At Preferred Technical Group Inc. in Andrews, Ind., one-trip, corrugated wooden shipping containers are making a permanent trip out of town.
The company, a supplier of power-steering and brake parts, has started phasing in new plastic returnable containers and pallets and, for select heavier items, metal racks to ship parts to Ford Motor Co. assembly plants.
Within three months, the supplier, known as PTG, hopes to spend close to $50,000 to buy more than 60,000 reusable containers, said Raelynn Martin, customer service supervisor for PTG, a subsidiary of Toledo, Ohio-based Dana Corp.
The work will begin when Ford launches its 1999 F150 pickup trucks and other models, Martin said. The Dearborn, Mich., automaker will give PTG financial incentives in a complicated arrangement that will essentially reimburse PTG for its plastic-container purchases and then reward Ford.
``I don't know that we would have gone out on our own and sought this,'' Martin said. ``It took some convincing by Ford. But now, we see the benefits, and both sides need to work equally hard to make it work.''
That is precisely what automakers hope will happen.
Ford's returnable-container program is part of a stepped-up campaign coming into full bloom at General Motors Corp., DaimlerChrysler Corp. and Ford. All three U.S. automakers are banding together to wipe out wood in favor of plastic pallets, containers and totes by early in the next century.
U.S. automakers have taken their cue from Japan, where reusable containers have been standard for more than a decade.
Before the change is made, the Big Three will spend millions to go returnable. The containers cost anywhere from $2.50 to $150 apiece, depending on their size, said Michael McGrath, manager of material handling engineering for minivan platforms with DaimlerChrysler in Auburn Hills, Mich.
That effort could pay off in containers that can make more than 100 trips before wearing out, instead of the handful of trips made by their inexpensive wood counterparts.
Chrysler started its program in 1992; next year, about 80 percent of its containers will be plastic or steel.
Of those, more than 70 percent will be made from plastic, using high density polyethylene that is either injection molded or made by a structural foam press, McGrath said.
``Initially, we did it for four or five car lines,'' McGrath said. ``Now, it's becoming corporate policy. We're at the point where we encourage suppliers to make the same effort and drive it to the subtiers.''
GM and Ford also started their reusable programs about four years ago, but Ford has recently switched to an aggressive strategy to convert suppliers.
That well-intended work — meant to save long-term shipping costs and send fewer containers to landfills — has become a poster child for the returnable plastic movement.
``The [auto industry] is leading the pack,'' said Daniel Huhn, senior product manager for container supplier Orbis, a division of Menasha Corp. based in Oconomowoc, Wis. ``All are doing it for the same reasons. It's good for the environment and a better product.''
But the battle must, by necessity, move uphill. Although concrete numbers are not available, an estimated 5 to 10 percent of U.S. containers are made of plastic, said Michael Ogle, director of technical and engineering services for the Charlotte, N.C.-based trade group Material Handling Industry of America.
Few other industries have embraced that cause as aggressively as automakers, Ogle said. Plant by plant, part by part, new model by new model, automakers are making the gradual switch.
``Just about everyone doing business in the auto industry wants to go to returnable plastic,'' Ogle said. ``As long as you can make a tight closed loop and return a container to its owner, it seems to be successful.''
That is the rub, Ogle said. The plastic and metal reusables can cost four times more than expendable containers. Payback comes from the number of trips that can be made. The return of those reusables — which can get thrown out or misplaced — is a must, he said.
The challenge, though, is getting suppliers to follow in the automaker's footsteps. It takes time to convince them to switch from the wood and cardboard containers they have used for years, said James L. Terry, manager of platform supply and material handling engineering with DaimlerChrysler.
The automaker must walk through the process with suppliers, Terry said. They talk about cubing — how a container fits both operations — and find common ground there, he said.
``How each supplier chooses to get there is more of a philosophical issue within the corporation,'' Terry said. ``The bottom line is that it's a good thing to do and it's our option. But they know it's not a willy-nilly project that they have to do now.''
Getting suppliers on board is essential to success, said Randall Stout, manager of North American containerization operations with GM.
The only worth of the plastic containers is in the ease of reclaiming them, he said.
``Our No. 1 concern is getting a [returnable] container back easily,'' said Stout, who has helped shift GM internally to more than 80 percent reusable containers in four years. ``Otherwise the program loses value to us and is just another headache.''
GM is considering using a third party to manage container logistics and keep up with maintenance, Stout said.
DaimlerChrysler recently contracted with Chep USA Inc., a container pooling company in Orlando, Fla., to identify and ship its containers, McGrath said.
Chep sends the containers from two central pooling depots in the Detroit area, where the containers also are cleaned and repaired.
Still, the process needs refining, McGrath said.
``You don't want to have containers you can't use,'' McGrath said. ``We'd like to automate the process so we get reports on traffic and repairs needed. It isn't terribly effective to sort through the paperwork and get a handle on the flow.''
Ford is attempting a different idea. Instead of taking a top-down approach by buying containers and passing them to suppliers, the carmaker is asking its suppliers to make the initial purchase.
``We're asking suppliers to work with us to convert from expendables to returnables,'' said Matthew Gajda, manager of Ford's returnable container program. ``I'd say we're in the middle of the process now, and we're working on high-volume users first. It's a collaboration between Ford and suppliers that benefits all of us.''
Ford's program, which started two years ago, offers financial rewards on both ends, Gajda said. According to suppliers involved in the program, they are reimbursed for buying the containers in a payback period that can last 12 months or longer.
Essentially, suppliers charge Ford, in a separate line item on a parts bill, for the cost of using that new container for those parts. Ford continues to pay the charge until the container purchase is paid off, suppliers said.
After that, the situation is reversed. Ford gets a price break from the supplier for reaping continued savings from using a longer-lasting plastic container.
Gajda was quick to emphasize that Ford started the program more for its environmental benefits than for cost savings.
Over the past two years, Ford has eliminated more than 150 million pounds of wood and cardboard packaging that would have gone to a landfill, Gajda said.
``We have to do the right thing for the world we live in,'' said Gajda, who called the strategy part of Ford's greening program. ``Reducing the packaging waste stream is part of a broader umbrella of our environmental strategy at Ford.''
Automakers also are trying to simplify.
The Big Three is working with both parts suppliers and packaging producers to come up with a universal, returnable container and pallet to ship fasteners.
The project, through the Southfield, Mich.-based Automotive Industry Action Group, is in the latter stages of designing an HDPE-based, straight-wall container that can hold 30 pounds of fastener parts, McGrath said.
The hand-held container is expected to be tested early next year at a new Saturn Corp. plant in Wilmington, Del., McGrath added.
Currently, about 20 different containers and six types of pallets are used to ship automotive fasteners, said Huhn, another team member. The new containers will cut down on wasted space and be easier to lift and load, he said.
The industry would like to turn its attention to standard containers for other parts, such as plastic interior trim, speakers or wiring, McGrath said.
Still, that project has its drawbacks. ``It may cut down on [research and development] and innovation down the road,'' said MHIA's Ogle. ``But it keeps down costs.''
But a larger issue could become an Achilles' heel. While automakers are paving the way for reusable containers, getting supply involvement down the entire food chain is critical for success, Huhn said.
``Who owns the reusable, how to get it back to the automaker, who pays for repairs all are issues,'' Huhn said. ``But with the sheer quantity of parts shipped in the auto industry, I can see why they want to take advantage of a tremendous opportunity.''