Makers of reusable containers see potential in a difficult economy. But if they hope to persuade penny-pinching DC managers to buy, the projected returns had better be good.
Peter Bradley is an award-winning career journalist with more than three decades of experience in both newspapers and national business magazines. His credentials include seven years as the transportation and supply chain editor at Purchasing Magazine and six years as the chief editor of Logistics Management.
It's turning out to be a rough year for much of the material handling industry. But that's not to say spending has dried up entirely. Conversations around the floor of Chicago's McCormick Place during January's ProMat 2009 material handling exhibition suggested that buyers are out there, willing to invest—if that investment offers a quick payback.
Among the industry players seeking to take advantage of that are manufacturers and sellers of returnable containers and related equipment and technology. Their hope is that customers—particularly those shipping within closed-loop and pooling systems—will see the advantages of equipment that combines a quick return on investment with the benefits of sustainability.
Bob Klimko is the chairman of the Returnable Packaging Association (formerly the Reusable Pallet and Container Coalition) and the director of general industrial marketing for Orbis, a manufacturer of plastic reusable packaging, including containers, totes, pallets, divider sheets, and storage products. He expresses confidence that 2009 will be a good year for the industry.
"With all the things going on in the economy, with a lot of layoffs and margin squeeze," he says, "there are a couple of things we can do for customers: help them use their capital better and help them reduce their operating expenses." Customers are looking for faster returns on investment than in the past, he adds, but will spend money for applications that offer returns in the range of 12 to 18 months.
Margot Beesley, director of marketing for Buckhorn, offers a similar assessment. "A lot of people are chugging forward full speed ahead, looking to implement savings and productivity opportunities right away," she says. (Buckhorn is a manufacturer of plastic containers and pallets, as well as dunnage.)
But that's not to suggest this equipment is an easy sell. Steve Letnich, vice president of sales and marketing for Worthington Steelpac, a manufacturer of steel crates and pallets, acknowledges that even with the returnables' many benefits, selling into the current market presents challenges. "Budgets are tight. Customers are spending every dollar as if it were their own," he says. "They are making multiple checks [before buying]."
Lori Pieszala, sales manager for Boston Rack International, a supplier of pallet rack, conveyors, mezzanines, totes, and other equipment, agrees. She reports that she also sees customers focusing on price and fast returns.
Lean and green?
Despite all the selling hurdles, Klimko believes that reusables' day has come. Customers are looking for ways to boost productivity in their facilities, reduce product damage caused by faulty containers, and reduce waste materials, all of which, he says, play to the strengths of reusable containers.
Take productivity, for example. Reusable pallets and containers, which offer the advantage of uniformity in size, dimensions, and weight, allow companies to standardize work processes from one worker to another and from one shift to the next, thereby boosting efficiency. (Beesley calls returnables a natural fit for companies that have adopted lean initiatives for that reason.) Uniform containers, moreover, are less likely than irregularly shaped units to jam a facility's automated equipment, thus reducing the risk of downtime.
Letnich of Worthington Steelpac adds that the strength and durability of reusables—which are designed to withstand multiple trips—give them an advantage over disposable packaging when it comes to product protection. Compared to a wood pallet, he says, steel pallets like the ones his company offers are "less likely to come apart." Their durability, he adds, also reduces the risk that a broken pallet will bring an automated DC operation to a halt. With steel, he says, "it's less likely that fasteners will come loose or that the top deck will come off. You can parlay that into productivity gained through fewer line stops, fewer catastrophic failures, and less debris."
But perhaps the biggest selling point for reusables right now is their reputation for eco-friendliness. That's a relatively recent development, notes Klimko. "We've been selling cost savings for a long time," he says. "Now, customers are looking for sustainable solutions. We are positioned very well to do that."
Adds Beesley, "There's a cost savings for every time a box makes a trip, a savings from keeping corrugated from going to a landfill or recycling. And every box makes hundreds or thousands of trips."
That raises the question of whether these "savings" can be translated into the kinds of hard numbers CFOs like to see. Klimko says both the cost and environmental benefits of reusables can be quantified. For example, he says, shippers who want to compare the costs of one-way corrugated packaging with reusable plastic packaging can use the Reusable Packaging Economic Calculator on his group's Web site, choosereusables.org. Designed to help potential users figure out whether switching to reusables makes economic sense for them, the calculator factors in corrugated costs, dwell time (how long containers are held at various stages of the supply chain), cartons shipped annually, annual interest rate, return miles for reusables, and the expected replacement rate.
