Swedish Grocery Industry Operates Cooperative Pallet And Container Pool
Details behind formation of Swedish reusable plastic pallet and container pool. Update on growth from 2.5 million container shipments in 2001 to a projected 60 million in 2005.
By By Rick LeBlanc
Date Posted: 6/1/2005
When the Swedish food industry launched its reusable plastic pallet and container system project back in 1999, it was looking for a way to simplify the handling of food and other consumer goods products. Hopes were high that it would succeed in significantly reducing solid waste from transport packaging and pallets as well as transportation
In addition to accomplishing these goals, Sweden’s reusable pallet and container system is also reducing costs for industry and at the same time demonstrating how cooperative pooling can succeed in a small country.
The pool, known as Svenska Retursystem (SRS), encompasses five reusable container models in addition to pallets and half-pallets. The not-for-profit rental pool is co-owned by DLF (Grocery Manufacturers of Sweden) and SDH (Swedish Trade Association); the latter group is composed of the retail distribution trade. The pool pallets are managed by AB Palleten, a subsidiary of Svenska Retursystem. With a structure somewhat similar to the Dutch beer pool (which was the subject of an article in the April issue of Pallet Enterprise), that being a cooperative industry subsidiary, Svenska Retursystem rents containers and pallets to industry participants.
"Back in the late 90s, both the trade (retailers) and the producers (suppliers) changed the way they approached packaging," explained Tryggwe Göransson, business development director for SRS. "Retailers were looking to eliminate one-way cardboard cartons and one-way wooden pallets from their waste stream. They didn’t want to handle these wastes in the retail outlets anymore."
The Swedish group looked at the reusable containers adopted by grocery chains in the United Kingdom. Unlike the British system, which has developed along proprietary retailer-specific container systems, the Swedes looked to an industry-wide system.
"Sweden is a small country, and there was a need to cooperate among suppliers and the retail trade," Tryggwe remarked. "They could own jointly the boxes and pallets, thereby reducing the need for separate boxes and pallets regardless of the product and regardless of the destination (which retailer)."
"Early in the game, the determination was made to manage the system internally," Tryggwe added. "The alternative would have been to turn to one of the established (third-party rental) companies, but the industry here decided to do it ourselves, with our own company owned jointly by the trade and by the producers."
Naturally, the industry wanted to keep fees for the service at the lowest possible level. "Our fees are always going to be much lower than any of the alternatives," said Tryggwe.
The reusable pallet and container system began as a two year pilot program to evaluate the suitability of the Svenska system. That plan called for the pilot project to run for two years in the Skåne area of southern Sweden and in the Stockholm region. The initial goal was to reduce packaging waste by 25% or 28,000 tons annually and reduce empty truck return trips by 260,000 kilometers annually. Both goals were reached within the time frame of the pilot program.
Since then, the pool has been extended to a national scale. "The growth has really been impressive," said Tryggwe. "For the first year in operation, 2001, we shipped 2.5 million containers. The following year we shipped 10 million containers. The year after that, we shipped 22 million containers. And last year we shipped 40 million containers. This year we are projecting over 60 million trips."
Such rapid growth has required an increased inventory of containers. SRS has been averaging about one trip per month from its container pool, but it is seeking to increase that rate to about 15 times yearly as volume increases, thereby reducing the amount of new containers required.
The pool uses plastic containers and pallets, with both made of high density polyethylene in an injection molding process. The system is based on an 800x1200mm pallet footprint, including both full and half-pallets, in addition to 400x600 containers and half-sized containers. There are five container sizes. The pool currently has about 5 million containers and pallets.
In terms of market share, the SRS containers capture about 75% to 80% of the inbound domestic produce container volume, which in turn encompasses about 40% of total produce volume. Overall, about 32% of inbound overall produce is packed in SRS containers and on SRS pallets.
The pallets and containers are made in the United Kingdom by Paxton Group, now a part of Linpac Material Handling. The Swedish group initially looked at the United Kingdom grocery industry as an example of how to use reusable containers for consumer products distribution.
(Note: The use of RPCs or reusable plastic containers in the United Kingdom dates back to the 1960s with bakery trays and bottle crates as well as with Marks & Spencer, a major grocery retailer. RPC use shifted significantly in the 1980s, when supermarkets such as Tesco and Sainsbury’s began to use them to transport produce. RPC use expanded through the 1990s into other consumer products and manufacturing sectors. The mid-90s also saw the development of dedicated washing and service depots to support the growth of RPCs.)
