Packing a punch

Appropriate packaging can transform supply chain costs for storage, warehousing and transport. It did just that for MTU Detroit Diesel, which manufactures and services large diesel engines.

To store more than 10,000 part numbers, MTU uses a warehouse in Brownstone, Michigan, located about 15 miles (24km) from the plant. Initially, the warehouse shipped parts in their original packaging, which caused several problems, according to senior manager Anshum Jain. Because the packaging was not line-side ready, the assemblers wasted time dealing with dunnage, cardboard and straps before accessing the parts.

“In addition, the lack of standardisation meant parts arrived at line-side in different-sized boxes each time, making it almost impossible to maintain the station layout,” says Jain. This led to wasted space on trailer deliveries from the warehouse and inventory problems.

Over the past two years, MTU overhauled its entire packaging system serving the assembly lines to improve the flow of material from the offsite warehouse. Matthew Talerico, packaging engineer, says that MTU introduced three types of standardised packaging – bin, bulk, and sequence – to use for all of its parts. MTU established a plan for every part to define specific packaging requirements. Small parts that can be delivered by hand use bin packaging, which uses small, reusable plastic containers. MTU uses these if the parts are small enough and are hand-deliverable, which is the case if the weight of the bin is less than 30 pounds (13.5kg).

For large parts that either exceed the 30-pound limit or are used in high quantities, MTU uses reusable bulk containers. For parts that have a high number of variations in their commodity group, MTU uses sequence containers to sequence only the part numbers that it requires for a particular day’s production.

Talerico says that MTU could use 20 different turbo chargers, so it would design one container specifically for the turbo charger commodity rather than 20 containers. Each commodity has a standard container and a set number of containers. Sequenced containers could include dunnage that varies, but outside the container is the same. By contrast, bulk containers do not use dunnage.

Warehousing improvements

Jain points out that the use of bins takes randomness out of the process. The bin, when emptied, acts as a trigger for replenishment to order more parts. The new packaging system enables the smooth flow of material from the time it is received at the warehouse until it is consumed at the workstation. Bins vary in colour by different sourcing areas.

The bins provide a standard pack size for each designated part, which enables the warehouse to assign dedicated locations for every part, which has improved put-away time at the receiving end of the warehouse, reduced pick time from storage, and increased inventory accuracy.

“At the receiving end of the warehouse, it used to take up to three hours to unload and put away a truckload,” says Jain. “Now it takes less than 45 minutes. We can now put away parts in designated locations rather than looking for random open locations.”

Standardised and designated packaging has enabled MTU to assign a designated location for each part at the point of use and at the storage locations in the warehouse. As a result, the location and inventory accuracy has increased significantly.

“Picking the part is the biggest improvement. It used to take 24 hours to fulfil an order because both the plant and the warehouse only worked one shift. Now it takes less than two hours,” says Jain.

Faster put-away has reduced congestion at the warehouse receiving dock, which has enabled the warehouse to receive more material at the same location. The faster order fulfilment at the warehouse has also reduced the need for excessive buffer stock at the plant. “We used to carry 16 hours of material on the line; now it is only four hours,” proclaims Jain.

Standardised new packaging, such as hand-delivered bins rather than forklift-delivered pallets, enables the warehouse to store more material in the same space and reduce the need for specialised material handling equipment.

Talerico adds that this system eliminates wood and other contaminants from expendable packaging at the assembly line. This packaging nests and stacks better than expendable packaging, increasing the trailer cube utilisation. MTU also reduced its non-value added labour for the breakdown and disposal of expendable packaging. “We reduced the number of people picking stock from eight to six,” says Jain.

Long heralded as the next best thing in logistics, the use of Radio Frequency Identification (RFID) tags on returnable containers is moving forward as a measure of control. John Canvin, managing director at European automotive standards organisation Odette International, says that in the past, carmakers conducted RFID pilot projects only in closed loops. Odette’s objective is to establish an open loop system that can read RFID tags anywhere in the supply chain. He predicts a large uptake in the industry within the next three years.

The containers in use with RFID tags are returnable and standardised, according to Sten Lindgren, managing director of Odette Sweden. Automotive shippers want to know the location of its packaging to avoid stock-outs or the need for premium transport. Lindgren says that RFID keeps better track of packaging than manual systems because it enables the shipper to store its empty packages.

“The packaging is handled more or less like products. By eliminating manual interaction, the use of RFID makes it easier to automate the entire supply chain process,” says Lindgren. Although paper labels last only one shipment, RFID tags are used throughout the supply chain to determine its origins.

The more common type of RFID tags in use by the automotive sector relies on passive technology. The main difference between passive tags and active tags is that passive ones do not require batteries; a mechanised reader activates it. The tags work by communicating with readers located on machines that handle the package, such as AGV robots or forklifts, or at particular locations such as a loading dock.

Volkswagen is making the first large-scale RFID use in Europe’s automotive sector as it replaces older packaging with RFID-tagged containers. Markus Sprafke, who leads VW’s RFID group office, says that the goal of the pilot project, known as Logistics Process Acceleration through RFID (LeoPARD), is to establish a fully integrated, paperfree, in-house production and logistics chain.

