building the business case for ... - mega trend...

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InternationalTrack: Containers and Materials

Tuesday, November 11, 2008

Building the Business Casefor Reusable Transport

Packaging

Presenter:

Brian Lindell, General Manager, Food and Beverage Division

Rehrig Pacific [email protected] 770-339-9888

mailto:[email protected]

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Established in 1913

Fourth generation family owned & operated

Technologically advanced plastic product manufacturer

Focused supply chain solutions provider

World-class product

design and innovation

Nine (9) state of the art

manufacturing

facilities

750 employees

“A family tradition of growth, service & innovation”

Rehrig Pacific Background

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Rehrig Pacific’s Manufacturing Locations

Sales Offices: Europe – United Kingdom; Asia – Hong Kong; Licensees - Worldwide3

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What customers use Rehrig Pacific?

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Reusable/Returnable Transport

Packaging Topics

• Reusable/returnable packaging and the

environment– Including a recently commissioned study on the energy use

and the solid waste and greenhouse gas impact of reusable

plastic crates versus one-way corrugated packaging

• Benefits of reusable/returnable packaging– Including cost drivers of reusable packaging

• How to get the reusable/returnable packaging back

and reduce shrinkage– Including a typical cost-benefit financial model for reusable

transport packaging

– The important issue of asset management

Both a User and Non-User Perspective

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So what is most green?

Reusable/Returnable Packaging

and the Environment

One-Way OR Reusable

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and the Environment

Sustainability – balancing three components:– Environmental

– Social

– Economic

Reusable – continued use

Renewable – replenished by natural processes at a rate

comparable or faster than its rate of consumption

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and the Environment cont.

Open Loop Supply Chain for Grocery Retail

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Closed Loop Supply Chain for Grocery Retail:




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Carbon Footprint or Global Warming Potential (GWP) –The measure of greenhouse gases (GHG) that are either directly or indirectly

emitted to sustain a human activity, normally expressed in CO2 equivalent.

Life Cycle Assessment (LCA) –A complex study that is the most accurate way of calculating the carbon

footprint of a product.

LCA analyzes every single part or process involved in the life of a product and gives a clearer picture of a product’s effect on the environment, but not its social or economic impact.

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Sustainable packaging systems*–– Society – effective, add economic and social value

– Packaging system – efficient with minimum use of materials and energy

– Packaging material – recyclable or compostable

– Packaging component – safe, non-toxic to humans and ecosystems

*from a Michigan State University presentation

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In accordance with ISO 14000, Franklin Associates, an independent laboratory, used the Life Cycle Analysis

methodology for determining the environmental impact of three packaging types.

Franklin Associates’ September 2008 study compared

1,000 cases of 20 oz. bottles packaged in the following

three ways:

Reusable Plastic

CratesCorrugated Pad with

shrink film, one-way

Corrugated Tray with

shrink film, one-way

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The three categories in which the packaging was

measured:– energy use

– solid waste contribution

– greenhouse gases

The Life Cycle steps analyzed in the study include:– extraction of raw materials from the earth

– materials and container manufacture

– outgoing transportation of containers

– backhauling of empty plastic shells, and recycling

– and end-of-life disposition.

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Two scenarios were analyzed:

Baseline:– Plastic crates: 10 turns/year, 6-year life, 5% annual losses

– Both corrugated packages: 25% recycled content, 95% recycling, 50% film recycling

Alternative (to provide a more favorable scenario for one-way systems and less favorable for reusable plastic crates):

– Plastic crates: 10 turns/year, 3-year life, 10% loss

– Both corrugated packages: 50% recycled content, 95% recycling, 95% film recycling

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Results: Baseline scenario for reusable plastic crates versus film with corrugated pad and film with corrugated tray.

Per the Wall Street Journal, U.S. residents generate an average of 118 pounds CO2 equivalent per day, or 20 metric tons per American annually.

Film with

corrugated pad

Film with

corrugated tray

Reusable plastic crates require 60%

less total energy

Reusable plastic crates require

75% less total energy

Reusable plastic crates produce 91%

less total solid waste

Reusable plastic crates produce

95% less total solid waste

Reusable plastic crates generate 64%

less total Global warming potential

(GWP)

Plastic crates generate 145 pounds

CO2 equivalent, while corrugated

with pads generate 407 pounds.

