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Understanding the Impact of Tracking RTIS On Your Bottom Line

Returnable Transport Items (RTIs) play a critical role in your supply chain operations, because they enable the safe, secure and efficient transport of highly volatile, delicate or costly goods, while also helping to protect both your bottom line and the environment. Of course, a vast majority of companies rely on supply chain management and execution systems to ensure the timely and efficient delivery of their high-value products, but these systems lack the functionality to optimize and manage their fleet of RTIs.

Furthermore, in today’s highly automated, streamlined supply chain, managers must dedicate all their time, effort and resources to maximizing accuracy and efficiency across production, finished goods inventory and order fulfillment. One byproduct of this singular focus is that distribution managers end up treating their RTI as an afterthought. Not managing your inventory of RTIs—which include reusable containers, pallets, wheeled trolleys, cages and other receptacles—may seem innocuous enough, but this lack of oversight quickly translates into added distribution and production costs, which negatively impacts your bottom line.

Regardless of the industry, the lack of compre- hensive RTI tracking and maintenance results in lost, damaged and misplaced assets, translating into an industry-average shrinkage rate of 10% to 25% annually. For those companies that track their RTI fleet, most rely on a manual approach, which is both time-consuming and error-prone so a safety stock of RTIs is definitely required.

Exactly how much money are we talking about?
Take a look at the number of containers in your own RTI pool, and multiply that number by the cost per unit, which generally averages between $200 and $5,000 each. Next, ask yourself what percent of your RTI fleet is considered ‘safety stock’ to compensate for RTIs never returned, lost in the field, needing repair or servicing or even unaccounted for in your own facilities. And the upfront cost of purchasing or manufacturing these extra containers is just the beginning. You also need to factor in the cost of storing, cleaning, maintaining, delivering/returning and manually tracking your safety stock of RTIs.

So, it’s clear that failing to track and manage your RTI fleet proactively results in unnecessary hassles and big costs, including:

  • Additional labor required to track assets
  • Shrinkage from lost, broken, unaccounted for or unreturned assets
  • Extra inventory to compensate for missing RTIs or late returns
  • Expedited fees for rush shipments
  • Safety and quality issues from lack of proactive and preventive maintenance n Charges for improperly maintained and non-compliant assets

Given these ongoing and unproductive costs, it’s critical that distribution and production managers dedicate the time and attention their RTI fleet justifies.

Not managing your inventory of RTIs—which include reusable containers, pallets, wheeled trolleys, cages and other receptacles—may seem innocuous enough, but this lack of oversight quickly translates into added distribution and production costs, which negatively impacts your bottom line.

Correctly calculating the total number of RTIS needed requires you first know the correct number of RTIS currently in storage, in transit, in the field and in maintenance.

With an asset tracking solution in place, the tracking and managing of their containers is now completely automated and the company has real-time visibility into the asset pool, saving significant time for the customer service reps.

Let’s look at common challenges with RTI tracking and management and review how some real-life companies are dealing with these issues.

BUYING AND MAINTAINING EXCESS CONTAINERS

When determining the number of RTIs needed, the goal is to keep the asset pool right-sized and lean. To ensure a strong ROI on your capital expenditures, in theory, your RTI supply should always equal demand. That sounds like an easy, straight forward equation,
but calculating supply is nearly impossible, if you lack real-time visibility of your existing RTI asset pool. But as previously mentioned, many companies purchase more RTIs than they truly need, which means they incur the cost of purchasing the actual asset as well as the costs to store and maintain it.

In many cases, the manufacturer needs to not just track the returnable container but also its valuable contents. One example of this requirement comes from the life sciences industry. In this case, the returnable containers themselves are very expensive assets used to transport the active ingredients in leading cancer drugs. Due to the high cost of the drug, these return- able containers need to be tightly controlled in order
to ensure these materials are delivered at the proper temperature. Once delivered to the customer, the manufacturer must then ensure the containers are properly calibrated, cleaned and staged for the next manufacturing run. Only an automated asset tracking solution allows for the automated management and oversight of these processes.

SHRINKAGE

Annual asset shrinkage rates of 10% to 25% are the industry norm for RTIs. This shrinkage rate pertains to RTIs damaged, lost, stockpiled or simply cycled inefficiently. Because customers are major RTI users, there is often little accountability for failing to return them, which means they be may be stored or misplaced for months, and never even returned. The number of supply chain nodes involved in the RTI’s route has an impact, as well. As RTIs move from facility to facility, they are more likely to be misplaced or damaged. Recipients may have limited storage space and squirrel RTIs wherever they fit. Plus, if the supplier lacks the ability to track individual units through the supply chain, then there is no way to hold users accountable for lost or damaged RTIs.

