A RETURN ON RETURNABLES

Transcription

1 A RETURN ON RETURNABLES HOW TECHNOLOGY ENABLED RTI TRACKING AND MANAGEMENT PROVIDES VALUE Introduction Millions of returnable transport items (RTIs) such as containers, bins, pallets, racks and kegs move through the global supply chain, providing the most fundamental way in which parts, materials and finished goods reach their destination. However, the inability to effectively track these returnable and reusable assets creates considerable productivity, labor, cost and time inefficiencies. The end result is that companies spend more money purchasing additional logistics assets and hiring adequate labor to manage them. LOADING PICK-UP DELIVERY This paper will detail the various methods, challenges and opportunities associated with tracking returnable assets through an organization s supply chain. It will also highlight successful real-world customer tracking implementations and their associated return on investment (ROI). Finally, this paper will provide a checklist of solutions and considerations for organizations interested in a more efficient way to track and manage returnable assets. Why Use Returnable, Reusable Assets? Businesses continuously seek ways to make their distribution methods faster, more effective and more secure while squeezing out cost and inefficiencies. Returnable containers and other reusable logistics assets are used extensively throughout the supply chain from suppliers, to manufacturers, across warehouses to retailers and point of sale to effectively deliver goods and parts to desired destinations without the waste that occurs with one-way containers. Not only are returnable assets considered green, but they are also a wise long-term investment compared to single-use assets. Powered By:

2 EXAMPLE Consider a new plastic pallet at $100 compared to wooden pallets that are $5 per use. Cost Per Pallet Yearly Shipments Total Cost One-way Pallet $5 24 $120 Reusable Pallet $ $100 ROI in 10 Months The math might be simple, but managing a fleet of returnable assets vs. single-use assets is admittedly more complex. THE CHALLENGE OF MANAGING RETURNABLE ASSETS One-way transport items operate under the ship-and-forget principal, as opposed to returnable assets that can create tracking challenges at various points in the supply chain, whether those assets are in an open- or closed-loop environment. Organizations with large and complex supply chains may have anywhere from tens-of-thousands to millions of returnable assets, posing significant operational, financial and audit implications for missing or inadequate supplies of these assets. At a shrinkage rate of anywhere from 3-20% a year, RTI fleets can be a large problem with a large cost. What s more, many organizations lack the ability to even gain insight into the size of their fleet itself, meaning that the cause and size of their asset management problems go unknown. Several obstacles prevent companies from getting the details they need to properly manage a reusable asset fleet: Inappropriate and/or unreliable tracking Extending supply chains and globalization Manual processes and errors Labor and time shortages Unverified arrival and departure records Loss of visibility and control one the returnable assets leave the owners facilities 2

3 When organizations lack visibility into returnable assets through the supply chain, it creates significant inefficiencies: Longer cycle times Fleet shrinkage Hoarding Supply chain bottlenecks Inefficient product recalls Delayed Orders Inaccurate shipments At the core, these problems are really causing five main wasteful practices that can cost companies millions of dollars a year: 1 Purchasing and carrying additional returnable assets 2 Increasing the labor and/or hours associated with inventorying, tracking and managing the assets 3 Inaccurate billing for asset usage, storage or detention 4 Losing asset contents/load due to mismanagement of RTI duality 5 Hiring additional customer support resources for inefficient service processes (product recalls, inaccurate shipments, etc.) Throwing additional resources at the problems has only provided a temporary, bandage approach to ensure continued operations of the supply chain. Gaining more automated returnable asset visibility and information throughout the supply chain is the only way to address the root of the business challenge. RETURNABLE ASSET TRACKING SOLUTIONS There are three primary methods of gathering returnable asset information manual, paper-based counts, barcode scans and auto-id automated tracking. Smaller companies may be able to effectively use a paper-based system in which they devise a log or spreadsheet and enter the status of each container throughout the process. However, as companies grow or increase the number and type of assets they must account for, they may need to consider more automated forms of asset tracking to ensure the accurate and timely delivery of returnable logistics assets. Barcoding technology has been employed for many years and provides a suitable means of logging information about the fleet as a whole. Its limitation, however, is its fickle line-of-sight requirements which necessitate an employee be present to perform the physical scanning of each asset and confirm a successful barcode read (sometimes difficult in a rugged environment where tags become blemished), as well as its inability to provide unique tracking of each asset. Therefore barcoding alone does not allow for fool-proof, automated visibility. The most widely adopted solution to address the returnable container challenge is RFID technology. This technology does not require line-of-sight or visual-based scans, tracks each asset as a unique item, and can read multiple tags at once, allowing for a more automated and quicker process that eliminates human error. The benefits of auto-id enabled asset tracking can impact a business by providing more consistent, timely and accurate information about the asset fleet and the asset itself, which results in optimized asset usages, a more efficient supply chain and improved customer service. 3

