Short of parts arriving without any packaging at all, OEMs and inbound logictics providers in India are working together to ensure line-side delivery in the most efficient and cost-effective means possible
Experts claim that the price of packaging, including its transport costs and impacts on the automotive supply chain, account for 2-4% of product costs – and the price is rising. Whether the cost of packaging is directly borne by carmakers or tier suppliers, it is ultimately passed on to end users. Therefore, it is critical that the packaging strategy chosen represents value, whether it’s returnable or expendable material; owned in-house or hired in. Efficiencies via higher cube utilisation, lower damage rates and reduced material handling can all make the right investment in packaging pay dividends.
Despite high logistics costs and poor infrastructure, in India packaging receives scant attention from many manufacturers and third party logistics providers, even though it is acknowledged to be a major cost. However, this may be changing.
“Packaging is an integral part of the automotive inbound supply chain and plays an important role in ensuring that parts reach their destination in the right condition and in the accurate quantity,” says Mumbai-based Prakash Rochlani, vice-president of business development for south and southeast Asia at DHL Supply Chain. Ceva Logistics’ director of contract logistics in India, S Madhusudhan, puts it simply: “Without packaging, products will not be able to reach their end target – the manufacturing line.”
Packaging comes with a price tag, which is generally paid by the OEM directly or built into a supplier’s part piece price, according to Kishore Sonekar, general manager of material planning and logistics at Visteon in Pune. “But if we need to do some changes in between, that we need to pay for,” he adds.
Packaging is often a collaboration between suppliers, carmakers and specialist design companies. However, OEMs tend to be the process owners since they pay for everything, according to Satkar Grewal, head of material supply engineering at India’s largest passenger carmaker Maruti Suzuki. He points, however, to the need for close collaboration with tier suppliers, as well as with global divisions that might have more expertise in this area.
For Mahindra & Mahindra, one of the leading car and SUV manufacturers in India, the onus is on tier one suppliers to manage the packaging process when it comes to parts under development, albeit with close OEM involvement.
"Generally, part suppliers are aware of best practices for packaging their parts, but it is also equally important that OEM inputs are taken during the design of packaging, considering transportation and warehousing aspects,” elaborates Milind Wadke, deputy general manager of Mahindra & Mahindra’s centre of excellence for packaging at the company’s automotive division. “These inputs could be the type of goods collection and delivery system that will be used; the kinds of handling equipment; and some specific manufacturing requirement like workstation ergonomics, kitting, sequencing, etc.”
"Packaging is an integral part of the automotive inbound supply chain and plays an important role in ensuring that parts reach their destination in the right condition and in the accurate quantity" - Prakash Rochlani, DHL Supply Chain
Third party logistics providers will often partner with tier ones and carmakers, as well as global and local packaging design companies, to deliver material in the most efficient mode. Ceva regularly gets requests to help design packaging for the automotive supply chain and, in some cases, even works alongside OEMs on packaging development, says Madhusudhan. So, too, does Unipart Logistics.
The ‘naked’ ideal
The use of nearby sequencing centres and supplier parks often allows for reductions in packaging. Given a choice, manufacturers would love parts to be delivered ‘naked’ to the line side for direct fitting where they are most needed. “Naked packaging is the most desirable format,” says TCI Supply Chain Solutions’ chief executive officer Jasjit Sethi.
“If you make parts at your facility, obviously you don’t package them, but when the same is gotten via suppliers from outside, packaging becomes a necessity for safety,” he goes on. “Those suppliers pushing their parts from nearby vendor parks send in their components almost ‘naked’, directly to the assembly line.”
The volume and quality of packaging also hinges on the delivery terms for procured parts. If delivery is the supplier’s responsibility, an OEM must do more monitoring of the parts and their packaging. On the other hand, when the manufacturer has responsibility, it has more influence over improving truck capacity utilisation, protecting components and increasing efficiency.
Waste disposal and ever-rising real estate prices are two major issues in which packaging, and particularly returnable equipment, can play a significant role. Indian manufacturers are showing more interest in making the switch from one-way, expendable packaging to reusable and even shared assets.
While the choice between expendable and returnable packaging is often dependent on supplier locations, Unipart’s Barnabus points to the higher efficiency and lower waste that comes from using returnable. “Considering all the ill effects on the environment that the use of packaging material has, I am of the strong opinion that it is now high time we focused on reusable bins for transport of material,” he says.
One example of packaging waste that Barnabus points to is the de-boxing of parts, which he believes is a non-value-adding activity that should be eliminated to save time at the receiving end. Barnabus points out that receiving material for the aftermarket in vendor-packed condition is especially wasteful since all this packing is thrown away and then the material is re-packed in OEM-branded packaging.