Take the example of the gas company that struggled with untimely container returns from customers. Their gas cylinders are expensive; and to ensure safety, they are heavily regulated and need to be tested at regular intervals. There was no system in place to track the containers and no way to enforce accountability with users. Customers were not motivated to return the cylinders in a reasonable timeframe, so the supplier carried a much large inventory of cylinders to make up for the unreturned stock. Unable to absorb any additional costs associated with this bloated inventory, the gas supplier implemented an RTI tracking system to gain transparency and real-time visibility of these assets so they could hold their customers accountable for returning the empty cylinders. The gas company leveraged their new asset tracking system to implement a deposit and rental program with customers, thus improving return rates and container utilization by eliminating lag time at customers.

HIGH LABOR COSTS

Tracking and managing assets is often a time-consuming and labor-intensive task. Relying on manual processes, including spreadsheets, phone calls and emails to track these assets takes an enormous amount of time.

Consider a very large chemical manufacturer with a large fleet of returnable containers. Tracking missing assets fell on customer service reps, who manually tracked the containers, calling individual customers to return the empty containers. This manual approach placed an ongoing strain on the customer relationship and wasted the customer reps’ time, which could have been better spent selling additional product. With an asset tracking solution in place, the tracking and man- aging of their containers is now completely automated and the company has real-time visibility into the asset pool, saving significant time for the customer service reps. More specifically, the RTI tracking system automatically sends notifications and emails to customers with an accurate status of the RTI inventory they carry.

With an asset tracking solution, you gain real-time visibility as your RTI assets move through the supply chain, which improves asset utilization, reduces rush charges, saves labor and improves overall operational efficiency.

Regular scheduling of RTI maintenance, repair, inspections, cleaning and sanitizing is essential for the safety of goods transported and to optimize the life of the asset. Without real-time visibility into RTIs, maintaining these constantly moving assets properly is nearly impossible.

SCHEDULING ISSUES RESULTING IN EXPEDITE COSTS AND LOST SALES

With lack of real-time visibility into the asset pool and missing containers, scheduling becomes a three-ring circus of manually tracking existing assets, constantly placing rush shipments on new RTIs, shifting deliveries from one customer to another based on pressing deadlines and paying rush fees on customer shipments. Without real-time visibility into reusable assets, companies lack the ability to meet the schedules of manufacturing and distribution. As a result, they are often stuck in the position of expediting shipments to meet shipping deadlines. Plus, when containers are missing, damaged or generally unavailable, customer shipment dates can easily slip, leaving dissatisfied customers turning to competitors, who are only too happy to fill the order.

Let’s look at the example of a chemical company that supplies material to paint manufacturers in returnable containers that cost about $5,000 each. The company compared the number of shipments versus the number of RTIs they owned and realized they had far too many of these expensive containers based on demand.

The company found the root of the problem as the customers’ inability to communicate production needs, which resulted in last minute orders and a lot of costly emergency LTL shipments. The chemical manufacturer implemented an asset tracking solution to manage the RTI pool and a VMI program to track consumption at the customer site. The ROI was significant through rightsizing the asset pool and eliminating LTL shipments. Plus the customers are happy with the added level of attention and customer service knowing the supplier can anticipate their needs.

SAFETY, QUALITY AND COMPLIANCE

Regular scheduling of RTI maintenance, repair, inspections, cleaning and sanitizing is essential for the safety of goods transported and to optimize the life of the asset. Without real-time visibility into RTIs, maintaining these constantly moving assets properly is nearly impossible. Many industries, including food, chemical, pharmacy and medical supplies must also contend with regulatory compliance and business partner man- dates for reusable assets to ensure safety.

Consider this chemical provider who ships goods internationally and has different regulatory guidelines to contend with in each of the different countries where the company ships goods. Inspection requirements vary widely, and containers need pressure testing, cleaning, repainting and examinations at different intervals. There are also specific rules about reuse, such as extensive cleaning processes for shipping different chemicals when a container is reused. To achieve and maintain compliance with both customer and governmental regulations, this company implemented an RTI asset tracking and serialization solution. From this solution, the company also gained real-time visibility into their fleet of containers, which allowed them to optimize container usage, decrease their safety stock of RTIs and reduce labor costs.

BENEFITS OF AN ASSET TRACKING SOLUTION FOR YOUR RTI POOL

The cost of mismanaging your returnable assets is quite high. With an asset tracking solution, you gain real-time visibility as your RTI assets move through the supply chain, which improves asset utilization, reduces rush charges, saves labor and improves overall oper- ational efficiency. With an RTI asset tracking solution, you can:

Gain comprehensive, real-time visibility of all your RTIs in the field
Increase RTI utilization
Achieve 100% asset inventory accuracy
Reduce inventory costs
Reduce shrinkage
Monitor unit performance
Track all RTI repairs, refurbishments, damage and usage history
Improve business relationships with customers
Tracking and managing your RTI assets without a comprehensive RTI tracking system in place is nearly impossible. Subsequently, it’s critical to take the time to determine the impact your current RTI tracking and management methods have on your bottom and even your top line. When done correctly, however, a properly managed fleet of RTIs improves asset utilization, reduces expedite costs, saves labor and improves overall operational efficiency.