Are Your Pallets Carrying Too Much Cost?

Look at your end-to-end supply chain for cost-saving pallet solutions.


“If you are shipping laptops versus detergent, there will be a huge difference in your decision-making tree. You have to consider that the parameter of the pallet protects the goods on it. All in all, manufacturers should select the platform that best suits the needs of their supply chains,” says Moore. “If you are shipping into major retailers who operate robust reverse logistics systems that respect the pallet rental company’s ownership rights and will return them, then you save money by having a more robust pallet.”

Consider Cost Of Ownership

Companies are increasingly choosing leased pallets over buying them, notes Hannum. “The important thing about leased pallets is that they are made to much higher-quality standards than most pallets made for sale, which figures into the total cost of operation,” he says. “Engineered wood pallets are about one-quarter the cost of plastic pallets, so leased wood pallets are still the most effective platform for large-scale pooling. Plastic is best used in closed-loop operations because you are better able to control those assets.”

Hannum acknowledges that both high-quality wood and plastic pallets are appropriate for high-volume operations. “It might make sense for a manufacturer constantly shipping truckloads between a production facility and a DC to use plastic pallets because the asset is controlled throughout the supply network, while a manufacturer shipping to dozens of grocery retailers might find wood more suitable.”

Remember that there is a supply chain cost associated with moving products on pallets from point A to point B, reminds Harrison at Rehrig. “Part of that cost includes the platform you choose. You can even go as cheaply as using a plastic slip-sheet for about $1.50. But keep in mind that you have to analyze your total supply chain operation—and every supply chain is different. If you have a good closed-loop system, you can start looking at factors like which is the strongest pallet, which is the most sanitary for your operations, and which will give you the least product damage.”

There are even instances where it is cheaper for customers to use a one-way pallet, notes Harrison. “We help customers figure out all of these things by analyzing their supply chain. We are material agnostic because we are looking for the best value for our customers. We look at their supply chain collaboratively with them and analyze all of the costs that will be associated with using a particular pallet solution.”

Scholnick at NWPCA notes that there could be a cost advantage in choosing a pooled pallet. “For instance, in a closed system for a food retailer with a private label going into a retail outlet, you know what your costs will be. For an open system, there may be a cost advantage in purchasing pallets. I suggest exploring all the costs of pooling systems and assure that you compare both the actual costs and the hidden costs.”

Hidden costs could include processing costs and the costs associated with monitoring where pallets are at any given time. “In this case, you have the expense of people, time, and energy required to track pallets. There are also insurance costs to consider. I am not saying that renting a pallet is bad—in fact, in many instances it is more productive than buying a pallet. But purchasing a pallet is a clear issue—you pay ‘x’ for it and you will sell it for ‘y’.”

Moore points out that all iGPS plastic pallets are embedded with RFID tags. “This will become important as the FDA increasingly weighs in on product recalls, and it would not surprise me to see the FDA requiring tracking and tracing very soon.”

He notes that RFID tags are a lot more affordable today than when they were first introduced in the mid-1990s. “Back then I paid $80 for my first RFID tag for a pallet. Today I pay only 11 cents per tag. So the cost gets cheaper and cheaper as the tags gain economies of scale.”

Companies can also reap significant cost savings by minimizing damaged and unsaleable products, continues Hannum.

“We partner with Genco and Inmar who do the auditing of unsaleables. They are studying the impact pallet condition has on product damage,” he says. “We have good data that shows when you use lower-cost pallets, your product doesn’t make it to the shelf. So, if customers are willing to use a heavier-duty platform in certain situations, they can more than offset that cost by avoiding the costs of unsalables, which is a $2 billion problem in the grocery industry.” d

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