4 AUTOMATIC IDENTIFICATION TECHNOLOGY An auto-id system usually consists of the following components: Auto-ID tags that contain unique identification information Auto-ID readers and antennas that enable the scanning and processing of the data on the tag A software platform that collects, organizes and analyzes the information in order to provide actionable business intelligence for both individual assets and the collective fleet RFID tags are primarily categorized as passive or active. Passive tags have no internal power source, get limited read range and are scanned only at specific readpoints or during specific processes; whereas active tags are powered by a battery, giving them a longer read range and allowing them to continuously transmit data to and from a reader that covers a larger area or a network of readers that blanket an entire facility or region. Passive tags are the less expensive option because of their simplicity and relatively short read ranges. Active tags, however, can also have sensory capabilities and internal memory to go along with their longer read range, which leads to a more expensive price. Tag choice typically boils down to a company s visibility requirements, asset type/construction, environmental nature and budgetary constraints. Bluetooth low energy (BLE) is one of the most versatile, accessible, and cost-effective asset tracking technologies available. A small beacon attached to an asset emits a Bluetooth low energy signal that Bluetooth-enabled devices such as smartphones, tablets, and laptops can read Leveraging existing devices and beacon low-power requirements make BLE one of the most cost-effective asset tracking solutions. Some assets are not contained in buildings; nor do they have access to Wi-Fi networks. GPS systems allow for tracking on assets such as vehicle fleets, construction machinery, maritime assets, and wildlife. GPS satellites can locate the asset, and the GPS tracker affixed to the asset conveys the information over cellular networks. 4

5 Information collected by auto-id readers must be correctly interpreted before it can add value to an organization s business processes. For example, when multiple tags are within a reader s transmission range, the result is a cacophony of responses with data that must be managed and processed in an orderly manner. This is where the software platform chosen becomes important. The exact function that software platform performs varies according to the requirements that it is designed to support. A comprehensive asset management platform, for example, collects the tag data, processes it through a variety of analytics and workflows, records it and translates it into actionable information for managing assets. Ultimately these scans should provide meaningful information such as: Individual asset attributes status, size, location, type, etc. Individual asset history Fleet inventory information Fleet supply chain trend information Fleet shrinkage rates Shipping/receiving dates Average cycle times And other reports that allow asset managers to examine how different variables affect the supply chain This information can then be used to provide the following cost-saving benefits: Improved cycle times Reduced shrinkage/loss Optimized RTI usage Inventory location management & positioning Improved product recalls Monitored repair & maintenance Optimized transportation management 5

6 The following table depicts solutions for tracking returnable assets and their associated weaknesses and benefits. Type of Tracking How it Works MANUAL Information entered into spreadsheets; 100% manual process BARCODE-BASED SYSTEM Barcodes placed on assets; handhelds use line-of-sight scanning to read barcodes; software captures scans, date and time Pros Cons Cost No technology needs; low cost Labor- and timeintensive; decentralized information; high error rates; difficult version control No technology investment, but high continual labor investment; human errors can lead to additional customer service costs Many systems exist; no manual recording process; data is stored in an application Labor- and timeintensive to find and scan; line-of-sight required; barcode tag blemishes impair scan ability; can be disruptive Low technology investment; moderately high ongoing labor investment PASSIVE RFID SYSTEM More automated, Tags placed on assets; accurate inventory handhelds and fixed processes; no read points used for line-of-sight required; non-line-of-sight multiple scans captured scanning; captures data at once; up to 20 foot about asset location, read range; rugged tags date, time and status last an asset s lifetime Technology investment Moderate up-front is higher ($1-3 per tag) technology investment; than barcodes, however slight learning curve to ongoing labor is system reduced ACTIVE RFID SYSTEM Automatic assets scans for effortless inventories; provides Tags placed on assets; RFID readers blanket accurate asset location; sensory capabilities an area; no line-of-sight such as heat and required; real-time humidity; asset updates foot read range; real-time capabilities Large up-front technology investment; complex tracking infrastructure needed; slight learning curve to system Technology investment is higher ($25-55 per tag) than passive, however ongoing labor is reduced greatly due to real-time, automated scanning infrastructure Table 1. Asset tracking and management systems (from least to most automated), and the advantages, disadvantages and costs of each. 6

7 PREFERRED SOLUTIONS Comprehensive solutions combine auto-id technology with a robust software platform that provides up-to-date, accurate inventory and supply chain information to help companies streamline their returnable asset activity and closely manage returnable assets with minimal time and labor. These types of solutions also include configurable workflows, alerting features, trend analytics and more to provide real-time control to fix problems before they escalate and optimize the RTI fleet as it travels through the supply chain. Furthermore, an RTI tracking software solution should include the following features: 1 SCALABLE: web-based software is the ideal way to expand the solution to multiple users and/or multiple facilities 2 ABILITY TO INTEGRATE: many companies already have WMS, ERP and other systems in place, so make sure that a new solution can work with existing systems seamlessly 3 HOSTING OPTIONS: to give users the most flexibility a software solution should be able to be installed locally or through a SaaS arrangement 4 FINANCIAL ALTERNATIVES: by providing financing possibility for the entire solution, as well as hosting options, customers can choose to buy a complete solution upfront as a capital expense or make monthly operating expense payments. 7

