A panel of packaging engineers and experts from automotive manufacturers discusses with Maxine Elkin why packaging needs to have more recognition from management and at all stages of the supply chain
This year our panel of packaging experts has once again pointed to pallet standardisation as a central theme for automotive packaging, but alongside that clarion call is an equal emphasis on knowing when not to standardise. Savings can be made through a part-by-part analysis, our experts agree. Meanwhile, collaboration between tier suppliers and OEMs is needed to enable better utilisation of existing packaging assets, such as pallets, particularly because durable packaging tends to outlive the programmes for which it was designed. Finally, all panel members agree that packaging deserves more recognition by top management and supply chain managers for the vital role it plays. In short, for logistics savings and efficiency, packaging is often king, however it too often remains uncrowned by supply chain and purchasing departments. Our panels hopes to see this change.
Maxine Elkin: What is the biggest challenge you face for automotive packaging?
MSilvio: In North America, because of the distances between origin and destination it is difficult to justify expendable containers in many situations due to the cost of transport for returns. Often, programmes begin with expendable containers and the limited production life of some parts adds to the challenge of justification. It is difficult to implement returnable containers on the tier two and three level.
MShahid: It is the selection of correct packaging dimensions due to the unavailability of standard inner dimensions for trucks. The impact of packaging on parts quality is not realised by the OEMs and suppliers. It is considered a burden on the product cost rather than a value-adding element.
CChism: The biggest challenge is tracking containers within the system between the OEMs and suppliers and in the distribution centres. There are several reasons for this: the technology that is available is not used, or the technology is either nonexistent or not robust enough.
TNickel: Globally, the challenge is achieving improvements where we know opportunity exists. Regionally it is a different answer: in North and South America, asset alignment and control are probably our number-one concerns, especially in a shrinking market. In North America we have a large pool of durable containers and as car production volumes have shrunk, we have found ourselves with excess assets. Durable containers have a much longer life than the programmes typically associated with them, so realigning or selling those assets is a key component of Visteon’s packaging strategy.
MElkin: In an ideal world how would you resolve this?
MSilvio: Increased standard packaging for suppliers coupled with a tracking system that treats containers like parts.
MShahid: The automotive OEMs should establish standards for inner dimensions of trucks [in India]. This can only happen if the industry shifts from a push system (DDP) to pull system (FCA). Further, a common forum should share the data of transit damages due to poor packaging, which will create the motivation to work towards better solutions.
CChism: First and foremost [the industry should] make the investment in the software and RFID technology. In order to do that you need justification to show how much could be saved by tracking these containers.
TNickel: In an ideal world we would have an endless line of new programmes to reassign [packaging] assets to. The best way to resolve that challenge might be greater use of container pooling, so that if our company doesn’t have a further use for the asset, we can find someone else who does. We should also look at end-of-life methods like recycling or more grinding. We could possibly have greater cooperation between tier suppliers and OEMs to reuse assets across organisations.
MElkin: In your opinion does packaging for automotive logistics need a higher importance placed on it?
MSilvio: There are clearly opportunities in packaging, in achieving savings, reducing damage and reducing waste material. During difficult economic times many suppliers have reduced resources that were dedicated to packaging. Not only should more importance be placed on design, more importance needs to be placed on network solutions related to management of the containers. With fewer tier suppliers, the networks have become larger. This presents opportunities for solutions as well as greater challenges to manage. At one time, the philosophy was that it was cheaper to buy more containers than to fix the tracking and management programmes at some of the OEMs. Now we know that philosophy is not in the best interests in the organisation.
MShahid: Yes it does. Properly engineered packaging will ensure minimal non-value-added costs such as multiple handling, low transport efficiency and other wastes. It will also bring down the packaging cost in the long run. In addition good packaging can ensure minimum transit damages and flexibility in planning the best transportation strategy.
CChism: Yes definitely. It is an area that is often seen as not important and only when there is an issue do people pay attention to it. Looking at packaging as a long-term investment means you make packaging more important and look at it as an enhancement or extension of your product.
TNickel: Absolutely I believe it does. Packaging plays a pivotal role in enabling the safe and efficient movement of goods. Sub-optimised packaging is a limiting factor to overall logistics efficiency and if you are able to put the packaging concept in concert with the logistics environment, it improves overall opportunities. Most packaging engineers can design a container effectively for the part that they are tasked with protecting, but the really successful engineers are the ones who can couple this with a stronger understanding of logistics and the interdependency of packaging and logistics.
MElkin: What are the most crucial lessons developing automotive supply chains can learn from the development of packaging solutions in more mature automotive markets?
MSilvio: Re-evaluating the packaging design after launch for improvements is a valuable exercise. Another is to increase the use of standard pack yields savings. An organisation should also develop a process to manage the flow of containers.
MShahid: I think the most crucial lessons are to set up material ordering as a pull system, the use of standardised trucks and standard packaging, and utilising pooling concepts in packaging. Overall, collaboration at the industry level is required to drive and implement new policies.
CChism: I think that looking at the pack on an individual basis to determine whether it should be returnable or expendable would be a way to improve supply chains. Another crucial lesson is the importance of tracking information.
TNickel: Work more toward processes than case-by-case solutions and pay attention to detail. Packaging design is sometimes mistakenly thought of as a simple task, for which the only goal is to create a specific package design. The end result is a solution but not necessarily one that is costeffective. Second, I would recommend that an organisation employs a packaging professional. For immature markets, the use of durable containers is an interesting topic. Durable containers tend to offer protection improvements, but the hidden costs can be extraordinarily high. It is essential to understand the upfront and end-of-life costs.
MElkin: How important is the standardisation of packaging?
