Returnable Packaging in the Auto Industry: Is it Practical?

If you work in the automotive industry, you may have heard about the possibility of returnable packaging—sending packing containers back to the supplier in order to be more sustainable and eco-friendly. It was a growing trend in the 1990’s, when more and more people in the industry were pushing for it. So where does returnable packaging stand now, and why isn’t there more of it?

While it seemed like a great idea at the time—who doesn’t want to do better things for the environment?—many soon realized that the cost of returning packaging simply didn’t make smart business sense. While it’s a fantastic idea if the supplier is located a short distance away, it’s not uncommon in today’s logistical environment for a supplier to be located hundreds of miles away. In the case of returnable packaging, someone has to bear the extreme cost associated with its return, and the cost was simply too much.

Personally, we have seen that returnable packaging is not attractive to most of our automotive clients. While we supply 20-25 tier 1 suppliers, only one of those suppliers practices this policy. For the rest, the financial burden is too much. And when it comes to the auto industry, costs are a huge driver, and the supply chain must do what’s most cost effective in order to remain competitive and keep a healthy bottom line.

Furthermore, many companies who once partook in the practice found that returning packaging proved to not always be as positively green as people had hoped. As an example, when Toyota first began implementing waste reduction programs, one of their measures included a returnable packaging system. However, shortly after its implementation, they found that while trying to be more sustainable, the opposite was happening. According to a Toyota executive, they soon realized “we were reducing a waste that was formerly recycled, and our recycling rate got worse. So our strategic indicator was telling us to not implement more returnable packaging programs.”

While we’re all mindful of sustainable, efficient business, it’s a competitive landscape, and, as in any industry, ideas that are not practical are not going to be able to become universally adopted.