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Packaging Alternative Analysis - Single-Use vs.

Returnable Packaging
Explanation of Basic Financial Model
Summary
This model is intended to compare basic cost differences of one way corrugated packaging verses
reusable plastic packaging. The model uses basic assumptions and requires users to input various
cost components into the model. While the model uses factual inputs from prospective users it is
intended to be directional and not an absolute indication of exact cost benefits for an end user. More
specific models are available to end users to determine their specific cost benefits once a directional
feel for expected costs are understood.



Description of Cost Inputs
corrugated costs - actual current cost of corrugated packaging for an end user

dwell time - the amount of expected time in days that a reusable packaging container is held at
various stages in an end user's supply chain

cartons shipped per year - represents the annual number of corrugated containers purchased by an
end user in a given year

annual interest rate - the end user input that is their internal hurdle rate

return miles reusable packaging - represents the number of miles required to return the empty
reusable packaging back for additional use

replacement rate - represnts the percent estimated annual replacement required for reusable
packaging


Packaging Alternative Analysis - Single-Use vs. Returnable Packaging
This model is intended to compare basic cost differences of one way corrugated packaging verses
reusable plastic packaging. The model uses basic assumptions and requires users to input various
cost components into the model. While the model uses factual inputs from prospective users it is
intended to be directional and not an absolute indication of exact cost benefits for an end user. More
specific models are available to end users to determine their specific cost benefits once a directional
the amount of expected time in days that a reusable packaging container is held at
represents the annual number of corrugated containers purchased by an
represents the number of miles required to return the empty
Purchase Price
Enter your actual cost
for a corrugated carton,
and the cost of a
comparably sized
reusable container.
Default values are
provided. Corrugated carton
$1.00
Container price
$7.50
Enter the cost of tape or
other materials used to
seal each carton.
Tape per carton $0.02
Total purchase cost $1.02
Dwell Time
At your site
5
Safety stock
2
Transit days to 1st
location
2
Days at 1st Location
5
Transit days to 2nd
Location
0
Days at 2nd Location
0
Transit to final
Location
2
Days at Final
Location
5
Transit back to
starting point
2
Processing time for
RPC, cleaning etc
5
Total Dwell Time 28
Turns per year
13.04
Reusables Cost Comparison Tool
2nd Distribution Center, or warehouse, if applicable.
Distribution Center, for example.
This model compares basic cost differences of one way corrugated packaging and reusable plastic packaging. The
model uses basic assumptions and requires you to input various cost components. While the model uses factual
inputs from prospective users it is intended to offer guidance and not an absolute indication of exact cost benefits.
More specific models are available to determine specific cost benefits once an overall feel for expected costs are
understood.
"Dwell time" is the amount of time in days that a reusable packaging container will be held at various stages in your
supply or distribution chain. In addition to time at your facility, be sure to also enter time at any distribution centers,
transit time, time at the destination, and time for preparing and returning the container for reuse. All times are in full
days. (Leave lines blank for rows that do not apply to your situation).
Corrugated
Containers in use, waiting to be used, or waiting to be shipped
Reusable Handheld Container
* average values, your cost will vary
Final destination (e.g., retail store, warehouse). Includes containers in
use, waiting to be emptied, queued for return.
"Safety Stock" is an amount of excess packaging kept on hand to avoid
running out at any time. If the cycle time through your supply chain is
relatively predictable, your required "safety stock" might not be
verysignificant. Experts recommend at least 1 to 3 days.
The # of complete round-trips. As dwell time decreases, the # of round
