“A supply chain cost minimization approach by using reusable plastic container a case study”-pdf final-08_05_2014

International Conference on Innovation Driven Supply Chain, Malaysia 2014| 1
“A Supply chain cost minimization approach by using reusable plastic
container- A Case Study”
Md. Gaish Uddin Miron1
Abstract
Business sustainability has become the hardest in the global market for any small or giant
company in Bangladesh. Companies are adopting & implementing many approaches to sustain in the
market. Cost cutting approach has been addressed as one of the most efficient supply chain
approach. Supply chain plays the key role to minimize the total cost and maximize the overall value
generated. Potential growth of economy of any country depends on the sustainable and stable
business policy and its execution. Likewise, any industry’s growth depends on it internal & external
business policy and precise successful implementation of the policies. Manufacturing industries in
Bangladesh has been booming from the early 80’s. And yet to reach to the lean manufacturing
approach due to lack of understanding of the modern supply chain practices and approaches. Supply
chain professionals in the world are at the edge of demolishing the unwanted cost involvement within
the process and re-engineering the process flow according to the specific organization need.
Practice shows that using reusable plastic container (RPC) is one of the successful
approaches for many manufacturing companies to reduce the overall cost of goods and implementing
the environment friendly supply chain practices. Durability and multiuse are the core advantages of
plastic container. Reusable plastic container can be used instead of corrugated carton, wooden box,
paper bags and plastic poly bag. Reusable plastic containers can have a greater impact on the total
cost of goods and supply chain responsibility as a whole and make supply chain operations more
responsive & efficient.
This paper intend to demonstrate the benefits and the drawback of using reusable plastic
container in one of the Bangladeshi medical devices components manufacturing company by using
cost benefit study. The purpose and the objective of the study are to identify the potential outcomes of
the application of using reusable plastic container and justify the sustainability of the approach and
execution of the application.
Key Words:
Reusable plastic container, Cost reduction, Cost benefit study, Supply Chain, Multiuse.
1
Bsc (Hons) Business & Marketing (AIMST, MY), Certified Supply Chain Manager (ISCEA-USA)
Strategic Planner- Supply Chain, JMI Group, Bangladesh
Amit Alfa Castle, Apartment No: 5 /D, Outer Circular Road, Rajarbagh, Dhaka – 1217, Bangladesh.
Tel personal: +880178-0014143, Email: md.gaish.uddin@hotmail.co.uk

1. Introduction
Global manufacturing industries have been facing the threat of cost hike up due to global
downturn of economy and buying capacity. This reflects grater impacts on developing countries
manufacturing industries. Sustainability has become tougher day by day due to huge competition.
“Manufacturers’ supply chains are growing extremely complex. With shorter product life cycles and
ever growing customer needs, as well as the increasing spread of distribution, manufacturing,
sourcing, and engineering operations around the globe, companies large and small are finding it ever
harder to orchestrate all the pieces together (Deloitte, 2003)”.
To overcome the downfall of economical situation and sustain in the market, supply chain
experts are sweating the head out to bring new competencies into their grip. Cost minimization,
process re-engineering and uses of alternative are the most common area that supply chain
professionals are trying to improve. Supply Chain connoisseurs are looking deep into all cost centers
that have impacts on company’s overall value generated. And also looking for solution’s which can
minimize the cost of business operations. Cost minimization is one of the common phenomena of
business without compromising the quality. “A study by Michigan State University (MSU) found that
actual savings from reusable packaging, in terms of cash flow, exceeded prediction for four
automotive manufacturers with medium-to-high usage of reusable containers. One company saved
$10.9 million a year over a four-year period after a $16.3 million investment in reusable packaging,
including a 35% reduction in truckloads sent to landfills. Another firm estimated its savings from
reusable packaging at $2.3 million (Wendee, Diana, Michael & S. 1996)”
JMI Hospital Requisite and Manufacturing Limited (JHRML) is a manufacturing company of
medical components and also assembler of medical devices components in Bangladesh. JHRML’s
core customer are its sister concerns. This company is using plastic poly (one time use) as primary
packaging for their components as bulk and later same is packed in a corrugated carton (one time
use) as secondary packaging to ship to the customer. During the primary packaging of the
components at the assembly line, ±10% of rejection rate is being identified due to the use of less
durable plastic poly as primary packaging also mishandling during the packaging.
Reusable Plastic Container (RPC) is a packaging intended for repeated use, which is used
primarily to packaging the goods. Multi use and it is durability is the character of RPC. RPC is used to
store, move & distribute products within a single operation or entire Supply Chain. RPC is used as an
alternative for other packaging items like corrugated carton, wooden box, plastic poly, cardboard box
etc. Recent business operations are more conscious about the cost, durability, less environmental
hazardous, flexibility. Application of RPC as primary & secondary packaging may reduce the cost;
reduce the warehouse space holding, reduce rejection ratio of goods and also bring improvement in
production process flow.

