Case study - Reusable transport bins

Automobile, based in Landshut, is an internationally renowned automaker. The company has also made a name for itself in the production of axles and counts 50,000 employees to its payroll, 15,000 of whom work at headquarters.

Because sales and profits have declined recently, Automobile is searching for savings potentials and additional customers. In the past years, negative press and radio coverage have been mounting against Automobile concerning its environmental policies. The company's refusal to switch from disposable to reusable transport bins and the resulting waste, which is to a great extent avoidable, according to environmental organisations, is a highly criticised issue.

Automobile suspects that large portion of its unrealised potential sales results from customers switching to other car brands due to this controversy. In order to win back these customers and potentially simultaneously reduce costs, the company would like to find out whether a comprehensive implementation of reusable transport bins is feasible. Two companies have been selected for analysis - Allied Auto of Hamburg and Tractormaker in Leipzig.

Allied Auto is a wholly-owned subsidiary of Automobile and produces vehicles for the parent company, from which it sources axles directly.Allied Auto's core competency, however, remains the production of tractors seats, which it delivers to Tractormaker in Leipzig. Tractormaker is specialised in the manufacture of tractors and transmissions of every kind with which it supplies Automobile.

Exchanges of goods between Automobile and Allied Auto are performed using standard European lattice boxes: the boxes are owned by Automobile and are imprinted accordingly in order to avoid confusion. Disposable packaging is used for all other deliveries.

Five axles or one tractor seat and four transmissions fit into one standard European lattice box. Disposable containers are procured for the tractor seats; each container can accommodate two seats. Due to their high susceptibility to damage, transmissions are transported in single disposable containers.

Disposable axle containers cost 4.50 Euros each with an additional cost 0.30 Euros for inlays. The tractor seat containers are ordered at a price of 3.50 Euros each and transmission packaging is calculated at 3.50 Euros each plus 0.35 Euros for each inlay. Transport costs per container are shown in the table below.

Cost in Euros	Landshut to Hamburg	Hamburg to Leipzig	Leipzig to Landshut
Lattice box	10.50	6.30	6.80
Disposable axle bin	9.90	4.80	5.15
Disposable seat bin	7.10	3.60	3.85
Disposable transmission bin	9.30	3.90	4.10

The reusable transport bins have a throughput time of two days per company. Generally, bins are en route from Munich to Hamburg for two days and for only one day on the other routes. Each month contains 20 working days.

A new lattice box costs 160.00 Euros and is depreciated linearly over 5 years. The average useful life is also five years.

For axle transport, disposable containers and lattice boxes are lined with cardboard inlays which are drenched in oil by the time of delivery and must thus be disposed of as hazardous waste in accordance with strict environmental regulations. The bin itself remains virtually spotless. Disposable cardboard boxes for tractor seats and transmissions normally reach the customer without collecting considerable grime. To protect against damage, transmissions are shipped with a foam inlay, which must be disposed of properly. One inlay is required per bin.

Material disposal volumes are shown in the table below:

Item	Volume (cubic meters)
Disposable axle bins	0.8
Axle inlay	0.2
Disposable tractor seat bins	0.7
Disposable transmission bins	0.9
Transmission inlays	0.25

The options for disposal of the materials are shown in the table below:

Container type	Volume (m3)	Cardboard (Euros)	Hazardous waste (Euros)	Foam (Euros)
Fixed dumpster	10	775	1,450	345
Wheeled dumpster	5	450	790	198
Container dumpster	36	2,550	3,550	883

The number of transported units per month is:

• Axles - 4,000
• Tractor seats - 800
• Transmissions - 3,200

It is being considered whether lattice boxes should be used exclusively in the future in order to reduce costs while reducing environmental damage and quelling harmful criticism from environmental organisations. A third party service provider offers to assume Automobile's entire transport and disposal management, but only with reusable transport bins. It offers this service for a fixed fee of 30,000 Euros per month.

Gleibner H. and Moller K. (2011) Case studies in logistics Gabler (Springer) Germany pp180-184

Questions

1. What is the monthly cost for the current situation using disposable bins? You will need to calculate the volumes of parts being moved about, the packaging required (disposable and lattice boxes) and its disposal. Assume that you are buying the lattice boxes new.
2. Show the costs for a period of 5 years and compare with the cost of moving to the 3PL provider.
3. What are the reusable options available apart from the lattice boxes? You will need to research this and identify the advantages and disadvantages of the options