Susan Lacefield has been working for supply chain publications since 1999. Before joining DC VELOCITY, she was an associate editor for Supply Chain Management Review and wrote for Logistics Management magazine. She holds a master's degree in English.
At the ripe old age of 60, the pallet—a supply chain staple since 1947—is going high-tech. Or at least it's trying to. What's changed isn't the platform's design—the pallet looks pretty much the same as it did in the post-World War II years. The difference lies in what's attached to some pallets: A growing number now sport RFID tags that make them easy to track and trace.
The idea of using RFID to keep tabs on pallets may not seem particularly revolutionary. After all, the technology has been around for years. But if the experience of iGPS, a pallet pooling company that uses RFID tags on all of its plastic pallets, is any indication, the practice is just starting to gain traction.
When the company's founders ordered 35 million RFID tags in 2006, they were surprised to learn that iGPS was the first private-sector company—as opposed to the military—to receive global reusable asset identifier (GRAI) numbers. (A GRAI is a unique identifier for reusable packages and other pieces of transportation equipment assigned by the standards organization EAN.UCC.) "[The industry] first started experimenting with the technology in the mid-1990s in test facilities," observes Bob Moore, chief executive officer of iGPS. "So I was surprised to find that 10 years later, retail manufacturers had yet to make much headway with it, even though RFID was being heavily sponsored by some of the largest retailers."
It's not hard to see RFID's appeal for pallet pool operators, which rent out usable pallets to clients (typically manufacturers and retailers) on a round-trip basis. Like all rental companies, pallet poolers have much gain from any technology that allows them to track and trace their assets in real time.
Yet their customers have sometimes been slow to warm up RFID. Take the case of HEB, a San Antonio, Texas-based grocery retailer that participated in iGPS's pilot. Moore reports that at the beginning of the elationship, HEB executives were not particularly enthusiastic about the technology, although they were willing to test it during trials.
As the company's IT department started working with the technology, however, it began coming up with more and more ideas for potential applications. A year and a half later, HEB has seen significant system-wide savings and cites RFID as a major reason for its continued participation in the pallet pool. The distributor now scans all plastic pallets entering and leaving its depot, so that it knows precisely how many have come in and how many have left the building.
Startup hurdles
As for why RFID-enhanced pallets have been slow to catch on with users, the answer seems to be largely a matter of cost. An RFID tag represents only a small portion of the total RFID infrastructure expense, says Puneet Sawhney, RFID program director for CHEP, the largest pallet pooling company in North America. The big-ticket items are the hardware—like pOréal readers or handheld readers— and the software and middleware needed to collect and process the RFID data and pass it along to other supply chain systems.
Right now, most companies are still in the pilot phase of their RFID programs, says Brian Beattie, CHEP's senior vice president of marketing. In many cases, those companies are tagging pallets of a handful of products that are being shipped to a limited number of customers. For the most part, that means that they've invested in RFID readers for, say, one or two dock doors rather than outfitting the entire distribution center.
That approach may go a long way toward holding down costs, but it also keeps companies from reaping the full benefits of RFID-enabled pallets, says Beattie. "Pooling requires mass to be efficient," he says, "and RFID takes mass to be efficient as well." It also requires participation from players throughout the supply chain. "You don't get value from just tagging one lane," he says. "You need to be able to use the data and to see the entire supply chain."
Though CHEP executives don't see that happening anytime soon, they're certainly not backing away from the technology. Far from it. CHEP is committed to RFID, says Beattie. Not only was the company one of the founders of the Massachusetts Institute of Technology's Auto ID Lab, he says, but it also remains an active supporter of the electronic product code (EPC) standard. "We have 10 years invested in this technology," he says.
Unlike iGPS, CHEP has not installed tags on all of its pallets, which number in the hundreds of millions. But it does use RFID-enabled pallets for its premium Plus ID service. Pallets used in that program feature a single tag in a plastic casing that's attached to the center of the company's signature blue wooden pallets. CHEP reports that it has achieved a 100-percent read rate with those tags.
The company has other RFID initiatives under way as well. Recognizing that its clients are at different stages of their RFID journeys, CHEP has designed (and patented) a "three-in-one" tag that can accommodate everyone's needs. This tag can be used by companies that are already using RFID, those using bar codes, and those that are still manually inputting information. "It doesn't matter what type of infrastructure you have in place," says Beattie. "You can still input the data into your software package, and you will still get the benefits of that tracking and tracing information."
