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Effective Pallet Management = Data Management: CPC Embraces Data-Centric Approach, Third Party Certification as Keys to Success
Effective Pallet Management = Data Management: The CPC balances cooperation and self interest of its members using a data-centric approach combined with third party certification.

By Rick LeBlanc
Date Posted: 11/1/2010

Managing a pool of millions of pallets is not an easy task, and for the Canadian Pallet Council (CPC) it is increasingly 'all about the data.'

CPC President Belinda Junkin, said, "CPC has always been based on honesty, integrity and a handshake, but that doesn't work today." Junkin recently explained the changes taking place over time in Canada's cooperative pallet pool.

As the CPC has grown it has become more diverse, creating greater strengths and synergies for the Council. At the same time, this diversity can complicate competing interests among members, which can pull them apart. The CPC includes product shippers, distributors, transport companies and pallet providers.

Belinda pointed out that while the diverse roles of members can help galvanize the CPC with a common vision, their more immediate corporate goals are invariably in conflict. With every member looking to cut costs or increase profit margins, CPC members can find themselves in a tug-of-war that pits goodwill, pallet quality and pallet return against razor thin bottom lines. For example, a pallet provider may not repair pallets to the required standard, or two trading partners may engage in a dispute with respect to pallet interchange imbalances.

"Today we increasingly need data," Junkin said. "It has to be a fact-based approach."

Founded in 1977, the Canadian Pallet Council has endured as a cooperative pallet mover for the fast moving consumer goods industry in Canada. The not-for-profit association has over 1,250 member companies and embraces a pool of 6-to-7 million pallets. Yet it does not own a single pallet. Pallets are owned by member companies. The CPC provides oversight to promote the effective functioning of the pool.

Two important initiatives are aiding CPC's data-centric approach. These include contracting with SGS Canada to provide 3rd party pallet quality inspection and improvements in the CPC's CTSweb Internet pallet and container tracking service.

Previously, CPC field personnel provided pallet inspection services, but there were concerns about inconsistency and predictability of inspections. If the CPC field inspector was in a particular city for an inspection, there was a good chance he would be doing the other local pallet operations on the same trip.

With this in mind, CPC is now utilizing SGS Canada to provide inspection services. Operating in Canada since 1948, and with over 800 employees, SGS provides inspection services to a number of Canadian industries. In Europe, SGS also provides inspection services for EPAL, the European Pallet Association. Junkin commented that the CPC's relationship with SGS is modeled after the EPAL program.

Over the last year, a "pilot" program with SGS has reported strong results having conducted 120 inspections.

Junkin said, "The biggest complaint from members has been the length of time they are on site, and their knowledge about pallets."

No major deviations were discovered during inspections. Deviations identified included minor to medium deviations, including misplaced boards and plating. The number of deviations identified continues to drop. The new inspection program officially rolled out in July 2010.

"Working with SGS Canada has given us access to professional inspectors," Junkin stated. The result should manifest itself into better consistency of pallet quality.

The implementation of the new inspection program has been endorsed by several members, including Paramount Pallet.

"The new inspection process takes the guesswork out of quality," commented Clint Sharples, President of Paramount and member of the CPC Board.

Sharples and Junkin are both quick to emphasize that the inspectors, while highly trained at what they do, are not necessarily pallet experts. There job is to report deviations to the CPC, which can then determine the next step.

"The new process allows some latitude for the Canadian Pallet Council to apply some discretion as they understand the day to day reality of the pallet industry better than the inspectors," Sharples said.

Sharples likes the fairness of the new approach. "The inspectors just report deviations, and they may not be sure whether they are major or minor," he commented. "They treat everyone the same."

Sharples is also in agreement with a significant progressive fine system that has been put into place. "If you do it wrong you will be fined. If you do it wrong again you will be fined more, and if you do it wrong yet again you will be fined even larger."

The stricter inspections allow for apples-to-apples comparison, versus competing against improperly repaired pallets where corners have been cut."

"It comes down to competing on price," Sharples said. "I've been told by customers that I've been beaten by a dollar by competitors. I m not even making a dollar on the pallet, so it's virtually impossible."

One of the concerns raised by some CPC repair companies has been that stricter standards will translate into more pallets being "blacked out" or retired from
the pool. The CPC logo is blacked out on pallets that cannot be repaired, which effectively shrinks the size of the pool. Sharples disagrees, "I don't think so; I think they are just going to do the repairs properly. The percentage of pallets culled today is not much different than it was five years ago.

