Letter from Ed: Do You Know Where Your Children Are?
Ed Brindley talks about the new iGPS compensation plan for recyclers and the latest in the CHEP antitrust case.
By Edward C. Brindley
Date Posted: 12/1/2009
It’s 11:00 o’clock. Do you know where your children are? This familiar commercial made parents stop and think when it was popular in the 1960s, 70s and 80s.
Now let’s put a pallet spin on it. Do you know where your pallet is today?
It is a common misnomer that interest in reusable pallets is a phenomenon of the last twenty years. Actually reusable pallets have always been a good idea. It is just that many users did not focus as much on pallets and saving logistics dollars in the past as they do now. Everybody wants to reduce costs where they can, including dollars in packaging and unit load shipping.
It’s 11:00 o’clock. Do you know where your pallets are? If you’re a pallet user or pooler, the chances are that you don’t, even if you have RFID tags or bar codes on them. But somebody does know. And that somebody may just be the local pallet recyclers.
From contacts with pallet scavengers to deals with local DC operators, pallet recyclers are the critical link to finding stray assets. While those operating pallet pools or rental systems may know major sources of leaks, that is not the same thing as knowing the precise location or having access to stray pallets. Truth be told – private pool operators need recyclers a lot more than recyclers need them. Yet, major pool operators tend to treat recyclers like they are doing them a favor by paying a minimal amount for reverse logistics services connected with safeguarding and returning stray proprietary pallets.
iGPS, the new all-plastic pool in the United States, has made a big deal of its tagging system. But tracking systems are only as good as the last scan. And usually assets are not lost by someone who takes the time to integrate scan data with your system. Pallets are lost by the lowest common denominator, the guy on the forklift who doesn’t care or isn’t aware what his company has agreed to do as far as proper pallet sortation.
This is not a new struggle. It has been going on ever since CHEP first entered the U.S. market in the early 1990s. However, the picture has become more complex as iGPS has added another pallet sort to the mix. iGPS claimed it was going to bring new tone when it first entered the market in 2006. Yet, it initially took a tough stance and has had a rocky road with recyclers.
Seeking to strike a new tone, iGPS announced a new compensation program in the September issue of the Pallet Enterprise. It now offers $2 to pickup stray iGPS pallets and $3 for delivered pallets. While it is good that iGPS had offered more for stray assets than CHEP has, in reality it has more to lose merely due to the cost of its pallet compared to CHEP. Also, iGPS has not developed the extensive retrieval network that CHEP has. Recyclers are a critical part of the iGPS retrieval strategy whether they want to be or not.
Still, recyclers have a choice if they want to participate. The Enterprise staff has heard various reports about how iGPS treats recyclers. One Midwest recycler told us that they have kept their word and paid in full since the new program started in September. Other major recyclers contend that iGPS has been less than a model partner.
The National Wooden Pallet & Container Association (NWPCA) recently dispatched an alert warning members that iGPS requires recyclers to tell iGPS where they obtained stray iGPS pallets.
Bruce Scholnick, president of the NWPCA, wrote, “Since iGPS will not share with recyclers a list of its network users, recyclers have no way of knowing which pallets were collected in network and which were strays. Recyclers’ compensation is therefore subject to the determination of iGPS.”
The Pallet Profile and Recycle Record staff pointed out this potential concern when it first wrote about the new compensation plan offered by iGPS. These market reports tend to provide the best analysis in the industry about hot issues, such as fair recycler compensation. You can subscribe by visiting www.palletprofile and www.recyclerecord.com.
Our staff has spoken with a recycler in the Mid-Atlantic region who claims to be getting more than $3 per pallet without having to provide information about the source of the pallets. In the end, it may all come down to your negotiation skills and just how many pallets you acquire. Volume is a big deal for iGPS and other proprietary pallet companies. If you come across enough pallets, you are in a better bargaining position because rental companies prefer to pickup truckload quantities.
Having signed a number of big clients, iGPS needs its pallets back to keep these customers happy. Yet, iGPS wants to be sure that pallets are indeed coming from out of network sources. It is also understandable why recyclers do not want to snitch on customers.
Bruce said, “The NWPCA has been working with a number of attorneys who are familiar with our industry and its challenges to develop a guidelines manual setting forth your legal rights with regard to the return of open- and closed-pool pallets.”
Kudos to the NWPCA for alerting members and providing legal guidance on this issue. In the end, recyclers have to decide what they are going to do. Just because iGPS or some other owner of proprietary pallets insists on certain terms, pallet recyclers are not under any obligation to accept those terms. If you return stray proprietary pallets and are not compensated according to what you expected to receive, you can sue for proper compensation in small claims court.
Pallet recyclers must remember that they have done nothing wrong by merely coming into possession of iGPS pallets in the normal course of business. They are doing a competitor a favor by helping them retrieve stray assets. It is up to iGPS to police its customers and identify leaks, not the recycler.
iGPS is not the only company that has angered recyclers by previous actions. CHEP has not increased its compensation program in years except for fuel surcharge increases. Last year a group of recyclers filed a federal antitrust case against CHEP claiming monopolistic practices and cost shifting. These recycles include Best Pallets, Itnolap Pallet & Crating, Pallet Express and Goeman’s Wood Products.
As previously reported Judge Robert Dawson denied the recycler’s petition to certify the class. Lawyers representing the recyclers sought to redefine the class to exclude companies that had operated service centers for CHEP. This effort to convince the court to reconsider its earlier decision about class certification failed when Judge Dawson denied the petition last month.
Judge Dawson wrote, “The Court has identified fundamental deficiencies in the evidentiary methodology that Plaintiffs have proposed. In order for class certification to be proper, these evidentiary issues will necessarily be re-litigated based on Plaintiffs’ amended class allegations…Plaintiffs now attempt to re-litigate these very issues in the guise of a motion to amend.”
In essence, the federal court for the Western District of Arkansas, did not feel that the recyclers had answered the key issues that led to the initial order denying the class certification.
It is unclear what will happen in this case. Certainly, the class action status is a thing of the past. This means the outcome of the case would only serve as a legal precedent not a judicial resolution for recyclers outside of the six plaintiffs who filed the case. Herb Schwartz, an attorney for the recyclers, said the case will likely continue although he didn’t offer any specifics about their legal strategy.
The recent decisions by Judge Dawson certainly look like major win for CHEP. Many recyclers had hoped this case would push CHEP to increase what it pays the market and to thereby improve competition. These losses are certainly a setback for recycler efforts to get a national resolution to the issue of just compensation and cost shifting involving services connected with the return of stray CHEP-marked pallets.
This may forever spell the end of industry efforts to get a national legal solution to this issue. Recyclers can still bring individual cases, but the talk of class action and major industry lawsuits might go away depending on the outcome of this case.
Smart recyclers are going to have to work to find solutions to these problems. Some have partnered with other recyclers to negotiate better deals with owners of proprietary pallets. Others do things with proprietary pallets that I would rather not mention. Still others participate with retrieval programs and take whatever they can get. No matter your strategy, remember that you are as much in the driver seat as the other party because you know where the lost pallets are.
Good night. It’s time to count sheep. I mean stray pallets.
Do you want reprints or a copyright license for this article? Click here
Research and connect with suppliers mentioned in this article using our FREE ZIP Online service.