This study mainly examines the cost and benefits of using reusable plastic container as
secondary packaging instead of other secondary packaging materials. This study is not
comprehensive of all packaging materials but assesses the cost and benefits of some important
packaging materials. These are:
 Reusable plastic containers
 Corrugated carton
 Plastic Poly
 Adhesive label
 Adhesive tape
The scope of this study is limited within the JHRML’S manufacturing process itself. This paper
includes literature review, approach to the study, case study of JHRML and conclusion in the following
paragraphs.
2. Literature Review
Reusable plastic container plays a crucial function shielding goods, preventing damage during
the manufacturing process, transport and storage from the elements, vibration, drop and
compression. Companies choose reusable packaging because of the cost savings and process
optimization.
Reusable plastic container requires a higher investment as it is designed to be long lasting
and also durable due to use of high quality materials which are expensive than one time use plastic
poly materials. One time use packagings are intend to design for one time and use low cost materials
for cost minimization purposes which is feasible for short time business operation but as for long term
investment reusable plastic containers are more cost efficient and durable. However, RPC also
includes other operating cost which may includes new materials handling equipments, storage system
and also reverse logistics (to return the empty RPC from customer end to manufacturing plant).
However, the cost associated with the RPC may be offset considering the long term financial
opportunity. Packaging costs reduces with plastic reusable containers and their protective body. “RPC
can last 5 to 10 years, reducing packaging material costs to pennies per trip by allocating the initial
investment cost over their useful life. Study shows that, five production facilities operated by a major
Tier One supplier of automotive door modules and trim. Extrapolating the per-plant figures to its 87
North American plants, the company ($1.8 billion net sales) could estimate savings of $25.4 million on
a reusable packing investment of $ 15.3 million, just by replacing expendable packaging with reusable
packaging ( Orbis Corporation, 2004)”
Application of RPC shows a great positive impact on the production process flow. Due to the
character of the RPC, the products its carries reaches its destination safely without any damage.

