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Armour Transportation Systems Excels at Cooperative Pallet Management
Pro-Active Approach Helps Ensure Customer Satisfaction, Profitability

By Rick LeBlanc
Date Posted: 10/5/2004

One of the pet peeves of many trucking companies is the trials and tribulations of pallet exchange. When pallet exchange expectations are not mutually understood and agreed to by shipper and receiver, the carrier can end up paying for pallet replacement and re-palletization costs.

            Pallet exchange issues can flare up as a customer service issue, consuming valuable management time in the process, and can result in unilaterally imposed and conflict provoking deductions to freight invoices for unreturned pallets or return of substandard pallets.

            “Pallet control is not an easy job,” said Ralston Armour, a vice president at Armour Transportation Systems, a leading trucking company in Atlantic Canada. “Many companies do not see the benefits financially with controlling pallets and do not want to invest the time and money into pallet control. While it is certainly difficult to measure costs associated with pallets, an efficient pallet control department will outweigh the costs associated with not controlling this asset.”

            “Pallet control is both an excellent marketing tool as well as a necessity to prevent unnecessary costs,” added Ralston.  “Obviously, organizations that are also serious about controlling pallets are much more comfortable dealing with a supplier that shares the same attitude towards efficient pallet control. On the other hand, pallet control is also important in eliminating unnecessary costs, as every lost pallet is an incurred cost.”

            For a transportation company with the daunting challenge of making returnable pallet programs work for its customers and their customers, a proactive approach can help ensure customer satisfaction and add to profitability. Such has been the case at Armour, which relies on the Canadian Pallet Council (CPC) and strong pallet control within Armour and its trading partners.  In fact, Armour provides pallet control analysis and assistance to its customers.

            “Pallet control is extremely important in the Armour system,” said Ralston. “Pallets, like freight, need to be monitored, tracked and accounted for on a daily basis. An inefficient pallet control system can result in lost dollars and disgruntled customers as they are a physical asset owned or rented by a company. When control over any asset is not maintained, you are effectively creating inefficiencies within your business.”

            Armour has long recognized that pallet management issues facing a transport provider are somewhat different than for shippers and receivers, and they require a different approach.

            “At Armour Transportation, we were looking for a program we could use to track third-party,” said Darrell Duncan, Armour’s veteran pallet control manager. Darrell was immersed in the development and field testing of CTSWeb, CPC’s enthusiastically received new Internet-based pallet and container tracking system. CPC has provided its members with tracking software for over 20 years, but CTSWeb is the first version that uses the Internet.

            The CTSWeb project has been gratifying. “We see it as a great thing,” Darrell said. “If you are going to have the responsibility of looking after pallets as a carrier, in our eyes it is going to make it a lot easier.”

            Armour not only uses the program to track CPC pallets but other pallets as well, including proprietary pool pallets for paint and oil companies. His department tracks close to 14,000 pallets moving daily through Armour’s logistics system, Darrell estimated.

            Armour, a family-owned transportation and logistics company, was begun by Gordon Armour in the 1930s. He began hauling hay. It soon blossomed into a legitimate trucking business when he began picking up backhaul loads of soap and chocolate.

            Gordon’s son, Wesley, came into the business in the 1960s and is now CEO. The company has continued to expand over the years both organically as well as by acquisition, and it has become the leading regional firm in Atlantic Canada. It was recently ranked as the 11th largest trucking company in Canada.

            Armour offers North American truckload services as well as strategic alliances for other major carriers delivering LTL (less than a load) or multi-drop loads into Atlantic Canada. With over 1,400 employees and running 2,300 pieces of equipment, the company has over 400 drivers and 23 terminals in the region. Armour Transport in Moncton, New Brunswick, operates a major cross-dock operation out of its 60 doors. Armour Logistics Services, another division of the company, operates a 300,000-square-foot warehouse in Moncton; it also runs a 50,000-square-foot facility in Dartmouth, Nova Scotia and is a partner in a 45,000-square-foot facility in St. John’s, Newfoundland. Under Ralston’s direction, Armour also operates a courier business throughout the Maritimes.