8 BENEFITS OF AUTO-ID ENABLED ASSET TRACKING FOR REUSABLE ASSETS Using an auto-id enabled reusable asset tracking solution has the capability to provide enormous benefits to an organization, including: REDUCED INVENTORY TIME AND LABOR. Allows for quick and easy inventories/cycle counts and searches for misplaced assets. REDUCED SHRINKAGE. Seeing trends within the supply chain and assigning accountability to assets help to reduce stolen, misplaced or mishandled containers. MINIMIZED NEW CONTAINER PURCHASES. By optimizing the asset fleet, gaining accurate inventories, improving cycle time and reducing shrinkage, new container purchases can be reduced significantly. GREATER ACCOUNTABILITY. Using auto-id technology to automate the supply chain improves monitoring as containers leave the manufacturing facility or warehouse to suppliers and distribution partners allowing for the identification of pain points. IMPROVED AUDIT ACCURACY. Gaining accurate inventory information provides better fiscal control and regulation compliance on capital assets. IMPROVED CYCLE TIMES. Better tracking provides insights into the time RTIs spend at suppliers, distributors and retailers and allows owners to reduce container downtime and underutilization. IMPROVED CUSTOMER SERVICE. Whether it s managing a product recall, predicting demand or eliminating problem kegs from the fleet, customer satisfaction will benefit. INCREASED EFFICIENCIES in manufacturing, distribution and transportation 8

9 CUSTOMER IMPLEMENTATIONS Real-world customer implementations of auto-id enabled RTI tracking solutions have demonstrated ROI in less than 12 months. More importantly these solutions easily integrate into existing business processes to help provide a more seamless implementation and even more value. As early as the first complete turn, companies can leverage data to make smarter decisions, better manage supply chain partners, create process efficiencies and gain more control over the total supply chain costs. A leader in the horticulture logistics industry sought to improve its distribution operations by using an auto-id enabled tracking solution for their reusable rack pool that allows their customers to distribute products across the country. With over 800,000 racks to account for across 51 depots for over 300 customers, they understood that anything less than a fully automated and integrated tracking system would lead to lost or delayed assets, which would cost the company and their customers significant time and money. The solution uses active RFID to automatically scan racks at each depot location as they are picked up and dropped off, enabling them to get reliable inventory / location information, optimize asset positioning, accurate bill customers for their usage and eliminate counterfeit assets from the fleet. A leading chemical manufacturer produces and delivers thousands of containers across the country using their own returnable container fleet. On top of contending with an industry-standard loss rate of 6-8%, they have to ensure that the contents of containers are tracked to defend against chemical mixtures that could be toxic or even lethal. Passive RFID tags are securely adhered to the outside of the chemical transport containers. Readers are set up to capture data regarding the type of chemical being transported, date of fill, customer destination, and historical maintenance and cleaning, among others. The information gathered is vital to the efficient and safe use of their returnable asset fleet. The solution has enabled the company to reduce capital expenditures on new RTI assets by over 50% per year. A brewery keg fleet is difficult to track, especially in the brewing industry s open loop environment. The brewer must also contend with an industry-standard loss rate of 6-8%, as well as sales volume growth of as much as 10% a year. Due to these factors, this brewery was preparing to purchase approximately 20,000 new kegs at an estimated cost of over $2.5 million. To try to reduce large capital purchases like this, they chose to install a scan point on their fill line in order to measure keg cycle time and capture inventory information. The brewer realized that by having a better understanding of their fleet size and supply chain trends they could make more informed purchasing decisions and even modify processes in order to reduce the number of needed kegs. They started their RFID project by tagging 10,000 kegs to give them sample measurement to apply to the whole fleet and now estimates that just a one to two day reduction in the time it takes to get back each container saves more than $100,000 in new keg purchases, not to mention the savings realized by reducing losses and improving customer service. 9

