In many ways, auto assembly plants aren’t like other manufacturing plants: they’re visibly different in pace, scale, and complexity.
One distinction is that auto assembly plants rely heavily on various parts from third-party manufacturers to deliver a finished product. Those parts may come from all corners of the world and have to arrive in a timely fashion in order to fit into tight production schedules, often following a precise build sequence on the assembly line. To eliminate delays (and related penalties) caused by parts that are damaged in transit or delivered out-of-sequence, most suppliers use custom-designed, special-purpose closed-loop returnable packaging. Boxes, cartons, palletized racks and crates, constructed from plastic, steel, and aluminium.
Although some returnable packaging is multi-purpose and capable of being used to transport and store a variety of components, much returnable packaging is designed to hold one specific component, securely and without damage, and in the correct assembly build sequence, until lineside delivery. There, it presents the component to the assembly operative in the correct orientation, and, where applicable, in the correct vehicle sequence.
It’s a clever solution to a variety of costly challenges and problems. Damage, the purchase of disposable packaging, and waste cardboard and paper are all minimized. Space is conserved, and lineside efficiency and delivery are maximized.
The returnable packaging in question isn’t cheap. It takes time and resources to design, requires careful design optimization to maximize cubic utilization, and further time and expense to actually manufacture.
But it’s necessary. Because within tightly choreographed assembly lines, it’s the best solution to the problems caused by damaged or out-of-sequenced parts. It’s costly—but cheaper than the problems it cures.
When returnable packaging goes missing
Once a part is delivered and removed from its returnable packaging, each piece of packaging is whisked away from lineside and begins its route back to the correct tier-1 supplier to be refilled in a never-ending closed loop.
But what happens if that closed loop isn’t closed? Because returnable packaging isn’t always returned, or returned to the correct location, which could be a tier-1 manufacturer’s plant several hundred miles away, or even across the border in Mexico or Canada. Which, for both vehicle manufacturers and their tier-1 suppliers alike, can be a costly headache.
As noted, auto assembly plants are fast paced and mistakes happen. Packaging gets returned to the wrong supplier, or to the wrong supplier location, or simply doesn’t get returned at all. And what exacerbates the problem of misplaced returnable packing is the various ownership models in place: packaging can be owned by either the auto manufacturer, its tier-1 suppliers, or by financial intermediaries such as packaging leasing companies.
Sometimes the thought is that someone else’s packaging is someone else’s problem—and in the case of packaging owned by a tier-1 manufacturer hundreds of miles away, tracking down something that has gone missing can be difficult or even impossible.
Returnable packaging may also just be appropriated and used for another purpose, either elsewhere in the auto assembly plant, or elsewhere in the supply chain. Tough, durable crates and boxes, many of them forklift-truck compatible, can find many uses.
All of which means that returnable packaging often needs to be replaced. But with a price tag of $700 or more per unit, this can be a costly problem, especially when some industry estimates point to around 10% of a given returnable packaging fleet being misplaced annually.
Beyond replacement cost
But replacing lost returnable packaging isn’t the only cost—or even the biggest cost.
The simple fact of the matter is that auto assembly plants really, really prefer their suppliers to use the returnable packaging that’s specified in the contract when shipping auto components to them. Not general-purpose plastic or cardboard crates, or steel stillages: they want the exact packaging that they’ve specified. And when that doesn’t—or can’t—happen, they will typically file a quality non-compliance report, sometimes with an additional financial penalty.
Anecdotally, there have even been reports of auto assembly plants charging tier-1 manufacturers for the cost of disposing of substitute expendable packaging if used instead. Demurrage charges may also be levied.
Generally, tier-1 manufacturers have to seek prior permission to ship in non-standard packaging—with the prospect of being charged line stoppage fees if vehicle production ceases through that permission being delayed while someone makes a decision, or even denied altogether if the proposed substitute packaging judged likely to cause quality defects or operational difficulties.
Roll it all together, and the result is that tier-1 manufacturers will go to a lot of expensive trouble to avoid shipping in non-standard packaging. Truckloads of empty returnable packaging might be shipped hundreds of miles on an emergency basis, in order to put it in the right location. Such shipments might be costly—we’ve heard estimates of $4,000 a week—but manufacturers will swallow the cost rather than ship their product in non-standard packaging.
Finding missing returnable packaging with real-time location intelligence
Imagine if it became more difficult for returnable packaging to become lost. Suppose that closed-loop packaging supply chains really were closed-loop and that even if returnable packaging were to be wilfully misdirected or repurposed, there would be enough evidence to aid recovery, or demonstrate culpability.
All this can be achieved today with Cognosos’ real-time location intelligence solution. A GPS-equipped tracking device about the size of a candy bar attaches to each piece of returnable packaging. The tracking device broadcasts its location via wireless or Bluetooth technology to wireless or BLE gateways located in plants and at transport hubs, which then upload that location to the Cognosos cloud via ethernet, WIFI, or mobile wireless networks. From there, each container’s owner can use the Cognosos app to see exactly where it is, along with associated analytics and tracking information such as time since last movement, last verified location, and if it’s currently in transit.
Ready to learn more about how Cognosos helps companies track returnable containers? Reach out.
