A Dynamic Simulation Model for the Total Packaging System Cost Analysis in an International Supply Chain

Abstract

To implement a new packaging system for an international supply chain, a packaging and supply chain manager should have a good understanding of the total packaging cost concept. Especially for the reusable packaging system, a poor investment may result in enormous loss of assets and efficiency throughout the supply chain. This paper compares one-way and reusable packaging systems. For the reusable packaging system, two options, company-owned or rental, were considered. A dynamic simulation method was used for calculating the number of reusable plastic containers (totes) and total packaging cost, based on activity-based cost data provided by an automotive company. The variables considered include costs of shipping containers, distance, and transport time required for a minimum 2-year operation. Five scenarios were tested which evaluated system time and cost, resource utilization for the process and number of units processed. The greatest benefit of using the dynamic simulation is that it provides real-time status information about the packaging inventory and various cost-benefit scenarios in the target supply chain. This paper identified the cost associated with each level of various activities (e.g., cost per line item picked, cost per delivery, etc.) which enables to show a clearer picture of the true packaging and logistics costs, so any inefficiency in a supply chain due to adoption of different packaging system. The results of this simulation can help in analyzing the interactive and coherent behavior between different packaging and supply chain systems.