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NEW ECONOMIC CASE STUDY: SHIPPING TOMATOES IN CORRUGATED PROVES MORE COST-EFFICIENT THAN RPCs
ELK GROVE VILLAGE, IL (October 18, 2013) – A new economic case study demonstrates a 25 percent annual cost savings from shipping tomatoes in corrugated versus shipping the same volume of tomatoes in reusable plastic containers (RPCs).
Using data provided* by a large grower in Mexico, a transparent software-modeling tool was used to analyze total annual costs for using corrugated containers vs. RPCs to ship 144 million pounds of Roma tomatoes to Houston, TX. Results of the detailed, activity-based accounting comparison show that corrugated saves $6.8 million annually vs. using RPCs.
The analysis reveals that RPCs incur $7.5 million higher trucking and handling costs than corrugated, due to RPC backhaul trip requirements, handling costs at return distribution centers, plus washing costs, and higher trucking costs from farm to retailer to DC. At a conservative estimate of $0.10 per container, washing alone adds $577,000 to the annual cost of using RPCs.
Corrugated containers are recovered for recycling after use at retailer locations. Supermarkets have helped propel corrugated recovery to an impressive 91 percent in 2012, maintaining corrugated’s position as the most recycled packaging material in the world. A significant part of the savings from using corrugated in this case scenario comes from avoiding $4.1 million in costs for shipping, handling and washing RPCs in their return cycle.
“Grocery retailers are looking to improve profits by reducing costs throughout the entire distribution channel. Transportation packaging is one area that retailers scrutinize for possible cost savings,” said Dennis Colley, executive director of the Corrugated Packaging Alliance.
Both growers and retailers save money when corrugated containers are used to ship tomatoes in this case scenario. A study of the data using a special rental analysis module in the software shows that, in a typical leasing arrangement, the retailer pays $3.5 million (17%) more to receive Roma tomatoes shipped in RPCs as opposed to corrugated. The grower pays $893,000 (12%) more to ship in RPCs. So, not only are the total costs higher, but the retailer also shoulders a higher cost increase to use RPCs.
Initial arguments to justify the use of RPCs vs. corrugated were based on the idea that RPCs were more economical because they were reusable. Case studies, like this one, detail the impact of major cost sensitivity factors on the total distribution system. Shipping container economics now present a clear picture that corrugated containers offer the lowest-cost supply-chain solution.
The Roma Tomatoes Case Study is available for download on the Corrugated Packaging Alliance (CPA) website.