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Reusable Transport Packaging REUSABLES 102 A cost comparison model for Reusable Transport Packaging How Businesses Have Successfully Switched to Reusable Transport Packaging Ready to switch from one-time-use to reusable transport packaging? The Cost Comparison Model for Reusable Transport Packaging in this document can help you determine if reusable packaging makes financial sense for your company. Many organizations today are turning to reusable containers (totes, boxes, and bins), reusable pallets, and pallet pooling systems (pallet rental) for multiple transport trips in closed-loop and managed open- loop shipping systems. Using durable materials allows reverse logistics—or the return of empty transport packaging components—to be repeated over and over again. You can find additional information and resources on reusable transport packaging at www.UseReusables.com. The website includes case studies that demonstrate the many cost-saving benefits of reusable transport packaging, answers to frequently asked questions about reusables, and a resource center with links to manufacturers, service providers, and packaging experts. Reusable transport packaging: Typically, reusable transport packaging has a higher initial cost than one-time or Benefits and advantages limited-use transport packaging, because Generally, a company will make the switch it is designed and manufactured with to reusable transport packaging when it more durable, longer-lasting materials. is less expensive to use than one-time or Other costs may include new material limited-use transport packaging. There handling equipment and storage systems, are many opportunities for companies to reverse logistics (the return transportation save money with reusables. of empty reusable packaging components), The primary cost-saving area is from maintenance and repair, and asset tracking elimination of the purchase and disposal and depreciation. costs of one-time or limited-use packaging. However, these costs are offset by the Secondary savings opportunities include: savings opportunities. The frequency of • Lower labor costs reuse over the extended useful life of the packaging determines your return on • Decreased product damage costs investment (ROI) for the higher cost of • Lower inventory costs reusable transport packaging: The greater For more information on reusable transport the frequency of reuse, the faster the packaging and how it can help your company, • Lower shipping costs return on investment. download the Reusables 101 primer, Think Outside the Box: Think Reusable. • Fewer workers’ compensation claims The Cost Comparison Model for Reusable Transport Packaging can help you determine both initial costs and potential savings from switching to reusables. REUSABLES 102 Get started with reusables Reusables: The cost Cost components To determine if reusable transport packag- comparison model Table lists the cost components for one- time or limited-use transport packaging ing will add profit to your company’s The following model expands on Step 6 and reusable transport packaging, as well bottom line, follow the six steps below. by presenting a way to identify and as definitions of what is meant by each For more information about each step, compare the one-time cost per use of component. Though every supply chain download the Reusables 101 primer at one-time or limited-use transport www.UseReusables.com. is unique, these cost components are a packaging (“one-time cost”) with the factor in most cases regardless of what lifetime cost per use of reusable transport material is used for transport packaging. Step 1: Identify potential products that packaging (“lifetime cost”). Substitute are frequently shipped in large volume your own data to identify the ROI from and are consistent in type, size, shape, switching to reusables in your company. and weight. One-time or limited-use Step 2: Estimate one-time or limited-use transport packaging packaging costs for these products. To determine the current cost of using one-time or limited-use transport packag- ing, identify all known cost components Step 3: Develop a geographical report and calculate the one-time cost per use for the products by identifying shipping for the current packaging system. and delivery points. Reusable transport packaging Step 4: Review the various types and The rewards of switching from one-time- To determine the cost of using reusable costs of reusable transport packaging use packaging to reusables are many: transport packaging, identify all estimated systems available to move these products • Elimination of the high purchase and through the supply chain. cost components over the lifetime of the disposal costs of single-use packaging new reusable transport packaging system • Safer ergonomics and lower labor costs and calculate the lifetime cost per use for • Product protection and lower product Step 5: Estimate the cost of reverse the new reusable packaging system. The damage costs logistics in a closed- or managed open- “lifetime” of reusable transport packaging • Smoother flow of goods through loop shipping system based on the refers to an extended useful life of the distribution channels geographical report developed in Step 3. packaging and can vary from one to as • Lower inventory and shipping costs many as five years or more. Unlike with • Higher worker safety and fewer one-time cost per use, the lifetime cost workers’ compensation claims Step 6: Develop a cost comparison per use may include net present value • Substantial environmental benefits, between the one-time or limited-use including reduced greenhouse gases packaging costs estimated in Step and and ROI in the calculation. the cost of reusable transport packaging researched in Step 4 plus the estimated cost of reverse logistics in Step 5. 3 TABLE 1. One-time (or limited-use) transport packaging and reusable transport packaging share similar cost components; reusable packaging also includes the cost of reverse logistics. Cost components One-time (limited-use) transport packaging Reusable transport packaging (RTP) Capital equipment Costs associated with packaging machinery such as box Initial RTP investment and tooling if custom. Washer or other and tooling erectors and tooling if custom, depreciated, or amortized equipment, depreciated or amortized over useful life. depreciation over useful life. Packaging materials Costs for one-time or limited-use packaging components Costs for RTP leasing or rental as well as disposable secondary such as containers and lids, pallets, bags, skids, slip sheets, packaging used, such as bags, pallets, slip sheets, banding, stretch banding, stretch wrap, and dunnage. wrap, and dunnage. Also costs for materials to repair, refurbish, and clean reusables. Packaging storage Packaging storage costs such as company-owned and RTP storage costs such as company-owned and rented warehouse space rented warehouse space used. space used. Labor Cost to prepare, stage, and load packaging for shipping. Cost to prepare, stage, and load packaging for shipping. Also includes Also includes the administrative labor cost of purchasing the labor costs to repair, refurbish, and clean reusable packaging packaging components. components, as well as the administrative labor cost of managing RTPs. Product damage, Cost of product damage, spoilage, or shrinkage due to Cost of product damage, spoilage, or shrinkage due to reusable shrink, or spoilage limited-use packaging throughout the supply chain. transport packaging throughout the supply chain. Shipping Cost to ship products, taking into account weight Cost to ship products, taking into account weight and size. and size. Disposal Costs associated with disposal of limited-use packaging Costs associated with disposal of secondary packaging as well as components: labor, equipment, hauling services, fees for RTPs damaged beyond repair at the end of their useful life: labor, trash disposal and labor, equipment and transportation equipment, hauling services, fees for trash disposal and labor, services for recycling collection. Net of recycling revenues. equipment and transportation services for recycling collection, net of recycling revenues.. Return N/A Handling and shipping costs to return empty packaging components for reuse. How the cost comparison Many-to-one supply channels used by One-to-many flow from model works manufacturers wholesalers and retailers One-to-many distribution channels used Examples of one-to-many distribution Typically, the flow of products and goods by wholesalers and retailers channels are wholesalers and retailers passes from manufacturers to wholesalers receiving finished products and goods and retailers, and from wholesalers and from manufacturers, then distributing Many-to-one flow to manufacturers retailers to consumers. As these products the finished products and goods to their and goods pass through the supply Manufacturers receiving raw materials customers (see Figure ). chain, transport packaging travels with and supplies from many sources to To show how the cost comparison them. While there are many logistical produce their products and goods is model works, two real-life examples of variations, products and goods (and an example of a many-to-one supply companies making the switch to reusable transport packaging) flow through the channel (see Figure ). supply chain in two basic ways: transport packaging are discussed: • A major food manufacturer used the model when replacing one-time-use FIGURE 1. Many-to-one supply channel of FIGURE 2. One-to-many distribution channel used
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