“According to Logistics Quarterly, December 1999, "A series of precisely scheduled milk and sweep
runs were designed for Ford Motor Company and their supplier network. The milk runs were
scheduled for each shift of the supplier's operation, based on the analysis of the time and place
requirements for parts, load capacities and locations of supplier facilities. Small quantities of parts,
enough for a few hours, are picked up from suppliers within specific window times several times a day
and then delivered to Ford, again, within specific 15-minute window times. In some cases, the parts
are first sent to a sequencing center so that the right color of floor mat, for example, reaches the line
in time for placement in the right color of vehicle. The benefits of reduced inventory, management
time, material handling and warehousing space accrue to Ford (Jim, 1999)”
Environmental issues are one of the major concerns for any business whether big or small
value organization. Corrugated carton, plastic poly and plastic items cause environment pollution as
they require huge time to degrade. Also disposal of these materials causes extra money and it is
costly. This disposal also involves labor which also causes financial expenses to the company.
“Ghirardelli Chocolate Co. had been spending $ 520,000 annually on 580,000 fiberboard boxes for
internal distribution. Disposing of solid boxes racked up an additional $2,700 in disposal cost. By
switching to reusable plastics totes the company saved $1.95 million over five years and eliminated
350 tons solid board from landfill (Stop waste partnership, 2005)”. Reusable plastic container serves
long life and also can be recycled once damaged and produced new goods with the recycled
materials. RPC offers long life as it character and causes less environment pollution. RPC systems
produce 95% less solid waste, consume 39% less energy and also produce 29% less CO2 (
Sustainable packaging, 2013). “At Ford Motor Company's Windsor, Ontario plant, the use of 100%
reusable containers for all production parts eliminated the generation of 11 pounds of expendable
waste per engine produced or 30,000 pounds per day (Orbis Corporation, 2004)”.
Damages or rejection of products due to packaging incurs losses for organizations. Non
durable packaging could hamper the products safety during the movement and transportation which
likely to face loss and also reputation in the market which raise questions to their competencies.
“Manufacturing Company of medical equipments procured 182 reusable containers for delicate
instruments, substitutes the 1,100 single-use boxes they use throughout the year. The switching
substantially reduced instrumental damage and the resulting savings paid for the containers in just
two months (Reusable Packaging, 2012)”.
Labor cost associated with the packaging process of plastic Poly and other expendable
materials can be reduced but cutting the packaging steps shorter. By implementing of reusable plastic
container, the packaging steps are shorter hence requires less labor involvement. Stacking of plastic
containers are more safe and could stack higher then corrugated carton which may take up less
warehouse space and handling of the containers are much easier than handling of expendable
packaging materials. “After CAMI Automotive implemented reusable packaging in the late 1990’s,
incoming product (in reusable plastic containers) was loaded onto carts at a cross-docking facility. At

the CAMI assembly plant, the cart was rolled from the trailer to the receiving dock, enabling a full truck
to be unloaded safely and easily in minutes (Orbis Corporation, 2004)
3. Approach to the study
The study has been pursued based on combination of primary data, secondary data. Primary
data’s are sales forecast, pervious sales quantity, production forecast, interview with respective
officials of JHRML and observations and secondary data are Journals, articles, books and websites.
3.1 Components of the cost benefit study
The components of the study are shown in the figure 1 and 2. The cost and benefit of using
reusable plastic container are estimated from:
 Current total cost associated with the primary packaging and secondary packaging.
 Initial investments and cost associated with reusable plastic container and other packaging
materials.
 Cost benefit and possible other benefit.
Figure1 Components of Study of current cost
Source: Developed by Author
Costs of packaging materials used currently are calculated based on the actual cost associated with
the primary and secondary packaging materials. The estimated consumptions are based on previous
consumptions data and also data from the sales forecast. Interview and observations are also major
inputs for the study.
Corrugated
Carton
Adhesive Tape
Plastic Poly
COST

Figure 2 Components of Study of initial investment of reusable plastic containers and other packaging cost
Cost calculation of investment of using reusable plastic container and other packaging materials are
estimated based on the current consumptions and requirements.
4. Case Study: JMI Hospital Requisite Manufacturing Limited (JHMRL)
JMI Hospital Requisite Manufacturing Limited (JHRML) is a strategic business unit of JMI
Group and joint venture project with Republic of South Korea. It is a modern medical devices
manufacturing plant in Bangladesh and it is the first company in the country is established to
manufacture components for Syringes, IV infusion set and this kind of products. In local and abroad
there are huge demand of IV Cannula, Needle, and Film for packaging, IV Set Chamber and many
other components. JHRML assembles the components which are used for finial Syringes, IV Infusion
set, Scale vain set manufacturing. Products of JHRML are listed below: Scalp Vein Set (21G,
22G,23G & 25 G), Assembled Slider & Roller, Spike Cap, Air Vent Spike, Assembled, air vent , non
air vent chamber (for IV Set), Bulk needle- (19G, 21G,22G, 23G, 26G, and 27G), Film (421 mm & 425
mm – for blister packaging), Assembled Y- Injection Port, Luer Slip Connector, IV Cannula, and Blood
Transfusion Set.
JMI Hospital Requisite Manufacturing Limited uses primary and secondary packaging to pack
manufactured components and for assembled components. For primary packaging they use plastic
poly and for secondary packaging they use corrugated carton. Corrugated carton are then sealed with
adhesive tape and shipped to customer.
Plastic Poly Adhesive label
Reusable plastic
container
COST