10 ROI CALCULATIONS Returnable transport items can easy cost $100 each or more, and it s not uncommon for companies to have to purchase over 1,000 assets in order to alleviate the problems caused by mismanaged assets. Specifically, though, the below situations and calculations demonstrate the significance of a tracking solution upon an RTI fleet. Assumption: XYZ Corporation has a fleet of 100,000 RTIs, with a replacement cost of $100 each REDUCED SHRINKAGE 5% yearly shrinkage = 5,000 assets Replace 5,000 lost assets = $500,000 A 20% reduction in shrinkage saves $100,000 yearly QUICKER TURN TIMES 5 turns per year = 500,000 turns 1 day improvement in cycle time gives 5.07 yearly turns = 507,000 turns 7,000 extra turns is the productivity of 1,400 RTIs; a $140,000 value VERIFIED RTI QUALITY.5% of RTIs or cheap counterfeits fail yearly = 500 assets and contents Contents worth $150 = $75,000 waste A 75% improvement in fixing RTIs and removing counterfeits = $93,750 savings IMPROVED INVENTORY & SHIPPING Automatic scans provide accurate inventory numbers with NO labor costs & 100% automated shipping SOFT ROI Accurate billing provides exact figures and improves customer service More efficient and accurate inventory provides precise numbers for audit or compliance purposes Improved product recall enables companies to more easily identify flawed product and more quickly get it out and good product in Automated shipping and receiving processes greatly reduced human error, improving order accuracy 10

11 CONSIDERATIONS OF IMPLEMENTING AN AUTO-ID RETURNABLE ASSET TRACKING RFID is a proven technology that answers age-old business problems in new and improved ways. Other auto-id technologies are emerging, but have been proven to solve these same problems in unique ways. However, before moving forward on an auto-id enabled reusable asset tracking solution, organizations should thoroughly examine their business processes and needs. WHAT IS THE BUSINESS NEED? The first order for any business is to fully understand the issues that are driving a technology enabled asset management solution. Is it wasted time and labor, fleet shrinkage and theft, asset underutilization or a combination of things? How large are those problems and how many people do they affect? If those driving the project fail to understand the business need for implementing an automated asset management system, it will be difficult for them to persuade the individuals or departments responsible for approving the implementation. To get their hands around the solution and problem, companies should begin by determining the desired ROI and the predicted efficiencies that will be driving it. Also, they must understand the cost and time involved with implementing an asset tracking and management solution. It is often helpful for companies to speak to different vendors that offer solutions, and even interview their customers. IS AN AUTO-ID ENABLED SOLUTION RIGHT FOR ME? Technology enabled asset fleets may still be a difficult concept for some organizations to grasp, and in some cases it may even be overkill. If a company has a limited number of returnable assets to manage or their assets and their contents are not of high value, a barcode based solution may be appropriate since it would be more cost effective. Some vendors even offer returnable asset management solutions that are hardware agnostic and can seamlessly upgrade from barcode or utilize both technologies simultaneously if/when the time is right. The first step in moving ahead with auto-id technology and an asset management platform, though, is to develop a firm grasp of its components, benefits, challenges and applications. For companies that want to save long-term time and money on asset management, it is necessary to understand all the assets and processes that can be improved. Many organizations are amazed at how much easier it is to track their returnable assets once an efficient system is found. IS THIS SOLUTION SCALABLE? If an organization is ready to take advantage automated auto ID-enabled asset tracking and management, it should absolutely invest in a flexible and scalable solution that will allow its returnable asset fleet to grow and evolve with its needs. Some auto ID-based solutions have a sweet spot in terms of the number of assets they can capably manage, number of sites they can support, while others are more open-ended. Furthermore, some solutions are flexible enough to track other. valuable assets such as manufacturing equipment, machinery, tools and even electronics, which can provide even more value. Organizations should evaluate their current and future needs and map them to the 11

12 HOW FLEXIBLE IS THIS TECHNOLOGY? Auto-ID and asset management technology is anything but stagnant. RFID technology is now out of its infancy stage and being used widely in all industries. Other new and improved technologies are being developed that have increased capabilities. There is no longer a need to invest in proprietary technology because open, universal solutions exist today that include all the components of an auto-id tracking solution and allow companies to expand the system to different assets and/or departments using any type of auto-id technology, such as passive & active RFID, UWB, GPS, BLE, and sensors as needed. Hurdles that existed years ago metal-tagging difficulties, high-priced tags and unreliable scanning are problems of the past. CONCLUSION Today s supply chains are becoming increasingly complex with greater demands on status information and security, as well as the assets themselves. The pressure to do more with less combined with rising costs of new RTIs means that it is now more important than ever for organizations to squeeze efficiencies out of their supply chains, though companies are also very conscious to only invest in fixes that will provide value in the long term. An auto-id enabled returnable asset management solution addresses all of these issues. Auto-ID enabled reusable asset tracking and management solutions provide much greater visibility throughout the supply chain such that companies don t have to carry excess inventory and waste valuable resources in order to ensure continuity of service. Therefore companies should seek proven solutions from experienced vendors. Leaders in auto-id enabled platforms are experts in effectively planning, tracking and managing the movement of assets, inventory and people. Unlocking the value of returnable and reusable assets with auto-id enabled solutions will provide a configurable, automated and highly efficient operation with full visibility into every asset. Powered By: 12