            Armour’s role as a regional interline partner for other carriers places it in the daunting spot of reconciling pallet exchange balances between shipper, initial carrier, Armour, and the receiver.  To make things even more complex, Armour not only delivers to retail distribution centers but also has contracts to deliver to retail grocery outlets -- and is required to maintain pallet control over these deliveries, too.

            While Darrell has managed pallet control in this environment for 16 years, he found that the previous generation of tracking software no longer met his needs as a third-party provider. “It was just between the shipper and receiver,” he said. “The carrier was stuck in the middle.  It just didn’t work.”

            Actually, Armour did make the old system work, but it required about twice as much data entry, according to Darrell. “It takes lot of labor,” he said, “and as a carrier, there’s no money in managing pallets. It’s just part of the business.”

            Darrell met with upper management at Armour to convey his concerns about the old system’s shortcomings. “I was asked if I thought we should build our own system, and I said I don’t think so,” he recalled. “I said I thought we’d be better off working with the Canadian Pallet Council in developing a system that is user friendly for everyone, including shippers and receivers as well as third-party warehouses and carriers.” As a pallet management veteran, he recognized that one tracking system that could be used by all participants was going to be a key factor in developing a long term solution that had everyone’s buy-in.

            Armour representatives, including Darrell, flew to Toronto in September 2002 and meet with CPC and iLogic, the Toronto-based tracking software developer. “They talked about the Web, but the Web didn’t really interest me at that time,” said Darrell. “I just wanted a system that would work for third-party.”

            A follow-up meeting at Armour’s headquarters allowed Darrell to show CPC and iLogic exactly the features he needed. One example he gave: pallets flowing from Kraft Foods, a shipper, to Atlantic Wholesalers, a distributor, with Armour as the intermediary.

            “We had to get a way that would allow us to get a report that Armour Transport owes Kraft, and what Atlantic Wholesalers owes us,” Darrell recalled of the meeting. “We had to come up with a program to do that.”

            A prototype of CTSWeb was launched at the end of 2002.  “It has been go, go, go ever since,” Darrell said.  Because the new system was Web based, Darrell could do a lot of testing at home as well as at the office.  A few ‘bugs’ were noted and corrected quickly by iLogic. “We had to make sure that everybody was on the same wavelength,” said Darrell. “It is not just for us, it is for everybody. There was stuff in there that I probably will never use, but I understand that other people need it. Everyone was unified. We worked really hard.”

            The project team included representatives from manufacturers, such as Kraft Foods and Newleyweds Foods, distributors, such as A&P and Sobeys, with Armour representing carriers.  “I worked with some of the top notch people in the industry,” Darrell said.

            Darrell is convinced that once a critical mass of CPC members changes over from the CTS system to the CTSWeb system, it will provide important benefits, such as reduced data entry, greater visibility and much faster reconciliation.  And there will be another benefit, according to Darrell.  “CPC will be able to police the system better,” he said, noting that the central database should allow CPC to more readily monitor operations. “It is a blessing,” Darrell said of CTSWeb. 

            “I’ve seen CPC at their highest point, and I’ve seen them at their lowest,” Darrell commented, “and I think they are on their way back up with CTSWeb.” After having as much as a 70% market share in the early 1990s, CPC’s share slid during the latter 1990s and early 2000s as CHEP expanded. “CPC has managed to hang on this long. I think you are now going to see a changing trend. People are starting to smarten up and say, ‘This is quite an expense, this invoice for rent every month.’ ”

            As is past and current CPC practice, each delivery is required to be accompanied by a CPC bill of lading, but computer-to-computer communication is part of a future plan that increasingly will involve paperless transactions.

            Darrell works full-time in Armour’s pallet program, managing two full-time clerks. One clerk performs data entry and the second performs data entry and helps Darrell with various tasks, such as coordinating unloading and loading, and moving pallets at the cheapest rates.  A third clerk helps part-time.

