Truth is in the Details ™

The Case of the Crushed Cartons

Synopsis:
A half-baked new product idea taken directly into high volume production without testing because of similarity to other products backfires in a most embarrassing manner.

Background:
A new liquid product was in marketing roll-out until palletized goods in three separate warehouses spontaneously collapsed, resulting in a $2 million loss. Goods already delivered began collapsing and leaking in customers’ warehouses and stores. The product was packaged in 1 gallon polyethylene bottles which came six to a carton. The cartons were stacked on pallets five layers high and the pallets were stacked two high.

Assignment:
TI was requested to determine the specific failure mode which resulted in the loss so that the insurer could determine whether or not the policy provided coverage for the loss.

Due to previous experience, TI knew that the gallon polyethylene jugs were slightly pressurized and then sealed with a metalized foil to retain the pressure before the screw caps were installed on the bottles. The slightly pressurized bottles provided column strength to the bottles so that they could help carry the weight of product stacked above. The strength of the bottles greatly added to the strength of the corrugated cartons, not only allowing the cartons to be stacked five high on a pallet but to have one pallet stacked on top of another in trucks and warehouses.

TI investigated the manufacturer’s large scale bottle blow-molding operations and found that bottle manufacturing was not under effective process control. However, further investigation found that out-of-control bottle molding operations was not the cause of the loss. Over a period of many years, millions of the bottles had been produced for slightly different products without this failure mode ever manifesting itself. TI then looked at the slightly different chemical makeup of the new product and found that one of the product components was not compatible with the polyethylene resin employed in the bottles. Exposure of the polyethylene to the chemical component resulted in stress cracking of the polyethylene in short order.

The relatively high pressure on the bottles at the bottom of the lower pallet, and the tendency of the polyethylene to crack due to stress while in contact with the new ingredient, resulted in bottles at the bottom of the pallet cracking and leaking. The combination of lack of support from the ruptured bottles as well as loss of strength in the wet cartons resulted in the stacks collapsing from the bottom.

The insurer reviewed coverage provisions of the policy and found that the chemical attack of the polyethylene bottles was not a covered condition and the insured withdrew the $2 million claim.

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