4.1 Operation process flow of JHRML:
Supplier
Rejection
store
QC Test
PM/RM
Store
Molding
Section
Assembly
Line
Packaging
Quarantine
area
Final QC
Test
Finish
Goods store
Deliver to
consumer
Production Line
Process QA
Figure 3: Details operation process flow of JHRML
Figure 3 shows the details operation process flow of JHRML. Raw materials (RM), packaging
materials (PM) and components are procured from local & overseas sources and store in the
respective warehouse of JHRML after Quality control’s (QC) approval. Required materials are
transferred from warehouse to production floor. Molding section produces the component and
transfers to assembly section for assemble. From molding to final finishing goods, components are
packed with plastic poly in bulk. Process Quality Assurance (QA) checks the quality at every step and
approves for final packaging. Sequentially the packed goods moves to quarantine area and approves
by QC if the quality matches the standard and stores in finish goods store. If rejection made, goods
moves to rejection store for disposal. From finish goods warehouse the products are transported and
delivered to the customer.
4.2 Packaging Materials:
4.2.1 Reusable plastic container
Reusable plastic containers are manufactured in many sizes and with different raw materials.
According to the need of the customer they decide and procure which one serves their need. The
decision of choosing the right products for their need is crucial. Whether to be used as primary
packaging or secondary packaging, user will make their decision and if require they may re-engineer
the size and style. For the purpose of secondary packaging of JHRML’s components below are the
specifications of the reusable plastic container. Estimated life time of RPC is 5 years and more.
Considering 5 years life time and each year 10 % of replacement of container and lid due to damage,
the study has been conducted.

Table 1: Specification of RPC
Raw materials used for
Body
Raw materials Used
for Lid
Raw materials Used
for Handle
Raw materials Used
for wheel
RCP (Random Co polymer)
Dimension:
690mmx475mmx390mm
PP (Polypropylene) PP (Polypropylene) PP (Polypropylene)
Source: Taken from local RPC manufacturer
Image: 1 Plastic container Image: 2 Plastic container
4.2.2: Corrugated Carton
Corrugated carton are used to store, transportation of goods. Corrugated carton are used worldwide
to transport goods. The key raw material in corrugating is paper, different grades for each layer
making up the corrugated carton. Corrugated carton are used as primary & secondary packaging.
Corrugated carton are produced in many different sizes as per requirements of customer and used for
one time.
JHRML’s few common size of corrugated carton is stated below:
Size 1: 18"x15"x14.5", Size 2: 24"x15"x14.5", Size: 27"x15"x14.5"
Image: 3 Corrugated carton Image: 4 corrugated carton

4.2.3: Plastic Poly
Plastic poly is one of the most common packaging materials use to pack goods and transport
to required destinations. Raw materials used to produce plastic poly are many but the poly used by
JHRML is made of Low-Density Polyethylene (LDPE). Plastic poly is used as primary packaging and
depending on the operations it is used as secondary packaging as well. JHRML’s uses plastic poly to
pack component in bulk. The size of the plastic poly depends on the requirement of individuals.
JHRML uses for plastic poly size: 23.5 inch X 45 inch.
Image: 5 Plastic Poly Image: 6 Plastic Poly
4.3 Cost and Benefit Study:
The study of a cost, associated with the implementation of a substitute approach for a solution of
a situation or problem and its benefits. Business decision are made or drawn with this process.
Cost benefit study involves all the factor related to the cost center and also further evaluation of the
value which may add to the overall value generated. The cost benefits study has been drawn step by
step:
4.3.1 Cost calculation
Costs associated with JHRML’s one time use packaging are drawn below:
4.3.1.1 Packaging cost (One time use)
Table: 2 Total costs of packaging materials (one time use) for five years based on sales forecast:
Consumption Duration Cost of Poly
Cost of
corrugated
carton
Cost of
Adhesive
Tape
Total Cost
( USD)
Monthly 3,542.00 7,700.00 18.56 11,260.56
First year 42,504.00 92,400.00 222.75 135,126.75
Second year 89,258.40 1,94,040.00 468.00 283,766.40
Third year 1,36,012.80 2,95,680.00 713.00 4,32,405.80
Forth year 15,49,271.00 33,67,980.00 8,119.00 4,925,370.00
Fifth year 32,89,810.00 71,51,760.00 17,241.00 10,458,811.00

