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Motivation
An initial question one should ask when thinking about introducing this
equipment is whether it offers real environmental benefits. This means that the
processes of producing and disposing of returnable containers, together with
the additional return logistic activities, should not be more harmful to the
environment than the use of one-way packaging material. This question has
been investigated by the Frauenhofer Institut, which specializes in studies of
material flows and packaging logistics. In 1993 this Institute published the
results of an ecological comparison of one-way packaging and returnable
containers[4]. On the basis of four criteria, it concluded that returnable
containers are less of a burden to the environment than one-way packaging
material, provided each container is used a certain minimum number of times
during its lifetime. This minimum number is dependent on the type of
container. The criteria taken into consideration in this study were energy
consumption, emission to the atmosphere, water consumption and pollution,
and solid waste.
The use of systems of returnable containers is being prompted by a growing
concern for the environment and by regulations from the government. For
example, in 1991 the Dutch government and industry signed the Packaging
Covenant forcing industry to think of new ways to deal with packaging
material[5]. In broad terms, the Packaging Covenant requires that in the year
2000 the total amount of new packaging material in The Netherlands should be
reduced by 10 per cent (relative to 1986), and that the total amount of packaging
waste to be dumped in the ecosystem should be reduced to zero.
Similarly, the German Packaging Order requires manufacturers to take
responsibility for their packaging waste. In order to comply with this, German
manufacturers and retailers created the non-profit organization Duales System
IJPDLM Deutschland (DSD) to collect packaging material for recycling. Participating
25,2 companies pay a per-item fee based on the amount of packaging used and
receive in return a green dot (grne Punkt) symbol that appears on their one-
way packaging material. The DSD commits itself to collecting and recycling
this material. The system is still suffering from a number of growing pains,
which, of course, works to the relative advantage of systems employing
58 returnable containers.
But, apart from increasing responsibility towards the environment and
legislation, several companies have discovered that the reuse of packaging
material can also be commercially rewarding. An example of this is the
company John Deere & Co., which has invested $20 million in a returnable
container programme with its suppliers of assembly parts. This programme is
economically feasible, and a positive cash payoff is expected by the time a
comprehensive recycling law comes into effect[6]. Another example is provided
by Herman Miller Inc., which claims to have saved over $600,000 in two years
using returnable packaging material for steel shelves. Returnable containers
are also applied successfully by IBM and Ford[7] and by General Motors and
Toyota[8].
Summary
The different variants described in this section are summarized in Table I.
60 Which system a sender chooses depends on the type, the weight and the
structure of the goods, as well as on the quantities involved, and whether the
sender has or does not have a return logistics system. Other variables that may
influence the decision on which system, if any, to use are the scope of the system
(international, or only national or regional), the co-operation of recipients, the
willingness to invest (from both the standpoint of the sender and recipient), the
available storage space, the control possibilities, the size of the organization and
the acceptance in the market[11].
A case study
In this section we describe a case study carried out for a large logistics service
organization in The Netherlands. The case study is related to the design of a
return logistics system for returnable containers.
The return logistics operation took the form of a depot system with a deposit
structure, as described in the previous section. The returnable containers are
collapsible when they are empty. By collapsing the containers, a 75 per cent
reduction in their volume is obtained. The containers are available in six
different sizes, all based on the dimensions of the Euro-pallet.
Five parties are involved in the system, namely: the central agency; a logistics
service organization; the senders of the containers; the recipients; and the
carriers that actually transport the full containers from senders to recipients.
Switch pool Every partner Sender, recipient Every partner is Direct switch
has an allotment responsible for
his own allotment
Sender, carrier Exchange-
and recipient per-exchange switch
1 2 6 5
8
d1 d2
3 7
4
s r
Figure 1.
= Goods flow The flow of information
= Information flow and goods
IJPDLM but it may also be carried out by another carrier (4). After the recipient has
25,2 received a certain number of containers, he notifies the agency of this fact (5).
Next, the logistics service organization is notified by the agency (6). Then the
logistics service organization collects the containers from the recipient and
takes them to the nearest container depot d2 (7). Before the containers can be
used again, they are cleaned, and, if necessary, also maintained in this container
62 depot.