SRS manages container and pallet washing at three sites. Two locations have double lines, translating into a total of five wash lines. Containers are washed after each trip. "Pallets are washed also, especially half-pallets because they are a display pallet," Tryggwe explained. About 20% of the full pallets are also washed on a yearly basis "to keep them in good shape."
Only about 5%-10% of grocery products are on plastic pallets, according to Tryggwe. "The percentage is quite small because we only recently started and are just in a building phase, but our aim is to take over the entire wooden pallet as such for the entire industry."
Asked about the European market in general, Tryggwe replied that they are not considering that business yet. They are concentrating on domestic trade initially as well as business with neighboring countries, such as Norway, Denmark and Finland. He noted that to a certain extent the system is international in that empty containers are shipped abroad to be filled.
The relative heavier weight of plastic containers versus corrugated cartons has been an issue — "but not a very big issue," Tryggwe noted. For imports coming from more distant southern European countries, weight may be more of a factor.
The pool has been largely financed through its deposit system. When containers are released to a customer, the invoice includes a deposit for the container as well as a user fee to cover transportation, washing and other expenses. The same system applies for half-pallets.
The system for full size pallets is slightly different. "For the full pallets, there is a daily rental fee," Tryggwe said. "The reason is that they are very expensive, and the deposit would be very high."
Pallets and containers are ordered by customers through a Web-based interface, and they are reported on the Web once items are shipped in order to transfer liability to the trading partner. Distributors ship the SRS containers and pallets through to their retail outlets and must return them to their distribution center for shipment to the washing plant.
It is difficult to measure pallet or container losses out of the system, Tryggwe indicated, because many customers tend to hang onto units for display purposes or internal applications. A store might tie up as many as 500 containers for a retail display, he said.
Since 2000, logistics has been provided by DHL, a major third-party logistics provider. "We would rather be a large customer to a single supplier than a small customer to many suppliers," said Tryggwe.
Tryggwe’s background was in marketing fresh produce, so he is well versed on both the benefits and the challenges that growers face when converting to a reusable container system.
"Where they are packaging the product and fill the containers, of course we have a high degree of automation in the country, and they have had to change the automation to handle reusable boxes," he said. "At first that caused some headaches for the producers, but they soon find out there is a payback because they pay less for the carton — they pay less for the user fee than they do to buy one carton."
Where fresh produce packing operations are labor-intensive, they can change over from expendable to reusable boxes on short notice. One bonus has been that produce can be harvested and packaged in plastic containers during rainy conditions; previously, packing operations would have to cease in the rain because of the detrimental impact on cardboard containers from moisture.
Product losses have been reduced substantially because of the superior protection offered by the reusable plastic crates, according to Tryggwe. Labor costs have been reduced, too. "The consensus has been that a retail store with 100 employees will save approximately one employee on a yearly basis due to less handling required with the RTI versus expendable packaging," he said.
SRS has been gratified by the rapid growth of the system. "The company is showing a profit now, which is good," Tryggwe noted. SRS serves as an example of how an industry can cooperate among its suppliers and distributors, in conjunction with logistics and pallet and container supply partners, to offer a successful solution to its unit load needs.
Swedish Wood Industry Left Out of Decision
The Swedish wood products industry was taken somewhat by surprise by the decision of the country’s food industry to launch a plastic pallet and container pool earlier this decade, according to Gunilla Beyer of the Swedish Packaging Association. That association was not part of the decision process, she indicated.
Plastic pallets are expensive and not widely used, she noted. However, she predicted that the plastic market share in the Swedish food industry likely will grow for several reasons.
First, the plastic pallet and container pool is owned by the grocery industry. Gunilla believes the industry is making money from the pool and therefore will continue to support its expansion.
Second, the precise manufacture and uniform quality of plastic pallets address some of the quality problems and specification inconsistencies among wood Euro-style pallets that have caused concern for grocery industry pallet users.
While wood pallets command the majority of the market and will continue to dominate, especially for internationally sourced products, more and more grocery retailers are requesting CHEP pallets for such shipments, she indicated.
Swedish Pallet-Container Pool at a Glance
Wholly owned subsidiary of Swedish grocery manufacturing and retailing trade associations
Pallets: plastic 600x400 and 1200x800
Containers: plastic 600x400 and half sizes
Pallet and Container Supplier: Paxton Group (Linpac Material Handling)
Containers and pallets in pool: 5 million
Total movements 2004 – 40 million
2005 – 60 million (projected)
Logistics provider: DHL
Plastic Pallets as a Percentage of Grocery Pallets: 5%–10%
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