Winning them over
If CHEP is taking the middle road when it comes to RFID implementation, iGPS is staying the RFID course. Part of it is simple economics, says Moore, who is a former CEO of CHEP International. "CHEP has a $20 asset; our asset costs $62 and can run to $65 or $66 depending on resin costs," he says. "Internally, for very selfish reasons, we can't afford to lose [our pallets]." In fact, the company has invested in not one, but four tags for every pallet in its pool. It attaches one tag to each corner of the platform in order to ensure 100 percent read rates.
But there's more to the company's commitment to RFID than just self interest, Moore says. Its customers—even those not using RFID in their internal operations—benefit from iGPS's ability to track and trace its pallets as well. If an iGPS pallet's tag is not read for 20 days, the company contacts the site where the last read took place to try to track it down. If it's still unable to locate the pallet, it charges the customer for the lost unit. But Moore reports that most of the time, the pallet will eventually be read by a scanner somewhere. Once that happens, the customer automatically receives a refund.
Though iGPS hasn't strayed from its commitment to using radio-frequency technology, Moore admits that the company has had to tweak its business model along the way. Its original business plan called for it to target industries like pharmaceuticals and consumer electronics, where traceability represents a prime concern. But Moore reports that interest has turned out to be much stronger in parts of the grocery industry, particularly among distributors of beverages and bagged products like pet food and sugar.
The slow uptake in the pharmaceutical and consumer electronics industries may be more a reflection of their attitudes toward pallet pooling than to any hesitations about RFID. Those sectors have proved somewhat reluctant to join pallet pools in the past. According to CHEP, these industries continue to prefer to use one-way pallets to eliminate concerns like sanitation.
A foot in the door
Moore acknowledges that what gets his company in the door many times is not RFID but its lightweight plastic pallets. Once clients get a chance to see what RFID can do, however, they're usually won over.
Martori Farms is a case in point. Initially, the Scottsdale, Ariz.-based company, which is one of the nation's largest growers of melons and broccoli, was drawn to the iGPS pool by the prospect of using plastic pallets. For produce companies, plastic pallets offer a number of advantages over their wooden counterparts, says Paul Fleming, Martori's vice president of marketing and business development. To begin with, plastic platforms eliminate problems associated with broken boards, loose pieces of wood, and loose or protruding nails. In addition, the lightweight pallets reduce strain on workers' backs and allow the company to load more produce onto each truck. And for food-industry companies like Martori, the plastic pallet has the edge over wood when it comes to sanitation. Plastic pallets are not only impervious to contamination, but they can also be thoroughly cleaned.
At first, Martori saw RFID simply as a bonus. But the company soon came to look upon the technology as more than a frill. Right now, it is only using RFID data to reconcile its shipment and usage records with those of iGPS, but it's looking to expand the technology's use into other business areas. For example, Martori is working with the vendor to integrate RFID readers with its warehouse management system. "This will be helpful for inventory control, shipping, and product traceability—a critical issue in the food business," says Fleming.
As Martori Farms' case illustrates, iGPS is willing to give its clients a hand when it comes to getting their RFID infrastructure in place. "Some of them need equipment, and we install it and charge for it," says Moore. But he adds that many of the company's other clients have taken care of their RFID reader and middleware needs themselves. PepsiCo, for example, has integrated the RFID technology with its warehouse management system and is now tying stockkeeping units (SKUs) to specific pallets.
Not ready for prime time
As for what the future holds, CHEP executives believe that it will take time for demand for RFID-enabled pallets to develop. In their view, the adoption of RFID in pallet pools will follow a similar path to the adoption of bar codes some three decades earlier. In short, they expect something that's more evolution than revolution as the technology matures and is incorporated into the distribution infrastructure.
When all is said and done, however, both CHEP and iGPS agree that RFID will provide a host of long-term benefits for pallet poolers. In fact, Moore goes so far as to suggest that the results will be revolutionary. Says the iGPS CEO: "I think what we are doing now will change the entire supply chain."
Jeremy Van Puffelen grew up in a family-owned contract warehousing business and is now president of that firm, Prism Logistics. As a third-party logistics service provider (3PL), Prism operates a network of more than 2 million square feet of warehouse space in Northern California, serving clients in the consumer packaged goods (CPG), food and beverage, retail, and manufacturing sectors.