The pilot began in late 2007 and concluded in early 2009. Currently, VW’s RFID system is active at its main plant in Wolfsburg, Germany. Under the LeoPARD project, special shipping containers were equipped with passive RFID tags, which enabled VW to track goods from the point where they exit the supplier through shipping, unloading, material handling, and storage. The system also records deliveries to the assembly line and the return of empty containers, according to Sprafke. The RFID scanners are located in mobile hand-held devices, forklift antennae and the gateways by which the containers travel.

VW expects to determine the technical feasibility and cost-effectiveness of RFID in its supply chain with this pilot. Sprafke says that the software and process used in VW’s pilot followed the Odette and VDA (German Association of the Automotive Industry) recommendations on the use of RFID in container management. The challenge was the effort in getting the VDA standards to coincide with Odette’s. “Now we are concentrating on data standards such as what kind of data fields are readable and writeable,” says Sprafke.

For VW, the advantages of RFID are the reduction of material stocks, container inventory, manual handling, and manual scanning. Paper-free processes eliminate the need to affix new labels. “We are achieving quality improvement by ensuring that we receive the correct materials. RFID is also improving how we load the transport vehicle,” says Sprafke. The next stage is gaining funding to take the project farther, but the economic climate makes this more difficult.

As with VW, the economy has also slowed the spread of RFID technology for Volvo Logistics but not stopped it. Bob Van Broeckhoven, an IT manager at Volvo Logistics, says that although the company has not launched a full-scale pilot, it is developing new packaging involving RFID. Its proposed pilot would involve Volvo suppliers, logistics hubs, Volvo packaging and tracking and tracing. For Volvo Trucks, the system would follow the entire chain for the life cycle of the packaging.

Van Broeckhoven says that one of the biggest problems with the current system is lost packaging. For example, Volvo Logistics currently tracks its packaging manually, but wooden pallets that it uses often get lost. “Although we have not finalised the business case for cost savings we believe that we can reduce shrinkage by more than 50% through tracking and tracing,” says Van Broeckhoven. “RFID is the platform for future shipment tracking.”

Packaging improvements needn’t always focus on the outer container, as dunnage is a big cost factor as well. MJ Systems has developed a high-strength dunnage to handle powertrain parts. Paul Derry, MJ Systems’ director, says that for Ford’s engine plant at Bridgend, UK, it packed inlet manifolds and cam covers using reinforced nylon dunnage.

MJ Systems’ latest introduction is a textile dunnage system that it developed in collaboration with Linpac Material Handling. The material can hold aluminium engine covers, which traditionally pack in vacuumformed trays.

Among the advantages of the textile dunnage is that it enables better pack density. Dieter Schmahl, head of logistics sales at tier one supplier Auto Heinen, was looking to better protect his products during transport. Auto Heinen now uses MJ Systems’ packaging, which consists of fabric dividers that fit into a standard plastic folding container. The hammock-like compartment suspends parts in the container to minimise damage.

It is also easier to remove the parts because the user needn’t lift the trays or stack them separately. As the user removes parts from the container, he or she pulls the rows of textile dunnage bags forward. Derry notes that since the bags are flexible, the parts can rest closely together. Thirty parts can fit in 15 rows. A dust cover folds over the top of the container.

Says Schmahl, “It is innovative to use nylon bags instead of plastic separators in bulk boxes. The new packaging requires less stock space and improves freight performance.” Auto Heinen ships its parts by road to Ford’s engine plant in Valencia, Spain. Schmahl expects to integrate this packaging fully into Auto Heinen’s supply chain in the first quarter 2010.

Since Ford began using the textile dunnage last summer it has reduced its loading and unloading times because the system requires less handling. By increasing the pack density of returnable containers, manufacturers such as Ford can achieve a 25% increase in pack efficiency. According to a material handling engineer at the Ford plant, another big improvement was to eliminate the plastic shavings produced by the sharp edges of the package’s front cover that could cause leaks in the engine.

In October Whirlpool switched to a system with applications for the automotive sector, using returnable packaging to reduce costs and improve quality, provided by the supply chain packaging company, Surgere. Whirlpool wanted the benefits of a dedicated loop with suppliers or internally while avoiding container rental. Surgere owns, tracks and maintains containers, which can move between plants. Surgere helped Whirlpool reduce the variation in containers, thus cutting the space needed for containers by half. Surgere has also recently had dealings with a major American carmaker as well as a tier supplier.

Chep China has developed a rigid wall modular container for China’s domestic market. It has also introduced lightweight, low profile foldable plastic containers for overseas shipping. These containers improve load utilisation and operator handling and safety.

Ceva Logistics introduced a high tensile strength collapsible “hybox” in 2008 to a European OEM that wanted to get rid of its small disposable cartons. This reduces cost for cartons and increases cube utilisation in trucks or warehouses, saving several million euros.

Mondi Packaging introduced flexible paper-based protector bags for large and bulky goods to reduce transport, warehousing, and packaging costs. The tight fit of the packaging enables a volume reduction of more than 60%.

Orbis Corporation launched the MP3 Topcap, which acts as a cover for pallet loads or bulk containers while providing a stable platform for the load above. This enables shipping flexibility and reduces partial truckloads.

Robert Bosch is working to define a global standard for its returnable packaging. Pressures such as the need to reduce freight costs are the driving force. Bosch is now looking at developing a new pallet size.