Klimko admits that it's difficult to develop a similar calculator on the environmental side of the equation, given the large variety of products that would have to be included. But he does cite a 2004 study conducted by researchers at Franklin Associates for the then-RPCC that compared reusable plastic containers (RPCs) and disposable displayready corrugated containers (DRCs) used for shipping fresh produce. Although the authors warn against using the study as the sole basis for comparing the two systems' environmental attributes, the research showed that "on average across all 10 produce applications [studied], RPCs required 39 percent less total energy, produced 95 percent less total solid waste, and generated 29 percent less total greenhouse gas emissions than did DRCs for corresponding produce applications."
Not for everyone
The benefits notwithstanding, Klimko acknowledges that returnables are not for everyone. "We're not saying one solution is better than another," he says. "You have to understand the drivers."
What are the key drivers, then, that make returnables worth considering? To begin with, there's volume. As Klimko points out, the companies most likely to see a swift return on their investment are those that use large numbers of containers and turn them around quickly. "You have to have some mass," he says. "If you are shipping once a month from Maine to California, it's not so good." Klimko adds that another key driver is consistency in shipments. "[Returnables] work best for shippers that have fairly standardized order quantities or lot sizes."
But even shippers who meet these criteria still have to justify the expense to the keepers of the corporate vault. That's why most of the providers offer to help customers develop cost justification metrics, and some, like Worthington Steelpac, are developing financing options such as leasing to help reduce the initial investment.
In the meantime, vendors can take comfort from the fact that while the economy may have slipped into a deep recession, it has not come to a standstill. "You still have to be able to move and sell products," Pieszala says.
States across the Southeast woke up today to find that the immediate weather impacts from Hurricane Helene are done, but the impacts to people, businesses, and the supply chain continue to be a major headache, according to Everstream Analytics.
The primary problem is the collection of massive power outages caused by the storm’s punishing winds and rainfall, now affecting some 2 million customers across the Southeast region of the U.S.
One organization working to rush help to affected regions since the storm hit Florida’s western coast on Thursday night is the American Logistics Aid Network (ALAN). As it does after most serious storms, the group continues to marshal donated resources from supply chain service providers in order to store, stage, and deliver help where it’s needed.
Support for recovery efforts is coming from a massive injection of federal aid, since the White House declared states of emergency last week for Alabama, Florida, Georgia, North Carolina, and South Carolina. Affected states are also supporting the rush of materials to needed zones by suspending transportation requirement such as certain licensing agreements, fuel taxes, weight restrictions, and hours of service caps, ALAN said.
E-commerce activity remains robust, but a growing number of consumers are reintegrating physical stores into their shopping journeys in 2024, emphasizing the need for retailers to focus on omnichannel business strategies. That’s according to an e-commerce study from Ryder System, Inc., released this week.
Ryder surveyed more than 1,300 consumers for its 2024 E-Commerce Consumer Study and found that 61% of consumers shop in-store “because they enjoy the experience,” a 21% increase compared to results from Ryder’s 2023 survey on the same subject. The current survey also found that 35% shop in-store because they don’t want to wait for online orders in the mail (up 4% from last year), and 15% say they shop in-store to avoid package theft (up 8% from last year).
“Retail and e-commerce continue to evolve,” Jeff Wolpov, Ryder’s senior vice president of e-commerce, said in a statement announcing the survey’s findings. “The emergence of e-commerce and growth of omnichannel fulfillment, particularly over the past four years, has altered consumer expectations and behavior dramatically and will continue to do so as time and technology allow.
“This latest study demonstrates that, while consumers maintain a robust
appetite for e-commerce, they are simultaneously embracing in-person shopping, presenting an impetus for merchants to refine their omnichannel strategies.”
Other findings include:
• Apparel and cosmetics shoppers show growing attraction to buying in-store. When purchasing apparel and cosmetics, shoppers are more inclined to make purchases in a physical location than they were last year, according to Ryder. Forty-one percent of shoppers who buy cosmetics said they prefer to do so either in a brand’s physical retail location or a department/convenience store (+9%). As for apparel shoppers, 54% said they prefer to buy clothing in those same brick-and-mortar locations (+9%).
• More customers prefer returning online purchases in physical stores. Fifty-five percent of shoppers (+15%) now say they would rather return online purchases in-store–the first time since early 2020 the preference to Buy Online Return In-Store (BORIS) has outweighed returning via mail, according to the survey. Forty percent of shoppers said they often make additional purchases when picking up or returning online purchases in-store (+2%).
