Custom returnable packaging trays. The easy way to help implement cost downs.

1. NA 2002 On-Floor Seminar Series
Welcomes You to Session 112
“Solving Work in Progress & Returnable
Packaging Through Industrial Metal
Containers”
Sponsored by: IMC&WD
Speaker: Todd Cozart
4/17/02 1

2. Returnable Containers Cost
Justification
Todd Cozart
4/17/02 2

3. Why Do We Define Packaging?
• Quality
• Cost
• Order Planning
• Standardization &
Modular
• Manpower Planning
• Inventory Control
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4. Why Do We Define Packaging
Cont’d
• Supplier Control
• Workstation Layout
• Warehousing
• Housekeeping
• Transportation
Efficiencies
• Safety
• Eliminate Surprises
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5. Assemble Logistic Team
• Packaging Rep.
• Materials Rep.
• Transportation Rep.
• Material Handling
Rep.
• Production Rep.
• Purchasing Rep.
• Safety/Ergonomics
Rep.
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6. Identify Commodities
• QDC Evaluation
– Gather Historical Information:
• Quality Concerns and High $
Reject Rates
• Delivery Concerns, Internal and
External
• Transportation Cost by
Commodities
• Labor Cost by Commodities
• Disposal Cost of Packaging
Material
• Packaging Material Cost
• Safety and Ergonomic Concerns
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7. Prioritize Commodities
• Prioritize Based on
Largest QDC Gains
– $$$$$
– Quality
– Safety
• Hint - Large Parts
Should Be the Targeted
Parts
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8. Concept Phase
• Logistic Team Define:
– Project Time Line Per Commodity
– Product and Process Requirements:
• Visit Workstation
• Part Orientation
• Quantity Targets Per Container
• Container Size
• Critical Part Characteristics
• Weight limits
• Loading/unloading requirements
• shipping storage and handling
methods
– Sketch or mock-up container concept
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9. Preliminary Logistics Study
• Define Current Cost Vs Proposed Cost
– Packaging Material Cost
– Transportation Cost
– Labor Cost
– Disposal Cost
– Inventory Cost
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10. Define Direction
• Logistic Team To:
– Review Logistics Study
– Continue or Stop
– Review Concepts
– Preliminary Buy-in
– Review & Update Timeline
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11. Purchase Prototype Container
• Review
– In Plant
– At Supplier
– Run Shipping Trial
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12. Prototype Container
• Modify If Necessary
• Update Timeline
• Buy off in Writing
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13. Finalize Logistics Cost
• Typical ROI Hurdle Rates Are:
– 25% to 35% Minimum Return on Investment
for Cost Reduction Projects
– 15% ROI on Required Projects
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14. Request Funds for Project
• Included in Justification Are:
– Logistics Cost Savings
– Savings Commitment From Supplier/plant
– Three Container Quotes
– Final Approval
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15. Place Purchase Order
• Update Timeline
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16. Container Samples
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17. Logistic Pieces of the Pie
Packaging Transportation Labor
Disposal Inventory Warehousing
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18. Packaging Cost
P ackagin g T ran sp ortation L ab or
D isp osal In ven tory W areh ou sin g
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19. Packaging Cost
Example: Class 8 Truck Battery Box Lid
• Current Method:
– Eight parts per crate
– $34.00 per crate
– $4.25 per part
• Proposed Method:
– Twelve parts per returnable container
– [($300/cont.)*(25 containers)/(8 yrs)] / (20 parts/day)*(250 Days/yr.) =
$0.19/Part
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20. Transportation Cost
Packaging Transportation Labor
Disposal Inventory Warehousing
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21. Transportation Cost
Example: Class 8 Truck Battery Box Lid
• Current Method:
– Negotiated $425.00 one way (Truck Load Rate)
– [($425/trailer)*(43% utilization)] / [(5 days supply)*(20 parts/day)] =
$1.83/Part
• Proposed Method:
– Negotiated $625.00 Round Trip (Truck Load Rate)
– [($625/trailer)*(14% utilization)] / [(5 days supply)*(20 parts/day)] =
$0.88/Part
Note: LTL uses rate per pound
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22. Disposal Cost
Packaging Transportation Labor
Disposal Inventory Warehousing
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23. Disposal Cost
Example: Class 8 Truck Battery Box Lid
• Current Method:
– [(55 lbs./cont.) / (8 parts/cont.)]*($0.03/pound) = $0.21/Part
• Proposed Method:
– Eliminated
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24. Labor Cost
Example: Class 8 Truck Battery Box Lid
• Current Method:
– [($37.00/hr)/(60 min/hr)]*[(4 min/cont)/(8 parts/cont)] =
$0.31/Part
• Proposed Method:
– [($37.00/hr)/(60 min/hr)]*[(2 min/cont)/(12 parts/cont)] =
$0.10/Part
4/17/02 24

25. Total Logistic Summary
Pkg. Transp. Disposal Labor Total
Cost/Part Cost/Part Cost/Part Cost/Part Cost/Part
Current $4.25 $1.83 $0.21 $0.31 $6.60
Proposed $0.19 $0.88 $0.00 $0.10 $1.17
Difference $4.06 $0.95 $0.21 $0.21 $5.43
$7,500 Investment / $27,150 Savings = ROI 28 %
Note: Most companies use a tax & amortization schedule
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26. Questions?
4/17/02 26