During his 21 years working at the family firm, Van Puffelen has taken on many of the jobs that are part of running a warehousing business, including custodial functions, operations, facilities management, business development, customer service, executive leadership, and team building. Since 2021, he has also served on the board of directors of the International Warehouse Logistics Association (IWLA), a trade organization for contract warehousing and logistics service providers.
Q: How would you describe the current state of the contract warehouse industry?
A: I think the current state of the industry is strong. For those that have been focused on building good client relationships over the years, I think it’s a really exciting time. Coming out of all the challenges of the past few years, I think there’s a lot of opportunity for growth and deeper partnerships. It’s fun to see the automation and AI (artificial intelligence) integration starting to evolve [in a way that’s] similar to what we saw with WMS (warehouse management systems) in the early 2000s.
Q: You are now president of your family firm. Is it an advantage having grown up in the business as opposed to working elsewhere?
A: I definitely believe it was an advantage growing up in the business. Whether it’s working with family or someone else in the industry, there’s always an advantage when you have mentors[to guide] you. I’ve been blessed to have several mentors, some in the industry, others just in life, and I’m thankful that they were willing to mentor me and that I was willing to listen to them.
Q: What are the biggest challenges currently facing 3PLs, and how are you addressing them?
A: Labor and legislation are both tough right now. The two seem to have a lot to do with each other, and it can make it tough to find and retain people. So I think we’ll see more and more automation of processes industrywide.
Q: Third-party service providers often must handle a wide variety of products for a lot of different clients. Does this variety make it difficult to invest in automation and other new technologies?
A: It can make things more difficult when looking at certain automation, but it’s in the “difficult” that a lot of opportunities lie. It would be tough to find a single solution that fits every client’s needs, but there are always opportunities to improve in certain areas. It just takes a bit of vision and commitment, and a willingness to invest in your own long-term success.
Q: As a 3PL, what do you look for when selecting the clients you work with?
A: Quality relationships that will last a long time. When both parties are happy and working together in the same direction, everyone wins.
Q: You’ve been a board member of the International Warehouse Logistics Association since 2021. Why is your involvement with this organization important to you?
A: I think it’s important to understand what’s happening in the industry. IWLA is a great resource for staying up to date and getting a solid education when it comes to the latest logistics trends. I also think it’s important to give back and pass along what we’ve learned to those just getting started in the business. As important as it is to have a mentor, it’s just as important to mentor and help others.
“While there have been some signs of tightening in consumer spending, September’s numbers show consumers are willing to spend where they see value,” NRF Chief Economist Jack Kleinhenz said in a release. “September sales come amid the recent trend of payroll gains and other positive economic signs. Clearly, consumers continue to carry the economy, and conditions for the retail sector remain favorable as we move into the holiday season.”
The Census Bureau said overall retail sales in September were up 0.4% seasonally adjusted month over month and up 1.7% unadjusted year over year. That compared with increases of 0.1% month over month and 2.2% year over year in August.
Likewise, September’s core retail sales as defined by NRF — based on the Census data but excluding automobile dealers, gasoline stations and restaurants — were up 0.7% seasonally adjusted month over month and up 2.4% unadjusted year over year. NRF is now forecasting that 2024 holiday sales will increase between 2.5% and 3.5% over the same time last year.
Despite those upward trends, consumer resilience isn’t a free pass for retailers to underinvest in their stores by overlooking labor, customer experience tech, or digital transformation, several analysts warned.
"The 2024 holiday season offers more ‘normalcy’ for retailers with inflation cooling. Still, there is no doubt that consumers continue to seek value. Promotions in general will play a larger role in the 2024 holiday season. Retailers are dealing with shrinking shopper loyalties, a larger number of competitors across more channels – and, of course, a more dynamic landscape where prices are shifting more frequently to win over consumers who are looking for great deals,” Matt Pavich, senior director of strategy & innovation at pricing optimization solutions provider Revionics, said in an email.
Nikki Baird, VP of strategy & product at retail technology company Aptos, likewise said that retailers need to keep their focus on improving their value proposition and customer experience. “Retailers aren’t just competing with other retailers when it comes to consumers’ discretionary spending. If consumers feel like the shopping experience isn’t worth their time and effort, they are going to spend their money elsewhere. A trip to Italy, a dinner out, catching the latest Blake Lively and Ryan Reynolds films — there is no shortage of ways that consumers can spend their discretionary dollars,” she said.
Editor's note:This article was revised on October 18 to correct the attribution for a quote to Matt Pavich instead of Nikki Baird.