The logistics service organization is responsible for having the appropriate
numbers of containers in stock in the container depots. Hence, if at some point
of time the numbers of containers in the depots get unbalanced, then a number
of containers may have to be relocated from depots with an excess of containers
to the depots with a deficit (8). This transfer of containers is accomplished
within the internal distribution system of the logistics service organization.
As mentioned previously, the system is a deposit system. That is, the sender
pays a deposit for the containers received. Next, the sender charges his recipient
a deposit for the number of containers sent out. Finally, the recipient regains the
deposit from the agency after the containers have been collected by the logistics
service organization. This closes the deposit loop. Besides the deposit, the
sender also pays the agency a fixed service fee per container for the services
provided. Furthermore, the agency pays the logistics service organization a
fixed distribution fee for the distribution of the containers, and a fixed collection
fee for their collection.
{ }
s r
Ld 0 ,1 for all d (9 )
All variables 0. (10 )
The objective function (3) expresses the objective of minimizing the total
logistic costs, which consist of the distribution costs, the collection costs, the
relocation costs, and the fixed costs of the container depots. Restriction (4)
ensures that the number of containers distributed to sender s equals the number
IJPDLM of containers used by sender s. Restriction (5) guarantees that the number of
25,2 containers collected from recipient r equals the number of containers sent to
recipient r. Restriction (6) shows that the number of containers relocated to
container depot d equals the number of containers distributed from container
depot d. Note that containers may be relocated from container depot d to
container depot d with zero relocation costs (i.e. in practice they remain at the
66 same place). Restriction (7) ensures that the number of containers recovered by
container depot d equals the number of containers relocated from container
depot d. In restriction (8) the variable K represents a very large number. Thus
restriction (8) guarantees that containers are distributed to and collected from
distribution centre d only if the latter acts as a container depot.
The model is a special case of the classical plant location model. For solving
such models specific algorithms are available[12].
Application. The model may be used to evaluate several alternative scenarios.
For example, an optimistic scenario (high coefficient of proportionality p) or a
pessimistic scenario (low coefficient of proportionality p) may be studied. One
may also consider scenarios with high or low velocities of circulation.
Although the model requires further refinement and does not provide a full
answer to all the questions posed, it turns out to be a valuable tool for analysis.
By experimenting with the model, we found out that initially appointing two
container depots is optimal with respect to total logistic costs. Later on, the
number of container depots may be increased. Also figures for the service fee
SF, the distribution fee, DF, and the collection fee CF, can be determined with the
model. Unfortunately, according to the model, the service fee SF would have to
be somewhat higher than the average costs of a cardboard box.
The model can be refined in several ways. A first improvement will be
achieved by using more sophisticated methods of demand forecasting, based on
the experiences with the new system in the Dutch market. Other improvements
will be accomplished by introducing several time periods into the model as well
as several types of containers, and batchwise distribution, collection, and
relocation. This will improve the accuracy of the model. However, we expect the
results of these further analyses to be only marginally different from the results
found so far.
Open systems
The return system described in this case study is comparable to a system in
Germany that was successfully introduced some years ago by the same agency.
However, as the systems are organized separately in each country, containers
do not normally cross international borders. For example, senders who may
want to send containers as far as Spain can hardly use this system, because no
international return logistics systems currently exist.
A more open international system will probably develop in the future that
will be accessible by any partner, and not restricted by any border.
In this context it should be mentioned that the role of the agency as the
initiator and the manager of the system is essential. It is unlikely that a carrier
would assume this role. First, most carriers have only a limited service area Returnable
which prevents the evolution of the system towards an open, international containers:
system. If more than one carrier were to introduce a system, they would want to reverse logistics
differentiate their own containers from those of the competitors. They might be
unwilling to transport their competitors containers, or even forbid their
customers from using any other containers than their own. The result would be
numerous closed systems with many different container types and sizes, all 67
exploited by different carriers. The problems for recipients of goods from
different senders using containers from different carriers are obvious: every
container type would need its own handling system and administration. Thus,
an open system should not be restricted to the services of a single carrier. In a
well-functioning open system of returnable containers, several carriers will be
involved. These carriers may develop close relationships with the agency and
with each other.
It can be concluded that an open system of returnable containers can only
survive in a larger environment, where each partner pursues his key activity:
the owner of the containers manages the system, and the carriers involved take
care of the distribution, the collection, the storage and relocation of the
containers.