• Consumers are extremely reliant on mobile devices when shopping in-store. This year’s survey reveals that 77% of consumers search for items on their mobile devices while in a store, Ryder said. Sixty-nine percent said they compare prices with items in nearby stores, 58% check availability at other stores, 31% want to learn more about a product, and 17% want to see other items frequently purchased with a product they’re considering.
Ryder said the findings also underscore the importance of investing in technology solutions that allow companies to provide customers with flexible purchasing options.
“Omnichannel strength is not a fad; it is a strategic necessity for e-commerce and retail businesses to stay competitive and achieve sustainable success in 2024 and beyond,” Wolpov also said. “The findings from this year’s study underscore what we know our customers are experiencing, which is the positive impact of integrating supply chain technology solutions across their sales channels, enabling them to provide their customers with flexible, convenient options to personalize their experience and heighten customer satisfaction.”
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
Two European companies are among the most recent firms to put autonomous last-mile delivery to the test with a project in Bern, Switzerland, that debuted this month.
Swiss transportation and logistics company Planzer has teamed up with fellow Swiss firm Loxo, which develops autonomous driving software solutions, for a two-year pilot project in which a Loxo-equipped, Planzer parcel delivery van will handle last-mile logistics in Bern’s city center.
The project coincides with Swiss regulations on autonomous driving that are expected to take effect next spring.
Referred to as “Planzer–Dynamic Micro-Hub w LOXO,” the project aims to address both sustainability issues and traffic congestion in urban areas.
The delivery vehicle, a Volkswagen ID. Buzz battery-electric minivan, will feature Loxo’s Level 4 Digital Driver navigation software, a highly automated solution that allows driverless operation. The van was retrofitted to include space for two swap boxes for parcel storage.
During the two-year pilot phase, Loxo’s Digital Driver will navigate a commercial vehicle several times a day from Planzer’s railway center to various logistics points in Bern's city center. There, the parcels will be reloaded onto small electric vehicles and delivered to end customers by Planzer’s parcel delivery staff.
Following the completion of the pilot phase, Planzer and Loxo will build on the program for rollout in other Swiss cities, the companies said.
The partners said the project addresses the increasing requirements of urban supply chains and aims to ensure the “scalability of their disruptive solution.” With largely emission-free delivery, it contributes to greater levels of sustainability for the city as a living space, they also said.
“The uniqueness of this project lies in the fact that it will have a direct impact on society,” Planzer’s CEO and Chairman Nils Planzer said in a statement announcing the project. “We didn't just want to integrate automated technology into existing systems, we wanted to develop a completely new concept and a new business model.”
As the hours tick down toward a “seemingly imminent” strike by East Coast and Gulf Coast dockworkers, experts are warning that the impacts of that move would mushroom well-beyond the actual strike locations, causing prevalent shipping delays, container ship congestion, port congestion on West coast ports, and stranded freight.
However, a strike now seems “nearly unavoidable,” as no bargaining sessions are scheduled prior to the September 30 contract expiration between the International Longshoremen’s Association (ILA) and the U.S. Maritime Alliance (USMX) in their negotiations over wages and automation, according to the transportation law firm Scopelitis, Garvin, Light, Hanson & Feary.
The facilities affected would include some 45,000 port workers at 36 locations, including high-volume U.S. ports from Boston, New York / New Jersey, and Norfolk, to Savannah and Charleston, and down to New Orleans and Houston. With such widespread geography, a strike would likely lead to congestion from diverted traffic, as well as knock-on effects include the potential risk of increased freight rates and costly charges such as demurrage, detention, per diem, and dwell time fees on containers that may be slowed due to the congestion, according to an analysis by another transportation and logistics sector law firm, Benesch.
The weight of those combined blows means that many companies are already planning ways to minimize damage and recover quickly from the event. According to Scopelitis’ advice, mitigation measures could include: preparing for congestion on West coast ports, taking advantage of intermodal ground transportation where possible, looking for alternatives including air transport when necessary for urgent delivery, delaying shipping from East and Gulf coast ports until after the strike, and budgeting for increased freight and container fees.
Additional advice on softening the blow of a potential coastwide strike came from John Donigian, senior director of supply chain strategy at Moody’s. In a statement, he named six supply chain strategies for companies to consider: expedite certain shipments, reallocate existing inventory strategically, lock in alternative capacity with trucking and rail providers , communicate transparently with stakeholders to set realistic expectations for delivery timelines, shift sourcing to regional suppliers if possible, and utilize drop shipping to maintain sales.