Savings on Tap

Savings on Tap

Copyright 2003, Traffic World, Inc.

A third mobile asset management contract with a large brewing company in the United Kingdom will give TrenStar Inc. the critical mass it needs to create its first industry pool of containers. For Europe''s brewing industry, this means radical change to centuries-old supply-chain practices as competitors share kegs and deploy innovations such as electronic tagging.

In April 2002 TrenStar, the Denver-based mobile asset management specialist, announced a 15-year contract with Scottish Courage Brewing Ltd. to acquire the brewer''s beer keg fleet of some 1.9 million units and provide an ongoing keg management service. The fleet acquisition and ancillary equipment of approximately $69.4 million was funded by a major U.K. bank. This was followed in September by a similar agreement with Carlsberg-Tetley Brewing Ltd., one of the largest brewers in the United Kingdom and a wholly owned subsidiary of Carlsberg Breweries A/S of Copenhagen, the fifth-largest brewing group in the world, involving more than 1 million containers.

The third contract, which TrenStar plans to announce soon, will bring another major brewer to the table and a pool of kegs that represents about 62 percent of all the units used in the United Kingdom, said David Adams, senior vice president of corporate strategy for TrenStar. The triumvirate of brewers will open doors to other industry players, such as tier one and tier two suppliers, and "give us greater density in the supply chain," he said.

The pool also provides a model that TrenStar is applying elsewhere. Other industries on the company''s hit list include auto, medical, food and chemicals. "We don''t want to boil the ocean," said Adams, and industry sectors have been selected as users of containers that can be standardized "and where the assets are not a competitive differentiator." As he pointed out, when it comes to sharing assets, "some industries won''t go there because of their competitive nature or the role of containers." TrenStar also is selling a pooling arrangement to leading players in the synthetic rubber industry.

The beer container pool is the most advanced, and TrenStar has persuaded companies that have been competing for 200 to 300 years to become asset sharers "because they see this as something that, for the most part, they don''t want to manage or a part (of their operations) that they have not been managing," Adams explained. When a container is placed for beneficial use, TrenStar charges a fixed fee that covers its management as part of the pool.

For many companies, managing the containers used to distribute product has been something of an afterthought. Adams said TrenStar is negotiating with a U.S. manufacturer that owns about 16 million collapsible containers with a book value of around $5 billion and can''t account for about a third of them at any one time. Typically such companies "have already made big supply-chain planning investments but forgot about the mobile assets," he said. Gaining more control of these assets means that containers are used more efficiently. But the potential benefits go much further than that. More accurate tracking of assets means more precise inventory control and a streamlined manufacturing process. "We are linking content to container, so now there is a feedback loop that traditionally these manufacturers have not had," Adams noted.

That is certainly the case in the long-established brewing industry. Adams said one beer company had to shut down a plant for an average of 2.5 hours a week "because they did not have the kegs." To a large extent, the reverse supply chain relied on phone calls made by office workers to locate where the kegs currently were residing.

According to Graham Miller, former head of logistics development for Scottish Courage. and now with TrenStar, the information provided by the pooling system has enabled the brewer to cut costs. Miller said that for every day Scottish reduced container cycle time - that is, the time a filled keg left a brewery to the time it was returned for refilling - it could reduce container inventory by a value of $2 million. The average cycle time for a beer container in Europe is 70 to 100 days, he said, so even a 5 percent improvement in this can yield big savings.

That requires very precise tracking, something that also is critical to TrenStar since it takes ownership of the pooled assets it manages. "We will obligate ourselves to providing a ready-to-use container when it is needed," Adams said. He noted that the company has invested some $220 million in its European keg pooling business with "the lion''s share going on the purchase of containers." It uses barcodes and radio frequency identification tags to track the whereabouts of units, although in the beer industry "it is mainly passive RFID," he said. In fact, with about 6 million RFID tags in use, TrenStar is one of the world''s biggest users of this technology, he said.

The ultimate aim is to provide a complete supply-chain management services package, he said, with TrenStar performing the role of a 4PL where required. The company''s "full vision" of the brewing industry container pool would involve beer companies delivering product to a distribution center, where TrenStar "assigns orders" and takes full responsibility for distribution. "That''s some way down the road but we have conceptually mapped it out," he said.

The company also is developing the tagging technology that underpins its asset pools. TrenStar has licensed technology for "conditional tracking" from the Department of Defense, said Adams, involving relatively expensive tags that monitor the content of containers.