Conclusions
In Germany the system described in the case study has already been operating
successfully for a number of years. Of course, there the success is stimulated by
strict environmental legislation, and by the problems of the Duales System
Deutschland. The success of the system in a different environment, and on a
larger scale, is still be be proved.
In this context it is noteworthy that, although the use of returnable con-
tainers may seem to be ecologically sound, companies will consider the
economic and logistic implications first. From this point of view it is
disadvantageous for the sender that the service fee of a returnable container
usually needs to be somewhat higher than the cost of a cardboard box.
However, the latter may change when a large number of organizations
participate in the system. Then it may become feasible to reduce the service
fee. Furthermore, the price of cardboard boxes may rise as soon as the market
price of waste paper rises.
Another deterrent to all participants is that a certain amount of money has to
be invested in the deposits for the containers, which is not necessary if
cardboard boxes are used. However, for the recipients this may not be a serious
problem, since, in the system examined in this article, the agency intends to
return the deposit to the recipients as soon as possible.
These disadvantages may be partially offset by the advantages, which are of
a more intangible and qualitative nature. Advantages for the sender are, among
others, the just-in-time reception of empty containers, stable pallets, the optimal
usage of truck loads, and the redundancy of shrink wraps. Another advantage
for the sender is the service to his recipients, who will have no cardboard boxes
IJPDLM of which to dispose Furthermore, in some cases the containers may be used
25,2 within the senders material handling system, which leads to a reduction in
handling activities and costs[13].
Finally, the advantage of the system of returnable containers for the logistics
service organization are obvious. If the distribution and the collection fees are
sufficiently high, then this organization makes a profit on each container
68 distributed or collected. For the logistics service organization the required
investments in the system are relatively low.
Note and references
1. National Inventarisation of Environmental Affairs 1990-2010 (in Dutch: Nationale
Milieuverkenning 1990-2010 ), Rijksinstituut voor Volksgezondheid en Milieuhygine
(RIVM), Bilthoven, 1991.
2. Kopicky, R.J., Berg, M.J., Legg, L., Dasappa, V. and Maggioni, C., Reuse and Recycling:
Reverse Logistics Opportunities, Council of Logistics Management, Oak Brook, IL, 1993.
3. Stock, J.R., Reverse Logistics, Council of Logistics Management, Oak Brook, IL, 1992.
4. Ecological Comparison of One-way and Returnable Packaging Systems (in German:
kologischer Vergleich von Einweg und Mehrweg Transport Verpackungssystemen),
Frauenhofer Institut fr Materialfluss und Logistik, Dortmund, 1993.
5. Packaging Covenant (in Dutch: Verpakkings Convenant), Ministerie voor Volkshuisvesting,
Ruimtelijke Ordening en Milieu (VROM), Den Haag, 1991.
6. Andel, T., The environments right for a packaging plan, Transportation & Distribution,
Vol. 34 No. 11, 1993, pp. 66-74.
7. Witt, C.E., Returnable distribution packaging saves money, Material Handling
Engineering, Vol. 48 No. 2, 1993, p. 14.
8. Auguston, K., Reduce packaging costs with reusable containers, Modern Materials
Handling, Vol. 47 No. 8, 1992, pp. 42-5.
9. Ltzebauer, M., Systems for Returnable Transport Packaging (in German: Mehrwegsysteme
fr Transportverpackungen), Deutscher Fachverlag GmbH, Frankfurt am Main, 1993.
10. The names originally used are Tauschpoolsysteme, Mehrwegsysteme mit Rckfhrlogistik
and Mehrwegsystem ohne Rckfhrlogistik. No official English equivalents exist. The
reason that return logistics is used and not reverse logistic, is that reverse logistics
comprises more than the return of containers from recipients to senders.
11. The German Packaging Regulation: A Guide-line for Companies (in Dutch: De Duitse
verpakkings verordening: een richtsnoer voor bedrijven), Nederlands Verpakkingscentrum
and EVO, Ondernemersorganisatie voor Logistiek en Transport, Gouda, 1993.
12. Erlenkotter, D., A dual-based procedure for uncapacitated facility location, Operations
Research, Vol. 26, 1978, pp. 992-1,000.
13. Trunk, C., Making ends meet with returnable plastic containers, Material Handling
Engineering, Vol. 48 No. 10, 1993, pp. 79-85.