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Loscam in the Driver’s Seat In Asian Market for Pallet Rental Pool Service: Australian Company Differentiates Itself from CHEP
Loscam Growing in Asia: Australian-based pallet rental company positions itself as the market leader in Asia; Loscam differentiates itself from CHEP in products and services.

By Rick LeBlanc
Date Posted: 8/1/2007

   (Editor’s Note: Loscam is an Australian-based pallet rental company.  At the request of some key customers, it established service in Asia several years ago, and today it is the market leader in Asia. Earlier this year, rumors surfaced that key customers with operations in the U.S.  were asking Loscam to enter the U.S. market. In the following article, Loscam officials agreed to discuss the company’s Australian business and its rapidly expanding operations in Asia, although they declined to comment on the U.S. market.)

   With operations already underway in China, Indonesia, Malaysia, the Philippines, Singapore and Thailand, and with the recent establishment of facilities in Vietnam to support them, Australian-based Loscam has positioned itself as the leader in the Asian pallet rental services market.

   The opening of the Vietnamese office is in keeping with the company’s objective of expanding its Asian operations that began 14 years ago, said Grant Anderson, who was recently named chief executive officer.

   “Vietnam is a milestone in the company’s Asian history book and offers the company the opportunity to service the growing consumer and manufacturing markets there with pool hire equipment,” Grant said in a Loscam news release.

   The company opened a new warehouse and office in Ho Chi Minh City (formerly known as Saigon), and Loscam also plans to open an office in the capital city of Hanoi.

   “The company is totally committed to making Asia an important part of the Loscam business,” Grant said, “and we are investing heavily in personnel, premises and resources.” Loscam has a pool of over 2.5 million yellow 1200x1000mm block pallets in Asia, which gives it a leadership position.

   The company’s Asian pallet business was launched 14 years ago by Garry Bachell, Loscam’s director of business development for the Asia-Pacific region. Garry has been instrumental in modernizing Asian supply chains, according to Scott Neubauer, Loscam’s general manager.

   Loscam was invited into the Asian market by one of its clients, the David Holding grocery company, as it was formerly known. The grocery business encouraged Loscam to establish a pallet pool in Singapore and Malaysia.

   Convincing Singapore businesses about the benefits of pallet pooling was not easy, Garry noted. “There were difficulties, but we forged great alliances with a number of companies who saw the growing middle class as wanting the same kinds of supermarkets and hyper markets that we have had in Australia,” he said.

   A number of large international grocery retailers helped drive the move to palletized handling in Asia by requesting palletized delivery of products to their distribution centers. Key retailers included companies such as Tesco, Big C, Makro, Carrefour’s, Park’n Shop, Wellcome, Matahari, and others. They were supported by cooperating consumer products manufacturers and major logistics providers.

   Powerful grocery and consumer goods manufacturing clients, such as Proctor & Gamble, Unilever, Nestle and Colgate were instrumental in shipping to retailers on Loscam rental pallets. Loscam also strengthened its relationships with important third-party logistics providers, such as Linfox, Diethelm, Exel, TNT and others who were involved in transporting palletized product across the region.

   As consumer products companies have restructured and organized production across the region instead of by country, international shipment of goods has increased. This initially amplified the challenges to supply chain activity because of the numerous borders and differences between countries. For example, religious and cultural holidays may vary from one country to the next, creating the need for sophisticated planning processes, Garry pointed out.


Palletization Grows In Asian Supply Chain

   Overall, however, the positive impact of improved palletization has been huge. A truckload which previously might have taken three hours or more to empty now is unloaded in 30 minutes or less. Asian countries have made a quantum leap from third-world warehousing to first-world systems, said Garry, without the transitional period experienced by more mature economies in Australia and elsewhere.

   The expansion into Asia was aided by strong financial backing from Affinity Equity Partners, which purchased Loscam from DB Capital Partners in 2005 for about $160 million (U.S.) With financial support from Affinity, Loscam was able to acquire some smaller competitors in the region, including last year’s merger with Thailand-based Dynamic Equipment Pool.

   “Loscam ownership is a combination of management and private equity,” Scott explained. “Having management shareholders has been a real positive for our business as it really focuses people when they have their own money invested in the outcome. Affinity Equity Partners is the private equity major shareholder. Affinity has been very supportive of the Loscam business in both financial resources and with acquisitions. This has been very important with our growth in Asia.”

   Scott, who grew up in suburban Detroit and emigrated to Australia in 1991, joined Loscam in 1993. He has served as state sales manager, state manager, regional sales manager, national sales manager, and now general manager-Australia.