MSilvio: Standardisation of expendable containers assists companies to negotiate better material costs, reduce the SKUs on hand and leads to less inventory. For returnable containers, standardisation allows us to use the same containers for multiple suppliers and multiple programmes.
MShahid: It is really important to have the standard packaging sizes generally used for parts in the pallets or trolleys and standard weight carrying capacity, as it brings efficiency, economies of scale and recyclability. However there will be projects that can be more optimally fulfilled using non-standard sizes and methods. So in practice we should have both standard as well as non-standard solutions.
CChism: Standardisation is of the utmost importance, related right now to pallets. We receive pallets that come from different suppliers that are almost the same size, but not. This happens because they look the same and the distribution centre sends them through without realising the difficulty that they cause, such as not offering full protection. This is important because pallets are seen as interchangeable and they are not necessarily so.
TNickel: It is certainly very important and it can enable efficiencies throughout the supply chain and a company, such as volume-based efficiencies. However, knowing when to deviate from a standard is just as important as knowing when to use it. Standards are good, but used wholesale they can be detrimental as users will stick to the standard rather than investigate better opportunities for efficiencies.
MElkin: What is your experience of standardisation projects?
MSilvio: Several years ago, Cooper Standard Automotive entered into a collaborative project with Ford Motor Company. Ford allowed Cooper to utilise finished good packaging for WIP moving between France and Poland. This provided savings of WIP packaging and allowed Ford to reposition the containers to Poland at no cost.
MShahid: In my previous project experience we were trying to work out standard sizes for all inbound packaging. However since the packaging was owned by the suppliers and even delivered by them in a variety of trucks, in the majority of the cases the standardisation was not successful.
CChism: I work for a plant that was a joint venture [now a wholly owned subsidiary of Chrysler] so we have similarities with our parent company but at the same time because we have a new product, we looked case-by-case at each part and at existing packs. If we can use the same tooling, put an insert in and standardise it, we will do that as much as possible.
TNickel: We are also working on global commodity packaging design standards. We have, for instance, 48x45 inch pallets in North America and internationally we also have a standard pallet size. We are looking closely at the way we package similar parts in different regions and are trying to determine if there is a standardisation opportunity.
MElkin: Do economic operating conditions affect your ability to implement wider packaging solutions, such as pooling?
MSilvio: In North America it certainly has, but the favourable outlook for 2010 and 2011 have allowed us to re-think our approach to packaging.
MShahid: The inability of the OEMs and suppliers to come together and implement common solutions is the problem.
CChism: Yes. We are in transition and there is not much new investment in packaging. Everything that is being done is happening at the corporate level.
TNickel: Participation in established pools does not appear to be overly taxed by current economic conditions. However, all parties are assessing future pooling opportunities. The owners of these pools have to decide if the economic headwind will allow that. Corporate investment in more containers certainly is heavily under pressure. Everyone down the tiers has to justify the investment when capital is not freely available. Visteon has been willing to make investment where there is a clear opportunity for improvements.
MElkin: How can tier suppliers and automotive manufacturers work effectively together to create solutions?
MSilvio: The first step is to create industry standards that apply to 80% of the material that moves in the marketplace. OEMs have different investment philosophies for containers [supplier paid, OEM paid, paid per use]. This won’t change, but it would be great if the tiers could use old containers after the programme has expired.
MShahid: A platform for collaboration should be developed wherein the needs of the entire industry can be discussed and a consensus reached. For example, the OEMs with common suppliers can agree on packaging design that can be common to both. Also, initiatives such as pooling can be pushed through in such a forum if the OEMs commit the volumes.
CChism: Agreeing on standards, first and foremost, which I think that many of the OEMs and tier ones are willing to do. Sharing information such as the standardisation of pallets or top-use packs that they currently have. Everyone could look at the top 10 or 20 and see how we overlap in the supply chain.
TNickel: Both parties have to be committed to finding win-win solutions. The best solutions are those that drive cost savings throughout the supply chain. If a tier three is approached by a tier two to implement savings, but the tier two wants all of the savings, that is not an effective solution.
MElkin: Who should bear responsibility for packaging innovation–the customer or the packaging companies?
MSilvio: Both. It starts with the customer designing parts with packaging and the supply chain as part of the design requirements. The customer needs to challenge the packaging supplier to develop a solution that is an innovation. A customer willing to settle for the current solution will get just that, because there is no cost for development. Partnering with a packaging firm that invests with you will bring benefits.
MShahid: Both, but more importantly packaging companies should lead by demonstrating their ability to innovate.
CChism: I think in the end the customer is responsible for understanding what their needs are and clearly communicating that to suppliers. Suppliers are responsible for coming up with solutions based on those requirements.
TNickel: Innovation should come from all stakeholders, including the suppliers of parts and packaging. Packaging suppliers and logistics organisations all have a vested interest in innovation. If you are able to provide an improvement, your position with the customer generally strengthens.
MElkin: Can you briefly describe a good packaging solution you are using or implementing right now?
MSilvio: We are planning on starting a review of our North American packaging in 2010 and are in negotiations with a packaging firm right now.
MShahid: We are also looking at many things, including the pooling concept for long-distance suppliers where the use of returnable packaging becomes unviable because of the high cost of transporting the packaging back.
CChism: We had to store a specific part short term, but didn’t have enough extra packaging. The way the part was used on the line meant we had to keep that same level of functionality in the packaging for the operator. We had to protect the part from rust and make sure it met ergonomic standards because it was heavy. I designed two types of inserts for the bulk pack. One was returnable, for long-term use, the other insert was expendable, but both had to function in the same manner.
TNickel: We have many examples, but probably the most noteworthy is that we collaborate globally. Visteon took this on a couple of years ago, knowing that the company had common parts shipping across many of our regions. A lot of solutions that we are generating now have come from benchmarking across the regions.