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Back to Basics: Hard Knocks Principles for Running a Pallet Management Program Inside a Customerís DC
Recycling columnists Clarence Leising and Dick Burns share principles about customer communication and setting up an effective on-site pallet management program in a distribution center.

By Clarence Leising & Dick Burns
Date Posted: 5/1/2012

††††††††††††††† Running a pallet management program inside a customer location has been done for years by some pallet logistics and recycling companies. It is a great way to get deep access to a customer and make it hard for a customer to replace you if you provide significant value. But it can also be a training challenge and a customer relationship nightmare having your workers in such close proximity with customers. Employees on the line must know how to serve the customer without providing information or communication that can damage the relationships. You donít want employees sharing information that could undermine what management has told them. Nor do you want employees sharing gripes with your customer.

††††††††††††††† On-site pallet management programs can take many forms. Some are simple sortation services that take out the good pallets and help return proprietary pallets. For example, maybe you provide four people in a customer location on two shifts, which is eight people total. It is important that every one of those employees be trained on customer interaction.

††††††††††††††† The number one rule is to mind your own business and say as little as possible to the customer. The workers on the line should be as invisible as possible while doing what the customer needs. You want to keep communication to a minimum yet you should have a strong presence and develop a reputation for efficiently getting the job done right.

††††††††††††††† True story Ė a worker on a night shift went to a supervisor working for the customer and complained about the hours of the night shift and tried to arrange new hours for the night crew. This is not the kind of communication you want anyone to have with a customer. This employee stepped out of bounds by discussing something with a customer that should have been raised by his employer. On-site pallet management staff should be trained to report working condition issues or concerns directly with their supervisor and to avoid raising the issue with the customer at all costs.

††††††††††††††† It is best to provide one crew chief or supervisor at the location to ensure that everything gets done right and to keep a watch on the production levels. This person may or may not be authorized to have some moderate direct contact with the customer. Many times the night shifts get short changed when it comes to management oversight. But that is where your problems can arise too. It is best to have a manager on hand at all times so that you have employees working in a customer location.

††††††††††††††† This manager may still not be the main contact for the customer because they may not have all the information that they would need to make major changes. It can be dangerous to provide any production employee or shift manager too much information on business costs and strategies that could be inadvertently shared with the customer. You donít want an employee trying to better their relationship with the customer at the expense of your business strategy. Loose lips can sink ships especially when it comes to discussing billing, pricing or pallet sortation counts.

††††††††††††††† On-site workers were discouraged from talking or fraternizing with DC employees and managers. We would go so far to limit contact in the break rooms and restrooms by designating certain break rooms and restrooms for our workers. We provided a phone so that workers could communicate back to the home office when needed and would not ask to use the customerís phone or mingle in their offices.This included providing a picnic table and refrigerator just for our employees to use. You need to think through all these little details or else it could hurt you if workers started having improper contact with DC staff.

††††††††††††††† At the same time, employees need to keep their eyes open. A major benefit of putting employees in a customerís location is that they can provide inside information on customer concerns, warehousing strategies, pallet-related issues, etc. These employees can provide you the intelligence that you need to foresee problems before the customer mentions them.

††††††††††††††† You want to select hard working, competent workers who will represent your company well while keeping communication with the customer to a minimum. Customers may prefer this arrangement because it saves them labor costs and headaches.

††††††††††††††† While servicing a major discount/closeout retailer, we setup a barter program with four guys sorting pallets. The customer wanted thirty thousand Aís or Bís in its yard ready to use whenever the need arose. These loads would be rotated from time to time to keep the pallet supply from ever getting very old. After reaching this thirty thousand pallet obligation with fairly fresh pallets, all the other pallets were free for the recycler to take and sell to cover the cost of this service and make a profit.

††††††††††††††† This four-man crew sorted out the ready to go Aís, ready to go Bís, repair Aís, repair Bís and scrap. All of this took place in four bays at a distribution center. They would just store up CHEP pallets and if there was a load squeeze them in somewhere. So basically just four guys, one on a forklift and they would set them down and three guys would grab them. Boom, boom, boom and put them in a stack; boom, boom, boom and put them in a stack.

††††††††††††††† The operator on the forklift would bring up the next stack and three guys grab off of it. This crew would whip through thousands of pallets per day, whatever the facility produced. The forklift operator would usually be designated as the crew chief. He would earn maybe $15 plus per hour to manage the operation. The other workers would earn about $9.50 per hour and would be paid for a full shift although they could go home when the work was done. This provided the production guys and incentive to hustle so that they could go home early and still get paid for a full shiftís worth of work.

††††††††††††††† Sitting down with the distribution center manager, he said that this approach doubled production, removed the headache of managing pallets, provided the supply he needed, and eliminated two office staff that used to keep track of pallets and coordinate pallet transactions with vendors. This approach simplified pallet sortation, storage and management.

††††††††††††††† Many other DC managers donít want this kind of deal because they want to sell the pallets as a profit center. But that does raise a lot of other concerns that can distract from the core function of managing the warehouse and supply chain functions. And when you factor in the headaches, the cost to manage pallets, etc., the distribution center may not make as much money as it envisions. This retailer discovered that outsourcing pallets and providing a competent recycler an incentive to do it well paid off in the end.

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