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Space utilisation and waste reduction

Published March, 2016

DK Rai highlights on the Total Crate Management as an effective logistics solution for auto industry that enables space saving and waste reduction.

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For the automotive sector CHEP brings in its globally proven Total Crate Management (TCM) methodology. TCM is outsourcing the management of reusable packaging requirements. A vehicle manufacture and its Tier suppliers convert all packaging within the supply chain to high quality, ready to use, reusable packaging. And the capitalisation of the packaging is handled by the outsourced company. In managing the packaging, the cleaning, conditioning and on-time delivery are handled as well.

TCM is successful because it delivers reduced overall supply chain managed packaging costs to the industry while providing on-time delivery of reusable packaging, resulting in a better quality component being delivered to the line. Built around the proven cost efficiencies of pallet and plastic crate pooling, TCM will be a game changer for the automotive logistics industry in India.

Traditional practice

Packaging has traditionally been managed within its own nodes at Tier-I and Tier-II component suppliers. When sending Just-in-Time components into the vehicle manufacturers (OEMs), only reusable packaging is used, however, whatever is used throughout the supply chain varies in a multitude of ways. There is everything from gunny sacks to wood packaging, as well as a large amount of corrugated cardboard and polypropylene. If reusable plastic crates are used, often they are not cleaned to specification and the management of them by individual suppliers requires dedicated people and a lot of coordination with the logistics provider to get them returned in time for new shipments.

Standardising packaging

The largest issue with this situation is there is no standardisation in the packaging material. Standardisation is what will be the first and most important step to building a strong logistic infrastructure across the country. There has been an excellent effort to make the plants as best as anywhere else in the world, developing components that are of the best quality when they leave the factory. The next step is to insure what leaves the factory is in the same condition when it arrives to be assembled on the car.

Standardisation of pallet sizes and crate types drives the efficiencies in pack density and truck utilisation we all desire. It allows for the automation of processes when handling, which improves handling time and quality. The same can be said for the efficiencies brought to loading docks, truck and rail container sizes and the actual handling equipment that will load and unload them through standardisation.

Standardise with TCM

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TCM standardises all crates and pallet footprints throughout the industry. This efficient packaging management unlocks many of the efficiencies mentioned above. The beauty of our standardised solutions is that we can facilitate that all while optimising international logistics, not just local and national.

It is safe to say, that after several years of debate and testing of different packaging solutions, the battle has been won by standard reusable packaging. This is because reusable packaging optimises overall supply chain costs. It does this by delivering pack density and utilisation benefits from the points of production right up to the line side delivery and line optimisation at the OEM. It reduces damage, especially during monsoon season while providing better transport and storage efficiencies at the warehouses. And more importantly it eliminates the removal of unwanted waste and the space and labour required to do so.

In moving to TCM, rather than trying to manage or own the packaging themselves, additional benefits are derived for the automotive OEM and Tier suppliers. We deploy our teams at the OEM to analyse everything that will be required in converting all the suppliers to reusable packaging. In doing so, we find at the OEM large areas dedicated to the storage of reusable packaging. As the solutions are not standardised, neither is this storage optimised. It requires that separate space be provided for each and every supplier and for separate trucks to ship out the empties, but also separate labour and security to load it. With CHEP, our crates are folded down for storage, so no components can be left inside, as well this greatly optimises the space required. No separate space for each supplier is required, as all the crates are standardised. When we ship out empty crates, we can load the trucks quickly and always utilise the whole space.

Space savings can also be found at the inbound warehouses were decanting and double handling into reusable currently takes place. Since we play out the packaging to work from the point of production to the point of consumption, there is no double-handling or decanting into reusable bins required. The space, labour and potential damage of this extra handling is eliminated.

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Indian passenger car, two-wheeler and three-wheeler production have been experiencing a long period of growth. To move an entire OEM and its suppliers to reusable packaging will take a significant amount of capital. Capital that could be better used at the production level. As CHEP owns all the crates in the TCM model, it is great for the OEM and suppliers in that they do not take on the risk of capitalising the purchase of that packaging. With several new vehicle manufacturing plants announcement in the last few months, close consideration must be made regarding the solution that lowers the impact of high amount of capital to produce cars, which is great for the industry.

Environment friendly

TCM and packaging equipment pooling are good for the environment. In every meeting I have attended with auto manufactures in India, they are clear about their concerns for the environment. It is refreshing to see in the market here that all manufactures have a greening the supply chain initiative. CHEP supports this and we also are working on getting our CO2 calculator authorised within India so that companies converting to reusable packaging and benefit from the carbon credits derived. We want to reduce the CO2 emission per vehicle built in India. Moving to a TCM model of reusable packaging is a positive step in doing so.

Way forward

The beauty of TCM is that it can be managed in the same manner at large Tier I suppliers as an OEM. We have successfully converted entire inbound, outbound and inter-plant packaging solutions for some large Tier Is in India. These plants are now using all reusable packaging and gaining from the benefits derived. CHEP has a long term commitment to the Indian market. We know the time and effort required to deliver on a successful pooling solution for pallet and reusable crates having done this in 47 countries. The time to best utilise Total Crate Management is now. CHEP has over 300 million pallets and 50 million plastic crates worldwide, it is exciting to see how this will benefit the Indian automotive industry as a whole.

The author is Director Automotive Business at CHEP, the world's leading provider of standardised reusable container and pallet pooling.