Hannum at CHEP adds that customers are choosing pooling options more today. “It is still a small percentage of the pallet market, which is dominated by one-way shipments. But pooling is popular with major manufacturers in the consumer packaged goods market because of the service we offer. They know there is 100 percent reliability for a uniform product and the pallets will be there when they need them.”
He adds that CHEP’s Portfolio Plus, an e-business customer portal, allows customers to manage their accounts online in real time. “Our large customers move tens of thousands of pallets out of their facilities every day, so reporting is an important activity for them. Managing all of that online saves them time and money.”
Cost: Lee at PECO Pallet explains the company is “very clear on what the price point is and we are eager to make sure we are competitive with that while delivering the high-quality wooden platform the industry expects. We also give the assurance that we will maintain that quality over time through our depot network.”
Justifying pallets as assets aids in per-use costing, advises Letnich at Worthington. “More people are examining their true costs related to one-way and disposable wood pallets. Leasing, pooling, or outright purchasing can offer huge cost savings.”
Renting is a smart choice vs. buying pallets outright and maintaining a pallet fleet, says Moore at iGPS, a manufacturer and provider of plastic pallets with a pool of five million pallets in the U.S. “Our customers don’t have to carry any assets on their books and they can rent our pallets for about four cents a day. When pallets get to their destination, we retrieve and inspect them for reuse.”
Pallets are turned five times a year. “So it’s the same as having 25 million one-way pallets,” says Moore.
MEETING CUSTOMER REQUIREMENTS
Wood pallets: Hannum at CHEP reports that its parent company, Brambles, recently announced a $160 million commitment to improve the quality of products and services in the US market.
“This means we will deliver consistent platforms every time. We currently repair a percentage of those and we will remove the variability of that repair process so every pallet performs optimally, regardless of the level of automation within a customer’s operation. This is quite a significant financial investment, especially in light of the current economic market,” he says.
CHEP is “material agnostic,” says Hannum. “Wood just happens to be an excellent material because it is renewable, recyclable, and offers an excellent strength-to-weight cost ratio.”
The company has tested every available material in its Orlando testing lab, but has not found an alternative to wood that solves the equation involving durability, racking strength, cost, and repairability, reports Hannum. CHEP recently introduced a repairable pooled plastic pallet in China and is testing its economics on a small scale in the U.S.
“We just haven’t seen a commercially available plastic pallet out there that will stand up over the long term to the rigors of a U.S. pooled wood pallet,” says Hannum.
Providers of alternative pallets point to drawbacks in wood, such as insect or bacteria contamination and material breakdown that can cause supply chain interruptions. “You really can’t talk in terms of absolutes,” argues Hannum. “I think the track record for wood pallets speaks for itself and we don’t know of any contamination being traced to a wood pallet.”
Lee at PECO Pallet reports the industry has long indicated a demand for alternative materials. “I looked at many plastic pallets but, unfortunately, they all failed for one reason or another. They are expensive, so they don’t meet the industry’s cost requirement,” says Lee, one of the six original people to launch CHEP in the U.S.
According to Lee, about 70 percent of the food and beverage market is serviced by leasing programs offered by CHEP, PECO Pallet and iGPS. The remaining 30 percent of the market is serviced by white wood programs.
“We ask our customers to help us understand their supply chains by telling us how many pallets they need to lease from us and where their supply chains extend so we can develop a competitive and economic proposal.”