In the world of produce, change can come as slowly as new buds in a cold field. But the dynamics at work in today's supermarket industry are driving transformation at a pace that is causing both retailers and grower/shippers to reassess their relationships and the ties that connect them.
One aspect of this evolution can be found in the produce box issue involving corrugated cardboard and returnable plastic containers. Ironically, as the debate continues and intensifies, the physical differences between corrugated and RPCs are quickly narrowing: Both have developed identical nominal footprints; possess stacking and cubing abilities; boast ergonomic benefits; arrive at the store display-ready; protect the product and therefore improve rotation; and are environmentally friendly, albeit in different ways.
Yet, certain retailers express solid loyalty to one or the other, an indication that larger issues are at work: It's supply-chain logistics, say retailers interviewed by SN, since it effects the entire distribution channel, from the field to the warehouse, and to the store and those who pack out product.
Corrugated Cardboard
The Fibre Box Association, Rolling Meadows, Ill., last October unveiled its new modularity standards, consisting of two footprint designs. The goal was to develop a competitive option to returnable plastic containers, which were built on a standard nominal footprint of 24 inches by 16 inches.
Now, after a comment period from retailers and grower/shippers, the FBA is prepared to adopt the nominal 24/16 standard, the optimal footprint in the 5 -10 down pallet system. ("Down" refers to the maximum number of containers of a certain footprint that can be placed in a single layer on a standard, 48-inch by 40-inch U.S. pallet, or the 1,200-millimeter by 1,000-millimeter "Euro" platforms). The standard must still be reviewed by two committees and approved by the full FBA board of directors, but it's the dimension most preferred based on feedback.
And, it's the latest differentiating factor that's been removed from the equation as retailers and their grower/shipper partners debate which container to use.
The significance of an industry-wide standard for corrugated isn't lost on Boise, Idaho-based Albertson's. With some 2,500 stores around the country, Albertson's is the nation's largest retailer, for whom logistics and simplicity are integral to its ability to operate on such a grand scale.
"One challenge the supermarket industry faces is to provide a wide variety of high-quality produce at a fair price, year round," said Cynthia Forsch, Albertson's corporate director of environmental affairs. "The logistics to accomplish that goal are staggering."
Albertson's has been using corrugated for more than 30 years, and the infrastructure to handle it is well established, she added. The retailer has developed a one-way system that takes boxes in, uses them at store level, and captures additional income as those pulpable containers are recycled.
"At Albertson's, our business decision is based first and foremost on providing our customers with the best possible prices without compromising variety and product quality," Forsch said, noting the retailer's reliance on corrugated for cost effectiveness. "[Corrugated] not only holds and protects the product throughout the distribution channel, but it becomes a display-ready container at the store," an attribute that has implications as to product quality upon arrival at store level; rotation rates due to better-quality arrivals; and ergonomics due to less handling.
The new corrugated 5-10 down standard will further simplify the retailer's supply-side operations, since the cardboard industry has not set a standard height. Forsch said that the ability to select box depth helps to optimize cube utilization and protect product.
"Potatoes could be placed on top of tomatoes and the tomatoes would arrive in good condition," she said. "The height of the box can be adjusted for any commodity and packing system. Apples, for example, can be shipped in either two or three layers, depending on the apple size and [how] the box is adjusted for the correct height."
At the warehouse level, standardized corrugated will allow selectors to create stable pallets that are shipped in refrigerated trucks up to 300 miles to individual stores. Once there, the containers can be jacked directly onto the store floor, since they are display ready, often with graphics imprinted on the cardboard surface.
"We're currently working out optimum box heights for commodities with several of our vendors," continued Forsch. "As these tests are completed, we will ask for product in the standard footprint from a broader range of vendors."
No matter what the box size, Albertson's prefers corrugated because it can capture additional money when used cardboard is thrown into the baler. While Forsch declined to cite specifics, figures released during an earlier forum on paper vs. plastic revealed that in 1997, Albertson's earned $12 million from the recovery of 161,000 tons of corrugated from its stores. The retailer would have had to sell $240 million worth of groceries to net the same amount.
Returnable Plastic Containers
Wal-Mart, Bentonville, Ark. has been the leading domestic supermarket company to test the viability and possibilities of returnable plastic containers. Bruce Peterson, the chain's vice president of perishables, said that since launching a six-store test four years ago, all 10 of Wal-Mart's regional distribution centers and at least 80 stores are now capable of accommodating RPCs.
Currently, 40% of inbound product arrives at warehouses and stores packed in RPCs, from suppliers who have worked with Wal-Mart to modify their packing-house systems. Even bulk items like bagged potatoes, pumpkins and watermelons are shipped today in bulk plastic bins, or at least merchandised in them at store level.
After compiling this data and first-hand experience since it launched the pilot test in 1997, Wal-Mart is now looking to add "value" -- so to speak -- to its RPC program by testing radio frequency identification technology.
"This box has multiple uses, so that you recycle it through the system 15 to 20 times," he said. "If you're doing that, is it cost-effective to try and retrieve information off that box by putting a chip on it?"
Both Peterson and Wal-Mart believe there are several components that make RFID tags very desirable, from a variety of perspectives. At the source, grower/shippers could program read-only tags with the vital statistics pertaining to each container, including trace-back data that could be invaluable in food-safety areas, where the chip could pinpoint the orchard or field from which the produce came.
This encoded chip could also spur advance shipping notification activity, where all the information could be transmitted directly to the distribution center. In turn, the warehouse prepares for its arrival by reserving slotting space. As product arrives, a reader in the receiving dock notifies workers where that container is to go. Quality assurance possibilities also come into play here, too, since time and temperature data can be downloaded from the chip.
"You've got almost seamless movement through the distribution-center level," said Peterson. "The store could receive it very much the same way."
At store level, RFID takes removes guesswork, since it "knows" when the container was received, and how long it's been on the floor, added Peterson. "The very fact that you can do this opens up a whole new potential for data capture in management."
During the recycle, third-party poolers erase the chip and sterilize the box, and return it to a source packer.
On paper, the pairing of RPCs and RFID tags holds a lot of appeal. Peterson noted that the cost of the technology has less of an impact than might be anticipated, since it is leveraged over the 15- to 20-trip lifespan of the RPC, thereby making the idea cost-effective. Still, the retailer will have to expend capital to implement the system.
"RFID allows you to track the assets very precisely, because in a pooling model, if you lose a lot of the assets through the system, it becomes cost-prohibitive," said the retailer. "It's cheaper to make a cardboard box than a plastic box. So you want to know where that asset is all the time."
The actual test phase is scheduled to begin around the end of February, with the cooperation and participation of select suppliers. During this phase, a decision will be made to determine what information grower/shippers can encode on the chip, and what data the retailer needs to make it cost effective.
Though reluctant to discuss specifics, Peterson said that a particular receiving dock in a single distribution center will be outfitted with reading devices that will scan "one or two pallets" containing the tagged and encoded RPCs.
"This is not a box issue. It's supply-chain logistics, because the box becomes more than just a conveyance of product," he said. "Now it's smart and you can capture data from it."
