Logistics Performance: The Total Impact of Pallets

Could something as simple as pallets be holding your supply chain back from the next level of efficiency?


Future Trends

Many shippers, as well as their receiver/customers, are searching for a solution to the pallet dilemma. One alternative that is growing in popularity with shippers is the one-way pallet. As the per-trip-cost of rental programs increases, it becomes economically viable to just absorb the full cost of a pallet without exchange.

This concept removes the hassles of pallet exchange, and avoids the cost of a third party such as a rental company. Unfortunately, this model often only addresses the needs of the shipper with respect to materials handling and pallet expenses. A pallet that is designed to meet the requirements of a one-way shipper often will not meet the requirements of the receiver. This may result in re-palletizing at the receiving dock onto acceptable pallets and/or negative feedback from a disgruntled receiver. Many receiver/customers have resorted to issuing fines for deliveries made on poor quality pallets. This trend toward increased use of one-way pallets could also exacerbate an already serious environmental issue with disposal of poor quality pallets.

Radio frequency identification (RFID), block pallets, plastic pallets, phytosanitary requirements for global shipments all are opportunities that are hampered by the pallet dilemma. Without effective management practices for dealing with the increasing value of a reusable asset across trading partner boundaries, these opportunities will struggle to achieve their potential. Shippers are and will continue to be reluctant to adopt changes that increase the cost of pallets, even though the overall benefit to the supply chain may be significant. The block style pallet is a good example. This relatively new design is a much more user friendly four-way entry design, allowing for more efficient shipping and handling practices. Many distributors have expressed a strong interest in broader acceptance and use of the block pallet, however, due to cost, shippers have resisted. The block design has become the standard for the rental model, a change that has added differential value to the rental model.

Plastic pallets have suffered from the same cost/price barrier. Everyone knows that plastic pallets are a good value in closed-loop systems, where control of the asset is doable, further validation of the pallet dilemma. Today's most popular buzz-phrase solution to supply chain performance issues, RFID, will suffer a similar fate. As with the block design, the pallet rental companies are embracing RFID as a point of differentiation.

Where to Go From Here?

Asset management across trading partner boundaries within a supply chain is the issue. Can the rental model be effective? (Definition of effective: profitable for suppliers and cost efficient and reliable for supply chain members.) The jury is still out. Creative ideas that are fair to all participants, and at the same time do not hinder new innovations, need to be a priority focus of all companies currently suffering with the total impact of the pallet dilemma. New ideas are out there trying to get your attention. Open your eyes, ears and minds and think, as they say, out of the box. Be courageous and try something new something that doesn't reside on your hard drive!

About the Author: Dave Sandoval is president of B.U.S. Systems Inc., a consulting firm established to introduce a new process for pallet management for the food and consumer products supply chains. Dave has over 30 years of operations management and consulting experience in the food and consumer products industries. www.bussystemsinc.com

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