4/17/02 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&WDSpeaker: Todd Cozart

4/17/02 2

Returnable Containers Cost Justification

Todd Cozart

4/17/02 3

Why Do We Define Packaging?

• Quality• Cost• Order Planning• Standardization &

Modular• Manpower Planning• Inventory Control

4/17/02 4

Why Do We Define Packaging Cont’d

• Supplier Control• Workstation Layout• Warehousing• Housekeeping• Transportation

Efficiencies• Safety• Eliminate Surprises

4/17/02 5

Assemble Logistic Team

• Packaging Rep. • Materials Rep.• Transportation Rep.• Material Handling

Rep.• Production Rep.• Purchasing Rep.• Safety/Ergonomics

Rep.

4/17/02 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

4/17/02 7

Prioritize Commodities

• Prioritize Based on Largest QDC Gains– $$$$$– Quality– Safety

• Hint - Large Parts Should Be the Targeted Parts

4/17/02 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

4/17/02 9

Preliminary Logistics Study

• Define Current Cost Vs Proposed Cost– Packaging Material Cost– Transportation Cost– Labor Cost– Disposal Cost– Inventory Cost

4/17/02 10

Define Direction

• Logistic Team To:– Review Logistics Study– Continue or Stop– Review Concepts– Preliminary Buy-in– Review & Update Timeline

4/17/02 11

Purchase Prototype Container

• Review – In Plant– At Supplier– Run Shipping Trial

4/17/02 12

Prototype Container

• Modify If Necessary• Update Timeline• Buy off in Writing

4/17/02 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

4/17/02 14

Request Funds for Project

• Included in Justification Are:– Logistics Cost Savings– Savings Commitment From Supplier/plant– Three Container Quotes– Final Approval

4/17/02 15

Place Purchase Order

• Update Timeline

4/17/02 16

Container Samples

4/17/02 17

Logistic Pieces of the Pie

Packaging Transportation LaborDisposal Inventory Warehousing

4/17/02 18

Packaging Cost

P ackaging T ransportation L aborD isposal Inventory W arehousing

4/17/02 19

Packaging CostExample: 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

4/17/02 20

Transportation Cost

Packaging Transportation LaborDisposal Inventory Warehousing

4/17/02 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

4/17/02 22

Disposal Cost

Packaging Transportation LaborDisposal Inventory Warehousing

4/17/02 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

4/17/02 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 25

Total Logistic Summary Pkg.

Cost/Part Transp. Cost/Part

Disposal Cost/Part

Labor Cost/Part

Total 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

4/17/02 26

Questions?