Academy of Better Business

RFID in returnable packaging management

New possibilities of improved logistics processes

In the supply chain which utilizes returnable packaging on a large scale, the implementation of radio tags may contribute to the increase of effectiveness for process participants.

Efficient management of returnable packaging (RTI – Returnable Transport Items) is becoming much more relevant in a modern supply chain.

The significance of this area is becoming more important as the utilization of RTI is becoming more popular in the logistic processes.  Even when not all products are distributed by RTI but the packaging is expensive (e.g.: beer kegs) the improvement in the RTI management may bring significant benefits for the company.

Process participants

In the processes using RTI there are often three major parties:

 RTI manufacturers – companies producing returnable packaging.

• suppliers – using returnable packaging to pack their own products which are then sent to the customers
• customers – companies selling final products  which have been received in returnable packaging.

Additionally, in some supply chain there may appear other parties such as logistics operator responsible for sending materials or for receiving the returnable packaging.

How does RTI work

Returnable packaging such as pallets, crates, beer kegs or other types of containers are sent to the customers together with the contents, after which they are unpacked and returned to the issuing point.

A model turnover process of the returnable packaging between the suppler and the customer has been presented in the following outline.

Company A (supplier) responsible for the packing of their material to the returnable packaging (e.g. crates) as well as for the secondary acceptance of their return from the customer.  The acceptance of return packaging is often accompanied by an inspection of the packaging, which eliminates faulty as well as damaged units and passes the rest for re-usage.

Company B (customer) accepts and unpacks the returnable packaging as well as passes them back to the supplier either each time or by larger batches, depending on the type of packaging and on the agreement between the supplier and customer.

Challenges

The following problems may exist with the described processes:

• lack of accurate control of stock take, which results in an increased safety stock to avoid its shortage during packing. 
• product issue and returns are expensive (because of manual counting), which creates costs, a risk of mistakes and holds up the process.
• inspection process of the returnable packaging take up priceless time which could be used in other – more profitable way.

Could this be prevented? How could the handling of modern technology will make the processes easier and faster?

For all the troubles: RFID

In the aim of improving the process of returnable packaging usage an increasingly popular RFID (Radio Frequency Identification) technology could be used.  RFID makes it possible to read radio tags with the aid of scanners (manual and gate scanners).

Radio tags through their characteristics (larger than in the case of barcodes resistance to damage and the possibility to scan larger amounts of objects at the same time) superbly suit for marking returnable packaging as they are used in the logistics processes for longer period of time thus it can be used several times.

EPCglobal organization, dealing with the RFID standards, has designed an electronic code product type especially applicable for returnable packaging – GRAI (Global Returnable Asset Identifier).

The GRAI code composition includes the company prefix, type of returnable packaging as well as the serial number of the returnable packaging.

Electronic Product Code (EPC) - is individual, unique object identification courtesy to which it is possible to localize origin of every product on which the code has been written.

RTI in SAP application 

Product of SAP cooperation – SAP AutoID Infrastructure is a standard component which allows using RFID technology with SAP Application systems. One of the scenarios supported by SAP AutoID Infrastructure is handling of returnable packaging.

The basic scope includes processes at suppliers (packaging, issue of complete packaging, receipts of empty packaging) as well as processes at customers (receipts of packaging with products, unpacking and issue of RTI to suppliers).

Handling of RTI processes in SAP AutoID Infrastructure is performed with assistance of mobile (manual) scanning RFID devices. Courtesy to these devices, processes foreseen in SAP AutoID Infrastructure in order to handle turnover of returnable packaging from supplier to customer and vice versa.

SAP AutoID Infrastructure allows usage of different levels of packaging. It is possible to pack identifiable by radio returnable packaging together with other materials identified by radio for instance with products or even pallets.

One of the foreseen scenarios is also packing of returnable packaging which is equipped with a radio tag with materials identifiable with commonly used bar codes.

Each scan with assistance of RFID scanners which confirms issue, receipts, move etc. is wrote in data base which allows to check, where and how long such a packaging has been in a storage location orsection.

More control

One of new options is possibility to scan all products at each localization and comparison of scan with stock take stored in the data base. This allows for a quick detection of products shortage as per stock take without a manual counting.

This solution allows not only quick and efficient handling of this process.  As there is considerable time saving this process can be run more frequently increasing control of stock take of products which have radio tag.

Using SAP BW business warehouse together with SAP AutoID Infrastructure, it is possible to obtain many reports useful in management of returnable packaging. Reports provide information about quantity of products in each localization (storage location) as well as quality of scan of radio tag via scanners.  

Quicker turnover, lower costs

Benefits related to handling of returnable packaging process with help of RFID include decrease of stocked quantity of these packaging in the warehouse (optimization) as well as increased speed of handling of these processes courtesy of using of RFID scanners:

• more efficient  management of assets in regards to returnable packaging which lead to decrease  of its quantity which are necessary to handle the process
• quicker handling of  issues and receipts of returnable packaging
• more accurate information about RTI quantity at each customer
• faster handling of inspection of returnable packaging
• decreased number of errors as a result of increase of automation of processes related to  handling of RTI  
• reduction of costs relating to control of turnover of returnable packaging

Towards further benefits

RFID is currently very trendy technology. A lot is being said about it, however a lot of companies are still frightened of extensive using of RFID. 

Skeptics tend to say that using RFID does not present obvious financial benefits whereas its implementation is very costly.

While handling of RTI processes with assistance of RFID technology gives definite and measurable benefits with relatively small financial outlay. It is worth to note that in contrast to turnover of one time packaging, tags on RTI can be used several times  - until utilization of a container, crate etc.   

Moreover, for companies that consider RFID as huge opportunity to improve logistics processes, implementation of RFID for moving of RTI can provide a one-off possibility to get familiar with this new technology and obtain invaluable experience for future project that envisage using RFID at larger scale.