In previous blogs we wrote about the impact of losses and theft of Returnable Transport Items or load carriers from a cost perspective. See also “the High cost of losses and theft for RTI’s”. Based on surveys and case studies the direct cost related to loss and theft range between 10-30% of the pool of registered items. These inefficiencies often also imply excess working capital, as companies try to mitigate the operational risks of shortage of RTI’s by (over)expanding their pool of RTIs.
These costs alone justify some effort from an “in control and compliance” perspective. After all, identifying improvement opportunity is one of the core tasks of the controller. Ensuring that RTI procedure and processes receive a decent amount of scrutiny and attention from a (financial and operational) control perspective. This is therefore a responsibility of the financial and controlling function within any company.
In addition, accounting rules govern the treatment of RTIs, such as containers, in terms of their capitalization or expenditure. In principle, RTIs are multi-use, so they are typically not expensed as part of the cost of sales. Rather, they are accounted for on the balance sheet. That implies that companies must assure themselves that the balance sheet reflects reality accurately and precisely. Especially at important period ends such as quarter or year end.
Tasks for controllers and accountants
Controllers and accountants should therefore have vested interests into the topic of RTI. This can be from a merely economic (opportunity driven) perspective, or from a more procedural and administrative one. They should safeguard that RTI is correctly and adequately registered and administered. This implies knowledge and insight of the whereabouts of the pool of RTI and a structured and sensible framework of control, meaning:
- A system to track RTI volumes and their status. In effect documenting where they go and if they are still in satisfactory condition (i.e. have not been damaged or are unsuitable for use)
- A clear operational procedure. Identifying how RTIs are linked to the operations and what the key (trans)actions are
- A sensible organization with clear tasks and responsibilities. Who does what when. This also includes ensuring a good segregation of duties where applicable
- Check and balances that effectively govern these and enable corrective measures
Too often though, finance and control personnel view RTI and their management as “purely operational” of “supply chain” responsibility and forgo to get involved much. In their defense, RTIs are often handled as a “secondary / non-essential process”. Lacking a lot of the prerequisites mentioned above. Sometimes, finance and control personnel are simply not involved. This is due to their lack of presence in the warehouse and production facilities. That is a pity because active involvement of finance and control personnel can contribute (a lot) to identifying and realizing the (improvement and savings) potential.
However, with the correct registration and administration, their involvement is much easier and allows finance and control personnel to contribute. This enables companies can quickly curb unnecessary costs related to losses. It can also release excess working capital tied up in large pools of RTIs. TellApe supports these efforts: it offers quick and easy registration and administration for any type of RTI based on a mobile application and insightful web based platform. This generates transparent and comprehensive reporting. TellApe is part of Tconsult, a Dutch firm focused on smart logistic solutions, with a particular focus on Returnable Transport Items and Load Carriers.
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