Reusable plastic crates generate

81% less total Global warming

potential (GWP)

Plastic crates generate 145

pounds CO2 equivalent, while

corrugated with trays generate

762 pounds.

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Results: Alternative scenario for reusable plastic crates versus

film with corrugated pad and film with corrugated tray:

Film with

corrugated pad

Film with

corrugated tray

Reusable plastic crates require 9%

less total energy

Reusable plastic crates require

46% less total energy

Reusable plastic crates produce 81%

less total solid waste

Reusable plastic crates produce

89% less total solid waste

Reusable plastic crates generate 32%

less total Global warming potential

(GWP)

Plastic crates generate 244 pounds

CO2 equivalent, while corrugated

with pads generate 360 pounds.

Reusable plastic crates generate

65% less total Global warming

potential (GWP)

Plastic crates generate 244

pounds CO2 equivalent, while

corrugated with trays generate

705 pounds.

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Benefits

of Reusable/Returnable Packaging

Product protection – reduced unsaleables

Product display – improved merchandising

Financial economics – continuously lower cost per case

Warehouse space – space savings, improved stacking

and stability

Ergonomics – improved for handlers, stock employees

and drivers

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Cost Drivers

of Reusable/Returnable Packaging

Product development cycle: Things to consider

Main cost drivers: – Product weight - over 50% of cost

– Tooling - varies dependent on process

• High pressure injection molding - most expensive

– Material, HDPE and PP (100% Recyclable)

– Color, black is least expensive and allows

for recycled material.

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Cost Drivers

of Reusable/Returnable Packaging cont.

Float size – how many turns does your business average

5 turns = 10% 3 turns = 17%

Recycled materials – tremendous cost savings, but

difficult to source if color other than black

Decoration – hot stamping vs molded-in logos

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Reusable Packaging Companies

Recommend Purchasing

More Containers and Pallets Because:

Your business is growing

Reusable packaging makes business sense

for your application

Not because of loss.

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How to Get Reusable/Returnable

Packaging Returned

and Reduce Shrinkage

Asset management– Loss due to theft

*Asset tracking

*Third party logistics companies, pooled floats

*Radio Frequency Identity (RFID)

*Due to time constraints, this presentation will only explore Asset

Management, but to represent a complete picture of ways to get packaging returned and reduce shrinkage, these three items are also listed here. More information about them is offered in the copy of my notes which you may request after this presentation.

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Asset Management

Asset Management has successfully reduced packaging purchases by as much as 20%.

Steps involved in Asset Management process should include:

– Objective assessment – execute with management to determine expectations (Goals)

– Preliminary preparation – interview key stakeholders already involved in the process

– Financial study – examine past performance

– Supply chain analysis – conduct case float analysis

– Planning and assessment – format information flow to educate and build awareness.

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Asset Management cont.

Implementation – Hold key meetings to kick off initiative, test and

monitor.

Identify results – Comprehensively review how the new system is

working, present the results to all stakeholders.

Structured and timely reviews – Process must be ongoing and

have continued support of upper management and continuous

feedback to all stakeholders.

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Loss Due to Theft

Loss* represents less than 5% of missing assets

Misperception exists around how many assets

are actually stolen

*The loss-due-to-theft study was partially funded

by Rehrig Pacific Company,

– Private Investigators were hired in South Florida,

Los Angeles, Baltimore and Atlanta.

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Loss Due to Theft cont.

Findings:

South Florida – no illegal recycling was found.

Baltimore – no illegal recycling was found.

Southern California – one illegal recycler was found with approximately

150K lbs. of mixed products.

Atlanta – one illegal recycler found with approximately

25K lbs. of mixed products.

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Summary

Reusable packaging and the environment– The recently commissioned study revealed that

reusable/returnable plastic crates require less total energy,

produce less total solid waste and generate less total GWP than

the two corrugated options.

Benefits of reusable packaging– Ask for a cost-benefit financial model – make sure it works for

you.

How to get the reusable packaging back

and reduce shrinkage– An asset management program can be beneficial.

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