Activity-based cost modeling and dynamic simulation study of an international reusable packaging systems

This study compares reusable to expendable packaging systems in a total cost analysis. It explores whether reusable packaging is an economically viable option to replace the expendable packaging in an international supply chain. It assesses the financial performance of reusable packaging, using a combination of Activity-Based Costing (ABC) with static and dynamic simulation.;Firstly, ABC method is used to visualize packaging activities and costs in an automotive part supply chain. Three packaging system costs (expendable, reusable, and rental packaging systems) are established, and for each the packaging activity drivers, activity costs and the total packaging costs were calculated.;Secondly, a static simulation was used to reveal interrelationships between the packaging and supply chain costs. Eleven scenarios were tested to learn if relative cost changes in one or more of the variables can influence the packaging decision. Overall, container cost ratio and cycle time were the most decisive factors in determining the packaging system cost. It was found that cycle time is a more important factor than shipping distance, meaning that time is more important than physical distance since it directly affects the number of required containers. Customs charges were also an important factor for implementing reusable plastic container system (RPCS) and rental plastic container system (RENS) internationally because this will reduce profitability of running reusable container system. Proper documentation for import tax exemption, free trade agreement and other contracts should be necessary.;Thirdly, a dynamic simulation method was used to compare and verify the company-provided data and ABC model. ARENA software was used to calculate the number of reusable plastics containers (totes) and costs for three international supply chain routes of a company. Seven scenarios were tested which evaluated system time and cost, resource utilization for the process and number of entities processed in the process. The greatest benefit of using the dynamic simulation was taking account of time during the logistical process such as identifying a bottleneck at ports due to loading and unloading process that is not revealed in the company-provided data or static simulation.;In summary, the cost ratio between expendable and reusable containers is the first thing to consider because of relatively longer cycle time and distance, a greater number of containers are required. However, shorter cycle time and efficient material handling can reduce costs by avoiding unnecessary logistical activities and lag time during trans-shipment and custom process. Standardized reusable containers, since they are interchangeable, reduce the number required for safety stock.;This study shows the amount of economic impact by adopting different packaging systems in the international supply chain, implying changing any elements of packaging process may change the cost driver for each activity, which eventually affects total logistics costs.;This research is limited because the simulation model is only for an automotive part supply chain from a single supplier to a single customer, and the analysis is limited to cost. The environmental performance such as packaging waste generated and greenhouse gas emissions, and long term performance of reusable container and operation systems are recommended for future research.