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Canadian Pallet Council Rebounds; Membership and Market Share Up
New Web-Based Pallet and Container Tracking Software Much More Advanced

By Rick LeBlanc
Date Posted: 4/5/2004

Cooperative pallet pooling is still alive and well and residing in Canada. “Top line, we’ve had a phenomenal year,” said Belinda Junkin, CEO and President of the Canadian Pallet Council (CPC).

            Increasing membership, maintaining key large members, Internet-based tracking technology, quality improvements and other initiatives added up to a successful 2003 for the reinvigorated Canadian cooperative pooling association. “We’ve had lots of consistent wins,” she said.

            The many “little wins” achieved by the CPC include objectives from its 2002-2003 strategic plan, a four-pronged document that emphasized quality improvement and cost reduction, improved ease of use, strengthened market share, and increased effectiveness of the CPC staff.

            “If you go back and look at the situation we found ourselves in a few years ago, with IFCO launching its own rental pallet in Canada as well as internal and external competition from CHEP, our 2002-2003 strategic plan was right on the money,” Belinda said.

            The CPC is a non-profit association of manufacturers and retailers that use CPC 48x40 pallets; the organization also includes transport companies and pallet suppliers. Members normally purchase CPC pallets and exchange them according to CPC procedures, but rental and retrieval services are also offered by CPC member pallet suppliers.

            CPC market share erode in the late 1990s and early 2000 in the face of stiff competition from CHEP in Canada and the U.S., where many decisions are made on behalf of Canadian subsidiaries regarding pallets; many U.S. white pallets shipped to Canada were converted to CHEP-US. The situation has stabilized, according to Belinda, and the CPC is on the rebound.

            Part of the problem was that while CPC field staff had solid relationships with operations personnel, over the years it had lost its connections in the board rooms of its larger members.  “We could walk into any warehouse door in the country and be greeted with open arms,” Belinda explained, “but executive level decision makers didn’t know who we were.”

            In response, the CPC developed a formal marketing plan -- part of its strategic initiative to strengthen market share. It worked with a public relations firm to develop a communications strategy for CPC staff.

            As a result of developing access to executive level decision makers among distributors and grocery and consumer goods manufacturers, the CPC has improved communication with industry executives. This has led to the agreement of distributors to help persuade non-CPC members that had been using CPC pallets to join the council, reducing the ‘gray pool’ of unsanctioned CPC pallet use.

            (The use of CPC pallets by non-members reduces pallet quality because they are not obligated to repair CPC pallets; owners of CPC pallets are required to repair 25% of their pallets annually.)

            “The non-members were using the program and contributing to all that ails it,” Belinda said.

            The CPC has also developed a trademark infringement policy and continues to actively challenge unauthorized use of CPC pallets, which may still account for about 20% of the pool.  In fact, the council is beginning legal action against one non-member pallet company that is dealing in CPC pallets.

 

Infusion of Executives

            One key to the CPC’s revitalization has been a renewed commitment from pallet users to appoint senior management people to the CPC board. While the organization has always had high level support from the entrepreneurial pallet industry, participation on the board by executives of manufacturing and retail businesses waned over time.

            The CPC started with vice president and director-level board members from the manufacturing sector, Belinda explained, “…but because there were no big issues on the plate, over the years it started moving down to the point that we had pallet administration people serving on the board. It was something that evolved from complacency and our many years of success.”

            The fresh infusion of senior managers onto the CPC board of directors from member businesses has had a favorable impact. “That has made a huge difference in making the board more effective,” Belinda said. “These are the decision makers in industry, the people pushing RFID and other initiatives.”

            The CPC board approved the development of a marketing plan that called for the creation of a new staff position, vice president for business development. Gordon Wilson was named to the new post. He is a 27-year business veteran of Nabisco, having run its food service division as well as working in marketing.

            “He came on board to help us strengthen and maintain market share,” Belinda explained, “to help us sell the CPC and to help us connect back into that senior management group. He clearly helped us market the organization.”

            One of the marketing aids developed by the CPC in 2003 was a new diagnostic tool that helps businesses analyze and determine pallet program costs.

            CPC membership grew 7% in 2003. “We gained McCain’s as a new member, and we have managed to keep Kraft and Nabisco,” Belinda said. “About five years ago it looked like we would lose Kraft to CHEP. We have put on an aggressive campaign.”

            In its effort to retain Kraft as a member, CPC staff met with Kraft officials in the U.S.  “They didn’t know about us, so we had to educate them,” said Belinda. The response was favorable, and the meeting was credited with helping keep Kraft in the CPC.

            The CPC has focused in recent years on solidifying its Canadian operations rather than looking to expand to the U.S. However, it has not shied away from explaining its pallet pool program to interested U.S. businesses when asked.

            Other members of the CPC’s executive team include Dave O’Dell, director of member services, and Alex Bird, who has headed up development of the Web-based container and pallet tracking program, CTSWEB. “For the first time we have a senior management group working with us,” Belinda said. Frequent meetings had put pressure on the executive committee and board. “Legally they have an obligation to the membership, but they’ve got full-time jobs,” Belinda noted. Expanding the CPC management team reduced the number of times that the executive committee and board were required to meet.