trips per year increases, resulting in better payback potential.
Volume
For this example, the
annual number of
corrugated boxes
shipped in a given year,
equals the number of
individual reusable
containers shipped.
Total number of cartons
shipped per year 70,000
Total number of RPC
containers shipped
per year 70,000
Returnable Container Cost Per Use
Annual interest rate 4.0%
Amortization years 5
Total reusable fleet
size 5,370
Total investment $40,273.97
Simple interest,
Annual $322.19
Annual, principal $8,054.79
Total Annual Cost $8,376.99
Total cost per trip $0.12
Return Logistics (Costs to Return Containers)
Number of miles to
return empty RPC to
the starting point
250
Cost per mile used $1.75
Minimum truck load 600
RPC per truck load 4,000
Cost per truck load $600.00
Return cost per RPC $0.15
No
Enter your own
override reverse
logistics cost here
(and select yes on
left):
$0.00
Calculation will use
this reverse logitics
cost per container
$0.15
Cost per container
7% $0.04
Cost per container
Processing Cost $0.15
Enter your needed internal rate of return here.This may reflect your
return on investment goal, or payback target.
Processing Cost: Use the default value of $0.15 to clean and prepare
returned containers for reuse, or estimate your own.
Containers can last indefinitely if not lost or mishandled, but it is typical
to amortize the cost over a 5 year period.
This is the total quantity of containers needed in your system, based on
the number of containers shipped per year and the number of turns per
year.
Total annual cost factoring in your internal rate of return.
Enter the number of miles the empty containers will travel to return to
your facility for additional use
Override: If you'd like to enter your own cost for
returning the containers and override these
calculations, select Yes and enter the cost.
Replacement Rate: At what rate do you expect to replace lost or
damaged containers annually? The Default value is 3%
A typical truck load can hold 4000 RPCs, but this number depends on
the size of the truck and the RPCs.
Other Cost (savings) Estimates
Item Calculations - Corrugated Cost per ctn Calculations - RPC Cost per container
Damage from pkg .5% of 40 lbs @$4/lb $0.80
washer @ $50,000
divided by 200,000
washes over 5 years
$0.05
Disposal cost Est. at $20000 $0.33
Labor cost Est. at $40000 $0.67
Additional cost (savings) $1.80 $0.05
Total cost per use
Corrugated Cost $2.82
Reusable, total cost
$0.51
Annual cost $197,400.00
Annual cost
$35,696.16
Cost Savings / (Penalty) using Reusable Shipping Container
$2.31
$161,703.84
Does not include potential cost savings from the following benefits of using Reusables
Reduced product damage from packaging
Easier loading and unloading of product; ergonomic benefits
Better cube utilization in trailers; reusables are made to stack and interlock
Reduced tangential packaging costs, (e.g., stretch wrap, corner boards)
Benefits from reusables creating enabling processes for lean manufacturing
Potential for reduced greenhouse gas emissions and overall energy consumption
Cost per unit per trip
*This cost comparison is presented as guidance on evaluating reusables. Each situation will
be unique.
Annual Savings / (Penalty)
Use the optional spaces below to enter additional costs or savings for corrugated and reusable containers. Examples
are provided - delete or modify as appropriate for your circumstances.
$-
$0.20
$0.40
$0.60
$0.80
$1.00
$1.20
11.3 11.9 12.4 13.0 13.7 14.5 15.3
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Turns per Year for RPC
Cost Comparison Corrugated vs. Returnable
Corrugated Cost per Use
Returnable Cost per Use
Cost Comparison Corrugated vs. Returnable
Corrugated Cost per Use
Returnable Cost per Use
Base from Inputs Mid
Minimu TL 600.00 $
Truck load costs 600.00 $ -15% -10% -5% Base 5%
Return cost per unit 0.150 $ 0.128 $ 0.135 $ 0.143 $ 0.150 $ 0.158 $
Turn Days 28 23.8 25.2 26.6 28.0 29.4
Turns per Year 13.04 15.3 14.5 13.7 13.0 12.4
RPC cost per use 0.12 $ 0.102 $ 0.108 $ 0.114 $ 0.12 $ 0.126 $
Handling per use 0.15 $ 0.15 $ 0.15 $ 0.15 $ 0.15 $ 0.15 $
Plotting costs 0.38 0.39 0.41 0.42 0.43
Corrugated cost per use 1.02 $ 1.02 $ 1.02 $ 1.02 $ 1.02 $ 1.02 $
RPC Costs per Use 0.46 $ 0.45 $ 0.43 $ 0.42 $ 0.41 $
Turns per Year 11.3 11.9 12.4 13.0 13.7
Override
override selection Yes
No
10% 15%
0.165 $ 0.173 $
30.8 32.2
11.9 11.3
0.132 $ 0.138 $
0.15 $ 0.15 $
0.45 0.46
1.02 $ 1.02 $
0.39 $ 0.38 $
14.5 15.3