            Another positive outcome that Armour has discovered is that training of new data entry people has proven to be very easy even though the new system tracks 13,000 customer accounts.  “We have discovered that if there is someone with some free time, we can use them in the pallet control department and get them doing pallet entry,” Darrell said. “It takes very little training to show them how to use CTSWeb.” For example, a receptionist with spare time can readily perform data entry for CTSWeb.

            Ironically, training took a little longer for data entry clerks who already were experienced with CTS. “Because this system is such a radical change, they were still thinking ‘old system,’ but then suddenly it sank in,” said Darrell. With data entry becoming increasingly streamlined, he expects his staff will have more time to concentrate on sending out ledgers regularly, freeing up time to focus on pallet pick-ups, pallet-related terminal operations, and trading partner relationships. The overall goal is to improve customer service.

            Asked if it is unusual for a trucking company to have a full-time employee managing pallets, Darrell admitted that it probably was unusual for one to stay with it as long as he has. “I’ve been managing pallets for 16 years,” he said. “I originally was a truck driver.”

            As a carrier, Darrell noted that his company is at the mercy of wholesalers when it comes to pallet returns.  “If they fall behind in their paperwork,” Darrell said, “they take us behind.”

            Some major distribution companies in Atlantic Canada fell behind earlier this year because of staff changes, and Armour did not get January and February reports from them until early April. This not only put Armour behind in paperwork but also in terms of distributors acknowledging they owed pallets and returning them to Armour. Slow reconciliation of pallet balances by trading partners resulted in increased dwell time for empty pallets at the distribution centers.

            With the new CTSWeb system, pallet management takes place at a much faster pace.  “The other day I checked to see how many pallets I owed Kraft Foods,” Darrell noted, “and I was able to tell in three minutes what was owed Kraft up to that morning when I did the download from the system.”

            While Armour’s approach to pallet management may be stronger than most trucking companies, it is a course of action that has steered the company clear of customer service or serious pallet replacement concerns. “With pallets, they often aren’t important (to companies) until someone gets into trouble,” Darrell remarked.

            “When you can tell me that the carrier is no longer responsible for the pallets, that’s the day we can stop worrying about the paperwork,” he continued.  “As long as we are responsible for pallets, we need to keep track them.”

            Armour generates five or six loads of one-way pallets weekly at its Moncton terminal. They go to a local pallet recycler. “You’ve got to recycle what you can, and then after awhile give it to the other guy and let him go through and repair it,” Darrell said. “He’s an old fellow getting pretty close to retirement, but he’s making a living at it.”

            Armour deals with numerous different size pallets, some 5 to 8 feet long.  “Being an LTL facility, there is a lot of cross-docking on various pallets,” said Darrell. “We sort out about 400 four-way and two-way pallets weekly just to use within our own system.” Armour uses one-way pallets for destinations where pallet retrieval is more costly.

            The Moncton terminal has two employees who sort pallets full-time. They use a combination of forklift and manual handling. Extra warehouse staff is assigned as required.   Armour also backhauls old corrugated for recycling.

            “There are too many throwaway pallets going into landfills,” Darrell noted. “That’s what I like about CPC and CHEP.  Both are pallets that can be used over and over again.”

            “We see a few plastic pallets coming in from the states,” Darrell said.  “Nobody seems to want them back - nobody is hollering for them. We’ll put product on them going back to the states.” While Armour hauls some palletized freight to U.S. destinations, it does not track the pallets, many of which are one-way pallets.

            When asked if customers who do not require pallet backhaul ask for price breaks, Darrell admitted that it has become an issue in recent years. “We’ve run into companies using CHEP,” he said. “They say, ‘There’s no pallet control -- what kind of discount can you give us?’ We gave one rate based on that and found out they were still using CPC, too. We came up with a sensible way to handle it and gave them a rate on a trailer-load going back and handled it that way.”