 

‘Revolutionary’ Program

            The newest version of the CPC container and pallet tracking software, CTSWEB, is a significant improvement over earlier versions. “We have an awesome product in CTSWEB,” Belinda said. “It provides the global picture that any pallet manager has to have.”

            Alex, CPC’s CTSWEB project manager, is equally excited about the new tool.  “CTSWEB is a clear example of how a cooperative can develop a solution of significant value for its members with speed and efficiency,” he said. The new program was developed from concept to a production system in just 15 months.

            “CTSWEB leverages Web technology to knit together a 1,350 member association across Canada into one networked solution sharing an application and common database,” said Alex. “It provides direct secure communication, accurate data sharing, reduced administrative burden, and information and data specific to the exchange partners and for the industry as a whole.”

            The new program was developed in cooperation with iLogic, a company that has been writing pallet tracking computer software for over 20 years. “This is a classic example of how technology can dramatically enhance a logistics function,” said Victor Cheng, iLogic president. His company has developed custom pallet tracking software and Enterprise Resource Planning systems for major U.S. and Canadian pallet companies. “We have been very lucky to be able to work with the brightest individuals in logistics,” said Victor.

            “When you are designing new software, companies usually assign the best people to work with us,” said Victor. “We work with them and learn from them. Also, we have literally answered thousands of hours of support calls from pallet users over the years. We’ve heard first hand what they like, their frustrations, what they don’t like.”

            Work on CTSWEB began in early 2003. After an enthusiastically received pilot test, it was launched in January 2004.

            The new version of CTSWEB is notably different and improved, according to Victor. “In the previous versions of CTS, we just basically automated the inefficiencies that were built into the system itself,” he said, which is a typical first step in developing information technology in many -- if not most -- applications. “We just made the inefficient system go faster.”

            “In the old system,” Victor explained, “no matter how well we made it run, each company kept its own records. At the end of the operating cycle, which usually should be on a monthly, quarterly or yearly basis, they sent each other a ledger. Then they went through hundreds of pages of ledgers, and then they yelled at each other about the exceptions. It has gone on for 20 years and hasn’t really changed that much.  The basic model was very confrontational.”

            The new program is based on a centralized database, which helps eliminate duplicate efforts. When shipper A writes a record from A to B, receiver B logs onto the same system and sees the record right away; the information does not have to be entered a second time, only verified.

            While the new CTSWEB can reduce data entry by one-half or more, Victor is hoping to largely eliminate keypunch entry altogether. “We are really striving for machine-to-machine communication…When they can accept the data from the supplier’s system into their own system, they don’t need to do any input. So instead of reviewing hundreds or thousands of pages of transactions, both parties would just see the few exceptions and decide how to deal with it. It is more cooperative now.”

            Some companies capture the transactions very effectively and reliably by computer information exchange and do not have to input data. Some companies are still “sort of half and half,” said Victor.

             “A vast majority of data is in agreement between trading partners. Our reconciliation screen will show by how much and in what way they disagree, and then the company can either log their comments on the system or e-mail the company, explaining the discrepancy, and then it will be resolved right there. In the old system that discrepancy would sit until the end of the month, cumulating over the years until the problem became very difficult to explain or resolve.”

 

Program Benefits, Savings

            According to Victor, one-for-one exchange of pallets can still work with CTSWEB.  “The returning in our system definition is another transaction,” he explained. “Any time a pallet is being shipped from one location to another with a change of ownership -- that is a transaction.” The new system specifies who has responsibility for pallet return, whether it is the delivery truck or whether they are to be left for later batch return or through a CPC-member retrieval company.

            Participants in the CTSWEB test project were so favorably impressed with the new tool that they wanted to make it available nationwide as quickly as possible. It put a lot of pressure on the development team, but it has kept to schedule. The next stage is to get the next largest 25 CPC pallet users onto CTSWEB, which will account for about 75%-80% of pallets in the pool, according to Victor. “Implementation has started and will be largely complete by the end of 2005,” said Alex. Beyond focusing on larger members, the CPC is making available a ‘self-implementation’ module for testing by smaller members or members with less complicated set-up needs.

            “In addition to CPC, our system also tracks other pallets and containers as well,” Victor noted. “Some of the members are using it to do this.” If pallet or reusable container data is captured in the customer’s information system, it can be downloaded into CTSWEB.

            Victor has been pleasantly surprised to see that some companies are using CTSWEB internally also to track intra-company pallet movements. A major grocery distributor is successfully using the program to track the internal loop between the distribution center and retail stores. “I wouldn’t be surprised if other grocery distributors follow suit,” said Victor.

            Savings from the benefits of using CTSWEB -- reduced administration costs, fewer lost pallets, better inventory utilization, and so on -- are estimated to reach at least $10 million annually once it has been implemented on a wide scale. “Their return on their investment is going to be very good,” said Victor.