However, an efficient, returnable packaging solution leads to benefits beyond waste management, according to Chep India president Devdip Purkayastha. The company runs container pooling fleet solutions for automotive and a number of industries, which Purkayastha believes to be of great benefit to Indian manufacturers.
“[Returnable packaging leads to] huge supply chain efficiency, damage reduction efficiency, quality efficiency etc.,” he says. “Supply chain efficiency is not just on the transport front. If you have a lot of disposable cardboard, you must have space to store it. With land costs today, storage space of 20-30 square metres for waste can cost a few million dollars in auto hubs such as Mumbai, Pune, and Nasik. You have to make up your mind where to spend your money – procuring land to store waste or to produce vehicles?”
DHL Supply Chain’s Rochlani also votes for returnable packaging and container pooling, but points out that such systems require returnable logistics management, tracking and upfront investment in the packaging. Additionally, when the part design undergoes significant changes, the returnable packaging needs to be redesigned as well.
Wadke shares Mahindra & Mahindra’s experience: “As a general rule, we prefer to use returnable packaging for inbound parts because it is sustainable, reusable and can directly be used on work stations,” he says. “The issue with this type of packaging is maintenance, cleanliness and timely return management, which sometimes get affected due to volume fluctuations.”
Mahindra looks for alternative solutions whenever returnable packaging is not feasible for logistics management and economic reasons. Conventional packaging generates large amounts of waste and non-value-adding activities like decanting, re-binning and waste management, he says. For longer distances, Wadke prefers to use corrugated boxes, as they can be recycled and also don’t need a return logistics leg.
Returnable packaging has the advantage of eliminating recurring costs. It also increases product protection, reduces waste, improves housekeeping levels and adds to employee safety. When assessing the costs of returnable versus expendable packaging, a key element for logistics providers in India is transport equipment utilisation and sustainability.Other important factors to consider include tracking boxes, – as DHL’s Rochlani warns – maintenance and, of course, transport costs. However, Visteon’s Sonekar says the cost savings of returnable packaging can be significant.
Mahindra eyes long-distance hires and returns
Packaging selection is dependent on transport mode and distance; for example, long distance transport generally requires extra protection. In these cases, a returnable option might not be feasible given the cost of returning boxes. According to Sonekar, the further the distance, the more investment is needed in a packaging loop. “We need to maintain more days of packaging inventory in the pipeline compared to when the distance is less,” he says.
For direct deliveries and milkruns, returnable packaging and loops are the more obvious choice, but Mahindra & Mahindra is also moving in the direction of returnable packaging even for longer flows. While more than 80% of the carmaker’s short-distance suppliers supply parts in returnable packaging, according to Wadke, long-distance suppliers have generally used expendable packaging. For these flows, the automotive giant is now increasingly turning to a hired, equipment-pooling concept with standard returnable containers of different sizes. “By using this hired packaging, we get rid of all hassles of maintaining, cleaning and managing return logistics. So far we have converted approximately 15% of our long distance suppliers to using a pooling concept for packaging,” he adds.
"We prefer to use returnable packaging for inbound parts because it is sustainable, reusable and can directly be used on work stations. However, issues include maintenance, cleanliness and timely return management, which sometimes get affected due to volume fluctuations" - Milind Wadke, Mahindra & Mahindra
Who should have packaging knowledge?
Building up a strong packaging knowledge is important for carmakers. The Mahindra Group’s packaging development team works jointly with supply chain teams to focus on critical and high-volume part packaging from both quality and cost points of view. The team offers in-house engineers and packaging suppliers suggestions for packaging improvements. The team’s experts are fully empowered and responsible for evaluating various sustainable packaging options, designs, validation, cost evaluation and implementation. The team also spreads packaging awareness and improvement culture in plants through training and close interaction. “The ultimate aim is to improve our supply chain efficiency and cost-effectiveness,” Wadke says.
TCI Supply Chain Solutions’ Sethi admits that packaging design has not been an area of focus for his company, although it plays a role in logistics engineering. “Honestly, expertise in packaging design? No, we don’t have it, but expertise of manning the right requirements of durability for the return of materials? Yes, that we do.” Though Sethi adds that TCI is likely to float a packaging design outfit as part of its portfolio soon.
Every packaging solution provider tries to balance the solution that best fits a supply chain with the total costs, including equipment and transport impacts. Weighing up these factors can be a daunting task and it might traditionally have been put to one side by many in the automotive industry, who didn’t want to bother much on a product that may not appear to be of any lasting value. However, considering the tremendous savings potential in designing and managing the right equipment – which is, after all, also protecting very precious cargo – packaging is well worth all the fuss.