Leasing pallets through a pooling system isn't for everyone, but rising disposal costs and landfill restrictions are prompting more companies to jump into the pool.
It used to be that companies joined pallet pools for one of two reasons: quality or convenience. Joining a pool meant an end to problems caused by cheap, low-quality pallets designed for one-time use. Whether they're made of wood, plastic or metal, the pallets used in pools are designed for repeated use and durability; they also tend to be more uniform in their dimensions than their one-way counterparts.
Joining a pool operated by a third party also relieved pallet users of the costs and administrative hassles of pallet ownership. The pooling company assumes responsibility for managing the pallet "fleet," tracking them, maintaining them, repairing them, collecting them, and when the time comes, disposing of them.
But now companies are discovering other compelling reasons to join a pool. One is cost. Marshall (Mark) White, director of the Center for Unit Load Design at Virginia Tech, reports that the cost per use of a pooled pallet has dropped well below the cost of shipping on one-way pallets. Estimates of the savings vary, but CHEP, the largest pooling company in the world, claims its customers save between $1.50 and $2.50 per move over one-way pallets.
Another consideration is environmental impact. "By virtue of their reuse, pooled pallets produce less solid waste and have a lower material consumption," says White. On top of that, pallet users have had additional pressures brought to bear on them in recent years. They include rising disposal costs at municipal landfills and demands from customers to use reusable containers— including pallets. There are also growing environmental restrictions on how and where pallets can be discarded.
Right now, the regulatory climate in the United States is nowhere near as restrictive as it is in, say, Germany. For the last 15 years, the German Packaging Ordinance has required all manufacturers and distributors to take back all transport packaging, including pallets, and to recycle or reuse the materials. Though there are no such ordinances on the horizon here, some municipalities are beginning to impose restrictions. North Carolina, for instance, adopted legislation last year that bans the disposal of wooden pallets in municipal solid waste landfills by October 2009.
The tough rules in Europe and growing attention to the issue in the United States have gotten business's attention. "Those of our customers that are active in Europe and the United States are starting to ask us a lot of questions on the U.S. side of the pond," says Per Ohstrom, director of marketing in the United States for Australia-based CHEP, which now operates in 48 countries. "They are worrying about regulations that might kick in later."
Quality, convenience and environmental considerations notwithstanding, pallet pooling isn't for everyone. Some companies are reluctant to turn over control of their pallets to a third party. Others don't have a consistent customer base or have customers mainly in locations too remote to allow for regular pickup. And others already have a well-established relationship with a supplier of one-way pallets that suit their needs, so they see no reason to change.
But for anyone thinking about jumping into pooling, there are also plenty of successful examples.
Take Clay Powell and Jerry Pimental, for instance. Powell is the plant superintendent at Aurora Organic Dairy's facility in Platteville, Colo., which ships 1,200 pallets of milk each week to grocery stores nationwide (the pallets are provided by CHEP). Pimental, who is the director of supply chain strategy and planning for Stop & Shop Supermarkets, a 355-store grocery chain in the Northeast, is one of his customers.
"The pooled pallets have several advantages over one-way pallets," says Pimental. "First, there is consistency. We can count on the pallets' having the same dimensions and the same quality of construction."
That's a major consideration for Pimental's operation. When pallets arrive at Stop & Shop's Assonet, Mass., DC, they're sent directly to the facility's automated storage and retrieval system (AS/RS) to be stored until the products are sent out to the stores. The AS/RS uses sensors to scan the dimensions of each pallet. Any pallets that are out of tolerance are rejected by the system to eliminate the potential for jams or product damage.
Pimental also praises the CHEP pallets for their strength. Made of harder species of wood than typical white wood pallets, the CHEP pallets provide superior support for heavy cans and bagged products such as sugar and dog food, he says. This sturdy support also makes them safer to handle.
"When lifting a load 20 to 25 feet into the air, using the CHEP pallet provides a safer environment to work in," adds Pimental. "It gives us a nice solid platform for bringing pallets through the supply chain."
In fact, about 85 percent of the dry goods received at the Massachusetts DC arrive on CHEP pallets. Many of these items ship directly to Stop & Shop stores on the same CHEP pallets used by their suppliers. Upon arrival at the retail backrooms, they're unloaded and then returned to the distribution center via the truck making the next delivery.
Once back at the DC, the CHEP pallets are sent to a recycling dock for pickup by CHEP. Because of the volume, CHEP typically sends 12 to 15 trailers (each capable of holding 500 pallets) out to the Assonet facility each day. The pallets are taken to a service center in nearby Norton, Mass., one of about 80 such centers CHEP operates nationwide. There, the pallets are inspected, cleaned and repaired if necessary before being sent out to another CHEP member. If the inspection reveals that a pallet is beyond repair, it's ground up into mulch. "None of our pallets ever end up in landfills," says Kevin Shuba, senior vice president of new business development for CHEP.
That pleases Aurora's Powell. "As an organic company, we are very ecologically conscious," he explains. "We like the idea of having a pallet that can be used over and over again." It saves money, too, he adds. Powell says that Aurora's use of CHEP pallets saves 20 percent over grade one pallets.
One word: Plastic
Though the best-known pallet pools are those operated by third parties like CHEP or Orlando, Fla.-based iGPS, there are also private pallet pools. For example, besides participating in CHEP's pallet pool, Stop & Shop runs a small pallet pool of its own, in what's known as a closed-loop or captive-loop system. The pallets in this pool are plastic pallets that are used to transfer mixed-SKU pallets between the Assonet distribution center and Stop & Shop stores. The pallets, which are owned by Stop & Shop, never leave the loop.
Stop & Shop chose plastic pallets for these "rainbow" loads because of their light weight and durability. As with the wood CHEP pallets, these plastic pallets can be used over and over again for many years.
Private pools can also be set up between a shipper and its carrier or between a customer and its supplier. For example, food titan General Mills has a pooling arrangement in place with one of its suppliers, Huhtamaki, a company that produces injection-molded plastic cups and other types of disposable packaging. Two years ago, General Mills bought 3,500 plastic pallets, which Huhtamaki now uses to ship orders from its plant in New Vienna, Ohio, to General Mills' Cedar Rapids, Iowa, processing facility, which uses the cups to package cake frosting. The pallets remain within the closed, captive pool.
General Mills chose plastic pallets for their uniform size, ease of cleaning, and durability, and they appear to be holding up well. "I can't even begin to tell you how many turns we have had with these pallets in the two years that we have had them," says Jeanette Yankey, planning manager for Huhtamaki. "They are also much safer to have around food products. There are no splinters or nails to worry about."
They're also economical, according to their maker. "Plastic pallets are more expensive initially, but when you look at how many turns you can gain from plastic pallets, you see the huge payback advantages," says Curt Most, national sales manager - pallets, for ORBIS Corp., which supplied the pallets used by Huhtamaki and General Mills. "They become a good investment."
About the Author
David Maloney has been a journalist for more than 35 years and is currently the editorial director for DC Velocity and Supply Chain Quarterly magazines. In this role, he is responsible for the editorial content of both brands of Agile Business Media. Dave joined DC Velocity in April of 2004. Prior to that, he was a senior editor for Modern Materials Handling magazine. Dave also has extensive experience as a broadcast journalist. Before writing for supply chain publications, he was a journalist, television producer and director in Pittsburgh. Dave combines a background of reporting on logistics with his video production experience to bring new opportunities to DC Velocity readers, including web videos highlighting top distribution and logistics facilities, webcasts and other cross-media projects. He continues to live and work in the Pittsburgh area.
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