            The transparency of the information should help increase efficiencies and reign in the ‘gray market’ in CPC pallets. “With CTSWEB, there is really nowhere to hide,” said Victor.  “When everything becomes transparent, it will be interesting to see what happens. It will definitely be a more fair system because everything is transparent -- more cooperative than it was in the past.” With better data, forecasting should improve, as should success with regional or corporate-level pallet management programs.

            “In the future, we see a lot more seamless integration with Enterprise Resource Planning or Warehouse Management systems,” Victor said. “Our goal is to make our system become almost transparent because it will become seamlessly integrated.”

            ILogic will also be working to incorporate radio frequency identification (RFID) information into CTSWEB in light of the rapidly growing interest of the logistics community in RFID technology. “I don’t think anyone could ignore that strong trend,” said Victor. “We are going to add additional modules to our system to exploit this capability.”

            Both Victor and Alex give high marks to Belinda for being a tireless advocate of the initiative, even though support was not always strong. “I think the real story is that nobody expected the CPC to rise to this kind of challenge with such a comprehensive solution,” Alex said. “Most people had given the CPC up for dead. I believe the success of this venture is directly attributable to Belinda Junkin, who single handedly pushed back at the lethargy and led the association  back to understanding the competitive advantage it was about to throw away.”

 

Enthusiastic About Future

            The CPC has many member-pallet companies that manufacture and recycle CPC pallets. Some pallet suppliers also provide other services, such as rental or retrieval. One of the benefits of participating in the CPC, according to Herman Long of Scotia Pallets, a regional pallet supplier in Atlantic Canada, is the uniformity of the CPC pallet specification. The CPC specification makes for a more efficient, equitable pallet procurement process. “When you make a pallet and when you are quoting on a pallet, the competition has to quote on the exact same product,” said Herman. “That’s pretty unique in the pallet industry.”

            “When you get into the CPC, it has to be the same, which puts everyone pretty much into the same playing field,” Herman added. The downside, he warned, is that a high quality pallet made for repeated trips is costly to manufacture. “The inspection system they have in place pretty much prevents anyone from not following the guidelines,” he said. “You make them up to standard or you just don’t make them.” Businesses buying CPC pallets generally are assured of getting high quality pallets. If they do not, all they need to do is notify the CPC.

            Herman expects demand for new CPC pallets to increase within three to five years after having been depressed in recent years. Since some major users left the CPC in recent years, there has been a good supply of used CPC pallets in the marketplace. “But that is not going to last forever,” he said. Membership has increased, he noted, so more companies are using CPC pallets. The largest buyer of new CPC pallets in the past has been the pallet industry itself --  in order to support rental programs, most notably companies such as Superior Management Group and Woodbridge Pallet.

            “The companies that are using them are very successful in keeping their trip costs down with the CPC, so it is not going to go away, especially in Atlantic Canada,” Herman said. “The rental system is something that is not very successfully operated here. We offer it, but not very many companies are interested in it (in Atlantic Canada). I think that in Atlantic Canada, the manufacturers can control their pallets. It is somewhat of a closed loop and they are able to control them.”

            “There are companies here getting literally hundreds of trips out of their CPC pallets because they may only have 1,000 pallets but they are running 24-7,” Herman reported.  “They bought the pallets five years ago and they are still going. It has been a real success story for a lot of medium sized manufacturers who have vertical integration in their operations. One purchase of pallets goes a long way.”

            With the advent of CTSWEB, Herman sees a much greater use of communication than there has been in the past. “It will be interesting to see how it all unfolds,” he said.

            “Most medium-sized businesses don’t have enough administration people around to check everything,” Herman observed. He cited the example of freight billing mistakes that still happen regularly in industry. “If you don’t check them all, no one can verify whether or not the bill is correct, and that’s the same problem they have with the pallets.”

            “That’s what’s going to change with this Web system. There is going to be instant information, and when you get it the day after shipment, you’ll know. And I think that is going to make the change. I think the issue is that now someone comes into work and keys in a pile of bills. They let someone else worry about the imbalances at the end of the month. With the new system they know they’ll have to deal with it (any discrepancy) today. And that’s a different story.”

            According to Alex, pallet supply members link with CTSWEB the same way as any other member. Currently IFCO Systems and Woodbridge Pallets are testing CTSWEB with an eye to expand its capacity further to reflect information on any type of pallet, its condition, and identifying the type and degree of any damage. The program also would identify different services, such as new pallet sales, used pallet sales, rental, repair, sortation, and transportation.

            “If you don’t do anything, you’re not much of a leader,” Herman concluded.  “If you don’t try new things, you aren’t going to get ahead, and I think the CPC has made some major advances in the control of the pallet by going ahead with this (CTSWEB) program. That in itself is to be commended.”

            The CPC is coming off its most successful year since Belinda took over as CEO and president eight years ago, she said. “Membership increased by 7% in 2003. We expect this membership momentum to continue into 2004, and we are well positioned for continued success with our strategic plan initiatives, especially with our planned implementation of the CTSWEB software.”








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