery chain and brings them to the nearest service centre for cleaning and repair. After that, the containers return to the supply chain and move to the closest customer, thus reducing the total transport costs.
More returnable needed on international shipments
Perhaps the Holy Grail in container management right now is the management of returnable loops across intercontinental shipments. One-way shipping flows, long lead times and disjointed supply chains often mean the economics of such loops don’t add up. Such returns are not completely unknown, as both Key Safety System and Lear have aspirations to increase them – Lear had even planned to ship its first returnable loop of wiring harnesses from Honduras to Michigan in the fourth quarter 2012. The packaging would ship to a sequencing centre, where the harnesses would be repackaged to sequencing racks.
But Chrysler’s Schmidt points out that any market building vehicles outside North America will have either its own container and rack fleet or it will ship in expendable containers. “It is cost-inefficient to return containers from North America back to Europe or another continent. Currently, any material except for engines and transmissions coming from Europe to North America ships in expendable packaging,” she says.
For international suppliers, the fleet size requirements also do not support returnable container fleets because of the number of days involved, according to Schmidt.
Linpac’s Healy points out that within Europe, more than 95% of the containers are returnable, with those sent to other regions usually repacked. “Deep sea packages ship one way and then are repacked by the third-party logistics providers in supplier parks near the manufacturer,” Healy says.
Roovers at Orbis estimates the use of expendable packaging from China to Europe is about 70%, most of which goes to a consolidation centre near the European plant. Steel racks are disassembled and reused. “In China, everyone wants to convert from expendable to returnable, but they need standards, without which it will be difficult to convert,” he says.
One of the challenges in using returnable packaging for overseas shipping is the use of different standards across regions. According to Schoeller Arca’s Doyle, tier one supplier BorgWarner, in Nashville, is considering the use of FLCs and Euro pallets, which is standard packaging in Europe, to ship between North America and Europe. But mixing standards across the Atlantic leads to big gaps in utilisation. “The dilemma is that ocean containers, which most closely accommodate the 1,200 x 1,000mm European pallet footprint, still leave 17% unused space,” he says. “We are looking at the 1,140 x 980mm North American pallet as an alternative to reduce waste. This type of operation would be easier in emerging markets, but in mature markets, the legacy systems make it more difficult.”
But while returnable remains elusive, the increase in global material flows has driven more interest in improving intercontinental packaging. Surgere’s Schweers notes that through the combination of design and appropriate sizing, intercontinental packaging has a significant opportunity to improve logistics efficiency. “We are beginning to ship more shipments to Brazil, Korea, Russia, Thailand, and India, among other countries,” he says. “Because our products are shipping to more international locations, utilising better methods of packaging and shipping to these areas is essential for us to remain competitive.”
Klenczar points to relatively quick wins that can be made by encouraging global suppliers to adopt proven standards. “For example, in shipping from Korea to the US in expendable packaging, our supplier did not consider the part size in comparison to the box size. This affected the pack density, piece price, and the transport cost. We provided our supplier with another direction on standards and increased our sea container utilisation by one-third by adding another row of boxes,” he explains.
As Key Safety Systems manufactures more globally, Shannon says it needs to find suppliers that can provide the right packaging specifications and quality to all of its locations. “For example, whereas a large regional packaging supplier may be the best option for our plant in Villahermosa, Mexico, it is difficult to use the same supplier for our Knoxville location without raising our inventory levels, transportation costs, and overall packaging piece price,” he says.
With so much of intercontinental packaging currently cardboard and of poor quality, there is a growing demand for packaging that is more secure and reusable. Chep introduced the IcoQube in September, which is a reusable and collapsible container designed for intercontinental shipping. Jason Rabbino says the boxes are built to sustain long journeys at sea. “Inside sea vessels, shipping containers are subject to extreme climate conditions,” he says. “Cardboard boxes often collapse, resulting in damage to the components.”
The IcoQube is also stackable, which results in improved shipping capacity of 8-10%, compared to conventional disposable packaging. It is recyclable and moisture-resistant, and optimises the space in standard sea containers up to 98%, claims Rabbino.
The move towards reusable packaging on intercontinental flows is encouraging, par ticularly as supply chains become more global and require more packaging. As the oppor tunities are already plentiful for domestic shipments and packaging loops, the potential on the international side would appear to be enormous.