            “I’m one of those guys who takes his job very personally,” Darrell said matter of factly.  “You have to put your personal life into it. If I make someone a promise, I want to fulfill it.  That’s the type of guy I am.”

            At Armour, company turnover is very low, less than 8%. Darrell started in the trucking industry 28 years ago, first as a helper, then driving straight trucks, 10-wheelers, and eventually tractor-trailers in the city as well as on the highway.

            “I had a lot of experiences, and it really helped me running a pallet pool,” he said.  “You know where mistakes are being made. You can see it.  Sometimes people accuse me of saying too much when they ask me a question, but I tell them, ‘You ask me a question. I’ve got all that experience, and I can see what can happen.’ People call and ask for help. I ask them for details. I look at it and then call them back. That’s a big service for companies. It is a value-added service to customers.”

            The information technology requirements to get aboard the CTSWeb pallet control system were modest given that Armour was already running in a Microsoft Windows 2000 environment. Pallet account information was sent to iLogic to be uploaded into the central database, and the new program was installed at Armour, which only experienced about one hour of down time. With Armour’s pallet data now residing in the central database, space was freed up in its computer system for transportation information. “Our IT department hasn’t had anything to do with programming,” Darrell said.  “There have been very few problems.  For the few occasions where help has been needed, we just emailed iLogic.”

            Darrell’s main concern going into the project, the third-party module, is running smoothly. “I’ve already talked to two major carriers, one in Quebec and one in Ontario, who have said they would like to come and visit me to see what the system can do,” he said.

            Darrell treads lightly on the topic of CHEP versus CPC. “I look at it this way,” he said.  “If CPC goes, we better watch ourselves because there is no competition to the other pallet company. That’s the problem in Europe, Australia and the U.S. There is no competition. To have a healthy industry, you need competition. CTSWeb will help CPC be more competitive.”

            Darrell also emphasized that Armour works cooperatively with CHEP Canada. “We do pick-ups for them,” he explained. “They are definitely part of the puzzle. They aren’t going away. They are going through our system all the time.”

            “They have their system,” Darrell observed. “As a carrier, I work with both systems. I’ve got nothing against either.”

            Armour Transport, for its part, is using a mix of in-house professional pallet management from Darrell and his team, a proven pallet pooling program (the CPC), and the new CTSWeb to help it stay on top of customer pallet requirements -- whether they be CPC, CHEP, or other pallet systems. A proactive approach to pallet management pays off.

            Pallet control is extremely important in the Armour system. Pallets, like freight, need to be monitored, tracked and accounted for daily. An inefficient pallet control system can result in lost dollars and disgruntled customers. When control is not maintained over pallets or other assets, inefficiencies arise within a business.

            Under the pallet control department at Armour, Darrell looks after monitoring, tracking and recording every pallet that requires attention through the entire system. Through increased innovations, such as CPC’s new Web tracking software, Darrell and his team can better manage the flow of pallets much more effectively.

            Pallet control is not an easy job.  Many companies do not recognize the financial benefits of controlling pallets, and therefore they do not want to invest resources into it. While it is certainly difficult to measure costs associated with pallets, an efficient pallet control department will outweigh the costs associated with no controls.

            Controlling the flow of paperwork associated with pallets can also discourage proper pallet control. Depending on the pallet bank and size of the company, many organizations are responsible for thousands of pallets each day. In many cases, separate paperwork must be completed to account for the pallets, and the paper trail must make it back to the proper individuals to record the correct information. Dealing with large quantities of pallets, the process of tracking and recording the paperwork is a job in itself. Fortunately, as technology continues to advance, so do better systems to control these pallets. While it is still very much a manual process today, companies are beginning to take advantage of systems designed specifically to help improve the flow of information and paperwork.

            Pallet control is both an excellent marketing tool as well as a necessity to prevent unnecessary costs. Organizations that are serious about controlling pallets are much more comfortable dealing with a supplier that has the same attitude toward efficient pallet control. On the other hand, pallet control is also important in eliminating unnecessary costs, as every lost pallet is an incurred cost.

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