4.3.1.2 Packaging cost (Reusable / Multiuse)
Before any decision is made to transform from one time use packaging to reusable / multiuse
packaging, some major issues or key areas need to be addressed. At first the total operations should
be carefully analyzed and identify the component flow and the packaging application and also identify
the objective of packaging. Then identify the feasibility of transformation cost and benefits.
Transformation cost involves initial investment and changes in operations process cost. Costs
associated with JHRML’s reusable / multiuse able plastic containers packaging process are drawn
below:
Table: 3 Total costs of packaging materials (Reusable / Multiuse) for five years:
Consumption Duration
Cost of Reusable
Plastic Container
Cost of Poly Cost of
Adhesive
Label
Total Cost
( USD)
Monthly 10,000.00 1,925.00 82.50 12,007.50
First year 1,000.00 23,100.00 990.00 25,090.00
Second year 1,000.00 48,510.00 2,079.00 51,589.00
Third year 1,000.00 73,920.00 3,168.00 78,088.00
Forth year 1,000.00 841,995.00 36,086.00 8,79,081.00
Fifth year 1,000.00 17,87,940.00 76,626.00 18,65,566.00
4.3.2 Benefits Study:
Table: 4 Total savings of using reusable plastic container as secondary packaging materials:
Consumption
Duration
Cost of one time use
packaging materials
( USD)
Cost Reusable / Multiuse
packaging materials
(USD)
Savings (USD)
Monthly 11,260.56 12,007.50 -747.44
First year 135,126.75 25,090.00 110,036.75
Second year 283,766.40 51,589.00 232,177.40
Third year 4,32,405.80 78,088.00 3,54,317.80
Forth year 49,25,370.00 8,79,081.00 40,46,289.00
Fifth year 1,04,58,811.00 18,65,566.00 85,93,245.00
The illustration in the table 10 shows, savings within five years application of reusable plastic
containers, JHRML can save USD 8.6 million and saves 5% of its total cost of goods sold over the five
years of application of reusable plastic container.
4.3.3 Other Benefits:
4.3.3.1 Process Improvement
Transformation from one time used packaging to reusable plastic container will improve the
process flow of production. Handling and cycle time of transferring components from one station to
another will consume less time and also packing time of the components will take less time.

4.3.3.2 Reduce components rejection
Due to the non durable secondary packaging, 10 % of rejection is observed. By using RPC
the components damage rate will be reduced as it offer hard protection and easy handling. The
protection of the products packaging could maintain by using reusable plastic container instead of
plastic Poly.
4.3.3.3 Reduce packaging waste
Reusable plastic containers are solid and tough. The disposal of plastic Poly and corrugated
carton are frequent. RPC offers long service life and can be use many times. “From 2009 to 2010,
L’Oreal reduced its waste per production by 7.4 % with reusable packaging and by reusing pallets
(Amatech Sustainability Report, 2012)”
4.3.3.4 Reduce workforce involvement
Reusable plastic container is easy to handle and require less labor involvement for
packaging. Plastic poly and corrugated carton are much less durable than RPC so require more
attention during packaging, handling which more likely to require more labor force during the
packaging.
4.3.3.5 Reduce environment pollution
One time use plastic poly and corrugated carton disposal is costly and also hazardous for
environment as those takes years to degrade. Whereas, RPC can be recycle and used to produce
new products. This will take more time for disposal and less pollution for the environment considering
plastic Poly and corrugated carton. The benefits of environmental of reusing packaging are extremely
huge.
4.4 Drawback:
4.4.1 Initial capital investment
Initial capital investment for introducing reusable packaging materials is expensive. This
investment also includes others accessories or machineries involve to implement the new packaging
process. This change over may associate high risk on the investment and may not be fruitful if not
implemented successfully.