Paramount Pallet has made a conscious decision to diversify over the last several years, Sharples explained, expanding its white pallet recycling as well as launching a new pallet division. As a percentage of total revenue, Paramount Pallet's CPC business is down, but only because the other parts of its business are growing.

CPC's Internet-based pallet and container tracking system, CTSweb, has been another success story for the Council. As of April 2010, 139 member companies had implemented CTSweb, accounting for somewhere between 70-80% of CPC pallet movements.

With CTSweb, Junkin is confident that members will increasingly move to automated data capture and reconciliation, with pallet administrators focused on pallet interchange exceptions rather than the vast volume of matching transactions. The desire is to eliminate manual data entry.

CPC and its partners recently received $1.25 million in funding from the Canadian government to further enhance its Electronic Container Transfer (ECT) technology. Currently, ECT technology operating within CTSweb allows for pallet interchange imbalances between three members to be electronically reconciled. If, for example, Company A owes 200 pallets to Company B, Company B owes 200 pallets to Company C, and Company C owes 200 pallets to Company A, then the ECT functionality will allow the imbalances to be cleared electronically without any trucks having to be physically dispatched to move the pallets.

The new improvements will allow for imbalances to be resolved electronically among larger numbers of CPC members. As a result, considerable physical backhaul of pallets should be reduced, resulting in a reduced environmental footprint for the companies which choose to adopt it. Longer term, Junkin sees the potential for CPC members utilizing the ECT technology to qualify for carbon tax credits, once such programs are instituted in Canada.

Outside of the grocery environment, CTSweb has also been tested by Canada Post, which is currently in an evaluation phase, prior to determining whether to proceed with CPC's tracking system. CTSweb software is currently being used to track 57 different pallet and container types.

Belinda stated that she often gets asked when CPC will put RFID tags in its pallets, but she counters by asking members when they will install RFID readers on their loading docks. She sees no current urgency to move forward with RFID tagging pallets until the supply chain infrastructure is in place to leverage RFID-tagged pallets.

Working with Canadian grocery industry executives, she has found that their two largest issues are sustainability and food safety. While CPC has supported sustainability through its very durable reusable pallet, it is also making inroads through its ECT function in the CTSweb software. \

Data mined from CTSweb will help CPC gain better visibility into its pool and more effectively manage the system. For example, is the current approach which requires members to repair 25% of their inventory each year a meaningful approach, or would it be more equitable for members to repair based on a proportion of total pallets shipped?

CPC believes that by having a cooperative option saves the Canadian grocery industry nearly $200 to 300 million per year compared to what pallet users would have to spend if the only option was pallet rental. CPC also has begun offering consulting services to members, both on the senior executive level, as well as for pallet administration.

CPC is also moving forward with a significant investment towards a new administration software system to better serve members. The current office system will be replaced with the Aptify Association Management System. This integrated product will communicate with the CTSweb web-based asset management system, leverage a centralized repository of information and be accessible to CPC associates across the country.

CPC's future success lies with a more data-centric approach that will ensure members live up to their requirements while reducing pallet reverse logistics charges. With efforts such as the outsourced inspection service and advances to CTSweb, CPC seems well focused on finding the elusive balance between cooperation and self interest.

Top Six Issues from CPC Members

These are the top six issues that CPC hears about from its members, according to Belinda Junkin.

1. High rate of damaged pallets being returned to product suppliers
In Canada, distributors do not pay for return of damaged CHEP pallets, and get paid by CHEP for pallet return. In order to compete with CHEP, distributors in Canada are also allowed to return CPC pallets on an “as is” basis.

2. Suppliers required to repair greater than 25%
Belinda urges members to think about trips, rather than the requirement to fix 25% of inventory. In soft drinks, for example, pallets will turn very quickly and will take many more trips per year than for example a canned good supplier. The alternative, Belinda, says, is multiple CHEP issues.

3. Difficulty retrieving empty pallets from trading partners
The longer retrieval is left, the harder it gets, just like stale invoices. The situation can be complicated by discrepancies about balances. CPC urges members to use CTSweb and frequently reconcile differences.

4. Non-members using CPC but not contributing to CPC quality
Non-members should be reported to CPC for follow-up. CPC counts on distributors to refuse exchange with non-members to help encourage them to join.

5. Costco block policy
CPC has talked to Costco about the lack of block pallet options in Canada, but to no avail.

6. iGPS
iGPS isn't generally available in Canada yet, and CPC questions whether its business model is sustainable at current pricing.


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