   Although Loscam is not widely known in North America, the company began operating a pallet rental pool in Australia in the late 1940s.


Loscam Vs. CHEP

   Companies in the U.S. that are trying to compete with CHEP, the global leader in pallet rental, might look to Loscam for inspiration. Loscam has managed to prosper in the Australian market for many years despite its No. 2 position in that country behind CHEP. Loscam has a pool of over 3 million of its red 1165mmx1165mm stringer pallets in Australia, accounting for roughly a 20% share of the market.

   Pallet pools in Australia and the Asian market are operated somewhat differently than in the U.S. and Canada. Unlike the one-way system in North America, where pallets are returned to the rental company depot after every trip for inspection and repair if required, rental pallets in Australia and Asia
typically are exchanged among companies that rent them.  Also, pallets in Australia and Asia are rented on an ongoing basis; the pool company collects daily rental fees.

   In Australia, Loscam has looked for ways to differentiate its products, services and market area from CHEP, and it has taken a number of interesting approaches to marketing. “We focus on quality products and superior service,” said Scott.

   One way it competes with CHEP is on pallet weight. While CHEP offers a hardwood pallet, Loscam provides a softwood pallet, which is lighter; the advantages of the weight difference are emphasized in Loscam’s marketing efforts.

   “Our softwood pallets are the best in the industry, and this is increasingly important to customers,” said Scott. “They require good pallets.”

   “Customers may require assistance in managing their pallets, and this is where we can really be superior,” Scott added. “Our commitment to customer service is very high, and our focus is always outward on our customers. I like to say that there is a secret formula for success – good old fashioned hard work!”

   Loscam’s customers can use the company’s computerized pallet tracking tool, Hire Management System, to track pallets and other mobile assets.

   There are similarities between the two pallet rental companies, of course. Both offer a variety of related material handling equipment for hire, such as intermediate bulk containers and pallet-containers. Both also offer a plastic pallet to help meet specific customer requirements.


Pallet Manufacturing In Australia, Asia

   Loscam does not manufacture pallets or operate its own trucking fleet. “We have top quality suppliers that do that for us,” Scott explained.

   All pallets are rented directly from a depot. Loscam owns and operates major pallet depots, and agents maintain smaller depots as needed to complete the company’s service network.

   The company’s major supplier of new pallets in Australia is CMTP, located in the state of Victoria. CMTP has had a continuous 20-year relationship with Loscam. It has gradually migrated from manually assembling pallets on jigs with pneumatic nailing tools to increasingly automated operations. It installed a fully automated painting and stencilling line last year, and this year it will add a fully automated nailing line to assemble 3,000 Loscam pallets per shift.

   Pallet manufacturers in Asia have become increasingly sophisticated with the growth of palletized logistics. One of Garry’s original suppliers in Thailand was a ‘mom and pop’ business that assembled pallets with hammers and nails in 1994. Today the Thai company employs 40 people and operates with modern buildings and equipment, including a large kiln to supply heat-treated pallets, which are increasingly in demand.

   “We work very hard to establish and maintain strong relationships with our trading partners,” Scott said of Loscam’s commitment to its pallet suppliers. “As a rule these are longer term arrangements with companies that share similar values as Loscam.”


Two-Pronged Focus

   Grant brings considerable experience in Asian manufacturing operations to his new position as CEO of Loscam. He began working as a “fitter and turner” for automotive component manufacturer Brittax some 27 years ago, eventually being promoted to manufacturing director and managing director. During his tenure as managing director, the company launched two new factories in China, a licensee in Thailand and an office in Japan. Subsequently he worked for PBR Automotive, a company with sales of over $850 million (Australian), becoming the Asian president, and ultimately president of PBR International.

   The pallet rental business has a similar set of processes and markets, but a different set of customers, Grant noted recently. He sees Loscam as a company with a fairly straight-forward mix of products and processes, a diverse base of customers — and a big upside.

   “Talking to our people around Australia in particular, we see great opportunities attracting new customers up and down the supply chain,” he said. “The customers want to be treated as a true customer, and that is where we are going to focus our attention.”

   For now, Loscam is targeting its energies in two key areas. One is continued penetration and leadership in the Asian market. The other is increasing sales in Australia by introducing new products and strengthening efforts in areas where its presence is less pronounced. For example, a new depot has been established in Queensland to accommodate anticipated growth in that area.

   Loscam makes a point of listening to its customers. The practice usually pays dividends — and sometimes handsome ones, as when a customer asks Loscam to follow it into a new, untapped market.

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