4.4.2 Acceptance of customer
The nature of JHRML’s requires high quality assurance of the products. Transforming from
traditional packaging to reusable plastic container may create a question regards to the quality of the
products. And also may negatively consider the handling cost of RPC during receiving of the goods at
their customer end and return the containers back. The acceptance of the change over may be hard
to establish.
4.4.3 Reverse logistic cost
Returning back the RPC from customer end to supplier end involves reverse logistic cost.
This will also require additional human resource and additional cost of the whole operation. During the
transportation & delivery of the goods additional precaution is required to take which may require
training for the labor force.
4.4.4 Maintenance of the container
To maintain the cleanness of the RPC, regular washing or cleaning is required. Due to the
traveling from one station to another and one place to another, the RPC may get dust and dirt inside.
To keep the RPC clean regular washing, polishing is required. For this purpose additional space is
also required with involvement of human resources. This may cost lower but will require a separate
operation for it.

5. Conclusion
Cost of packaging materials plays a vital role for any manufacturing industry. Study shows
that transforming from plastic Poly & corrugated carton to reusable plastic container has greater
positive impact on the total cost and operations. Application of the reusable plastic container can
improve the overall manufacturing process of JMI Hospital Requisite Manufacturing Limited.
Implementation of the use of reusable plastic containers requires management decision
whether the investment is possible at the moments or not. If management agrees for the
implementation then further factors may be bring into consideration. Standard operating procedure
must be introduced for the operation of reusing plastic container.
Further study on this area can be done for addressing the areas where further cost
minimization, process improvement can be done. Radio-frequency identification (RFID) can be one of
the functional study areas which shall have positive impact on process improvement and increase the
visibility of products movement and delivery process. Also reverse logistics approach can be one of
study area to reduce further cost. Reverse logistics approach can be used to identify the cost and
benefits associated with transaction of the reusable plastic container from customer to the
manufacturer and manufacturer to customer.

6. References:
Deloitte touché Tohmatsu (2003) “The challenge of complexity in global manufacturing:
Critical trends in supply chain management, London, Downloadable from:
http://www.deloitte.com/assets/DcomShared%20Assets/Documents/SupplyChainSurvey(
1).pdf
Jim Davidson (1999), Logistics Quarterly: “Worldwide Automotive Supply Chains” 5 (4)
Downloadable from: http://www.logisticsquarterly.com/issues/5-4/article3.html
Orbis Corporation (2004), Lean Packaging: Using Plastic Reusable Packaging to Support
Your Lean Operation. Downloadable from:
http://www.orbiscorporation.com/getattachment/utility/downloads/ORBIS_UsingRPforLea
n_0104.pdf.aspx
Orbis Corporation (2004), Why Reusables? Using Plastic Reusable Packaging to Optimize
Your Supply Chain, Downloadable from:
http://www.orbiscorporation.com/getattachment/utility/downloads/ORBIS_WhyRP_UsingR
PtoOptimizeSC_0104.pdf.aspx
Reusable Packaging (2012), Good for The Environment, Good For Business, The Fabri-Form
Company, Downloadable from:
http://portal.pendaform.com/site_media/media/documents/Reusable_Packaging_White_P
aper.pdf
Stop Waste Partnership Case Study (2005), Ghirardelli Chocolate Company
Downloadable from: https://www.stopwaste.org/docs/g-choc_final_101205.pdf
Sustainable Packaging (2013), A Brambles Company, www.worldwide-responsibility.com
Downloadable from: http://vcm-international.com/wp-content/uploads/2013/05/IFCO
Reusable-Plastic-Containers-Company-Overview.pdf
Amatech Sustainability Report (2012): Where sustainability meets cost savings: The cost for
reusable packaging. Downloadable from:
http://www.amatechinc.com/skin/frontend/default/amatech/img/Draft%20Sustainabilty%20
Report.pdf
Wendee V Rosenau, Diana Twede, Michael Mazzeo, and S. Paul Singh (1996),
“Reusable/Reusable Logistical Packaging: A Capital Budgeting Investment Decision
Framework," Journal of Business Logistics, 17(2), 151.

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