The market for environmentally friendly logistics services is expected to grow by nearly 8% between now and 2033, reaching a value of $2.8 billion, according to research from Custom Market Insights (CMI), released earlier this year.
The “green logistics services market” encompasses environmentally sustainable logistics practices aimed at reducing carbon emissions, minimizing waste, and improving energy efficiency throughout the supply chain, according to CMI. The market involves the use of eco-friendly transportation methods—such as electric and hybrid vehicles—as well as renewable energy-powered warehouses, and advanced technologies such as the Internet of Things (IoT) and artificial intelligence (AI) for optimizing logistics operations.
“Key components include transportation, warehousing, freight management, and supply chain solutions designed to meet regulatory standards and consumer demand for sustainability,” according to the report. “The market is driven by corporate social responsibility, technological advancements, and the increasing emphasis on achieving carbon neutrality in logistics operations.”
Major industry players include DHL Supply Chain, UPS, FedEx Corp., CEVA Logistics, XPO Logistics, Inc., and others focused on developing more sustainable logistics operations, according to the report.
The research measures the current market value of green logistics services at $1.4 billion, which is projected to rise at a compound annual growth rate (CAGR) of 7.8% through 2033.
The report highlights six underlying factors driving growth:
Regulatory Compliance: Governments worldwide are enforcing stricter environmental regulations, compelling companies to adopt green logistics practices to reduce carbon emissions and meet legal requirements.
Technological Advancements: Innovations in technology, such as IoT, AI, and blockchain, enhance the efficiency and sustainability of logistics operations. These technologies enable better tracking, optimization, and reduced energy consumption.
Consumer Demand for Sustainability: Increasing consumer awareness and preference for eco-friendly products drive companies to implement green logistics to align with market expectations and enhance their brand image.
Corporate Social Responsibility (CSR): Companies are prioritizing sustainability in their CSR strategies, leading to investments in green logistics solutions to reduce environmental impact and fulfill stakeholder expectations.
Expansion into Emerging Markets: There is significant potential for growth in emerging markets where the adoption of green logistics practices is still developing. Companies can capitalize on this by introducing sustainable solutions and technologies.
Development of Renewable Energy Solutions: Investing in renewable energy sources, such as solar-powered warehouses and electric vehicle fleets, presents an opportunity for companies to reduce operational costs and enhance sustainability, driving further market growth.
A real-time business is one that uses trusted, real-time data to enable people and systems to make real-time decisions, Peter Weill, the chairman of MIT’s Center for Information Systems Research (CISR), said at the “IFS Unleashed” show in Orlando.
By adopting that strategy, they gain three major capabilities, he said in a session titled “Becoming a Real-Time Business: Unlocking the Transformative Power of Digital, Data, and AI.” They are:
business model agility without needing a change management program to implement it
seamless digital customer journeys via self-service, automated, or assisted multi-product, multichannel experiences
thoughtful employee experiences enabled by technology empowered teams
And according to Weill, MIT’s studies show that adopting that real-time data stance is not restricted just to digital or tech-native businesses. Rather, it can produce successful results for companies in any sector that are able to apply the approach better than their immediate competitors.
“ExxonMobil is uniquely placed to understand the biggest opportunities in improving energy supply chains, from more accurate sales and operations planning, increased agility in field operations, effective management of enormous transportation networks and adapting quickly to complex regulatory environments,” John Sicard, Kinaxis CEO, said in a release.
Specifically, Kinaxis and ExxonMobil said they will focus on a supply and demand planning solution for the complicated fuel commodities market which has no industry-wide standard and which relies heavily on spreadsheets and other manual methods. The solution will enable integrated refinery-to-customer planning with timely data for the most accurate supply/demand planning, balancing and signaling.
The benefits of that approach could include automated data visibility, improved inventory management and terminal replenishment, and enhanced supply scenario planning that are expected to enable arbitrage opportunities and decrease supply costs.
And in the chemicals and lubricants space, the companies are developing an advanced planning solution that provides manufacturing and logistics constraints management coupled with scenario modelling and evaluation.
“Last year, we brought together all ExxonMobil supply chain activities and expertise into one centralized organization, creating one of the largest supply chain operations in the world, and through this identified critical solution gaps to enable our businesses to capture additional value,” said Staale Gjervik, supply chain president, ExxonMobil Global Services Company. “Collaborating with Kinaxis, a leading supply chain technology provider, is instrumental in providing solutions for a large and complex business like ours.”