Opportune Times for Returnable Solutions
Expendable wooden packaging has been the go-to solution since days past for securing cargo, whether that be a vehicle body being transported in a container today, or wine amphoras being secured on a horse carriage in Ancient Rome. Wood is used as a packaging material due to its relative low cost and ease of assembly.
However, as has been experienced across so many industries and product groups since the outbreak of the Covid Pandemic: Supply chains are fragile, raw material cost has skyrocketed, and the future situation is in general extremely hard to forecast. According to fortune.com industrial wood production in the US is currently at the highest level it has been since December 2007, yet the cash price per 1000 board feet of lumber was in June this year $1391 USD, up 288% when compared to April 2020. Prices are down slightly in July, but still well above the pre-pandemic price ranges of $350-$500 USD. This is to a high degree driven by the real estate sector and DYI homemakers with time and cash to spare due to the pandemic. However, the packaging sector is also struggling with a heavy price increase. Looking at the Producer Price Index for wood pallets and pallets containers from the US Bureau of Labor Statistics we can observe an increase of 83.2 points from May 2020 till May 2021, the steepest climb ever observed since the index was first established in January 1975.
Impact on Automotive
The automotive industry uses returnable packaging/equipment solutions to a very high degree and is second only to the food & beverage industry in terms of market share in the global returnable packaging sector.
However, skids, racks and similar packaging solutions used to load and transport both finished built vehicles and knocked-down or semi-finished car bodies for container transport are still often observed done using expandable wooden material.
Be that for completely new vehicles shipped two cars per container loaded on large vehicle skids, as seen in the top picture, or for secondhand vehicles loaded up to four cars per container using customized racking systems built up (often without safety and quality in mind) inside of the container. The same story goes for SKD vehicles or vehicle bodies being packed in containers, though usually using wooden buildups with a higher degree of customization, and following more professional guidelines and standards than what is seen for the second hand vehicle in the above photo. The reason for using one-time use, wooden packaging is often related to the additional logistic complexities involved in running returnable solutions in a cross-border or trans-continental scenario. In many situations it is perceived easier to simply bring in cars on expandable racks or skids which can be discarded after unloading the vehicles at destination, than what it is to manage a global returnable packaging operation.
As prices for wooden packaging grows, a clear effect will be seen on the bottom line on any project relying on loading and securing CBU or SKD vehicles (or any other form of cargo for that matter) with expandable wooden material. The price of one 6-meter vehicle skid as in above photo will cost somewhere between $350 - $400 USD per skid. As seen in the US Producer Price Index for Wooden Pallets, there has been roughly a 30% increase on production side over the past year. This will easily equate to additional cost of $100 - $150 USD on the purchase side for said wooden skid, which will directly increase the per vehicle transportation cost.
Opportunities to Grasp
Besides the other shipping and supply chain disruptions experienced around the globe over the past year, this increase in wooden material will add additional cost to many shipper's logistics activities. However, it can also create opportunities to rethink how things are done. To cite Winston Churchill:
"Never let a good crisis go to waste."
Nothing motivates change in supply chains as well as rising cost. In nearly all cases, returnable packaging/loading solutions will in the long-term be more cost efficient than one-time use solutions. The roadblock to implementation is, as mentioned above, often the additional complexities shippers have to deal with. When the direct material cost increases drastically over a short period, swapping to returnable solutions becomes more of a low-hanging fruit which can add swift and substantial cost savings. Where Kar-Tainer can support in this pursuit is on the returnable equipment solutions required to load and transport CBU and SKD vehicles in containers:
Besides the direct cost savings achievable through returnable systems, there are plenty of additional benefits to realize in upgrading from one-time wooden packaging to sustainable multi-use solutions.
Operational Efficiencies: Professional equipment is easy to assemble and disassemble; loading and handling time will be greatly improved compared to expandable solutions; and processes are easier to standardized when you do not rely on building up the packaging material before each use.
Safety Enhancements: Steel is a much sturdier material than wood, and will give a whole other level of support during loading and transportation, in general providing a better safety environment both for the cargo itself and for the operators handling the cargo.
Reduced Environmental Footprint: Returnable equipment can improve the load factor of each container shipped; this will reduce the overall quantity of container shipments used which in turn will drastically lower the CO2 footprint of the shipper. Expendable packaging solutions that are discarded after use requires a huge material input, shipping one vehicle or vehicle body requires a minimum of 250kg wooden material, material as well as packaging production input will disappear after each use, as opposed to returnable steel packaging which can be used "indefinitely". Steel or other reusable packaging material are not subject to ISPM15 phytosanitary measures as wooden packaging is. The process of fumigating or heat-treating wooden packaging adds additional cost and environmental impact on wooden packaging when compared to steel or plastic.
Are you interested to learn how Kar-Tainer's returnable steel cassettes systems can be an excellent alternative to your current wooden loading solutions for CBU or SKD vehicles? Get in touch with your closest Kar-Tainer representative or reach out to us through the website contact forms to learn more of how we can support your activities.