Markets in Transition: Dirty Tricks That Pallet Buyers May Encounter and How to Avoid Them
Pallet user specialist outlines dirty tricks that pallet suppliers may play on unsuspecting customers to skimp on quality specifications and strategies to avoid this problem.
By Rick LeBlanc
Date Posted: 2/1/2013
There are a number of ways that pallet buyers can be shortchanged when purchasing pallets. This is similar to the same way that they can receive less than what they have paid for when purchasing any number of products or services. So why might it be more likely to happen with pallets than with the other items that they buy?
For example, let’s take the case of an import warehouse I am familiar with from my past in distribution center management. It receives sea containers of floor loaded consumer goods from overseas which are manually unloaded and palletized. They are wrapped with shrink wrap and then put away into rack storage before being assembled into orders to ship to retail outlets.
In this operation, labels are printed for each pallet of goods that is destuffed and palletized, with the total number of cartons per pallet clearly described. Sample products are opened to ensure the correct identification and quality. Any damaged items are set aside and a claim procedure initiated. The received quantities are verified against the purchase order, and if there are any discrepancies, these are reported to the inventory control team for further scrutiny. The paperwork is filled out according to prescribed procedure and placed in the appropriate tray in the receiving clerk’s office for further processing.
While this finely attuned receiving verification process is going on, a load of pallets happens to arrive and is assigned a door. The operations manager reluctantly grabs a busy forklift operator from his other duties to pull off the pallets. The operator unloads the trailer quickly so he can get back to his main job of putting away pallet loads of product into the storage racks. He haphazardly signs the paperwork and sticks the receiving copy in his jacket pocket. That jacket will probably get washed on the weekend, and chances are that the paperwork will still be in it. When the invoice arrives at the end of the month, the accounts payable department cannot match the receiving paperwork and as a result, contacts the operations manager. He confirms that the pallets arrived, as far as he can recall.
You get the idea. Pallets often are not subject to the same rigorous quality and inventory systems as other products used by the pallet buyer. When you don’t pay attention, you are in danger of getting ripped off. It reminds me of the first time I was driving in Mexico when I filled up at a PEMEX gas station outside of Playa Del Carmen. The pump said about 400 pesos. I was talking to my wife and casually handed the attendant a 500 peso note over my shoulder. Then he tapped me on side and pointed at his hand in which he held a 50 peso note, which is a similar color, and that I owed him more money. I reluctantly paid twice, accepting that I was a victim of the old switcheroo scam because I wasn’t paying attention.
Not getting the respect they deserve, pallets also slip under the radar. This allows dirty tricks to be possible. And this is a real sore point to honest pallet providers that quote on a pallet order only to find themselves underbid by a competitor who intend to supply a cheaper pallet that will likely work for the shipment scenario but does not meet the exact specifications requested. Pallet buyers continually try to drive down price all the while giving lip service to company quality specifications without ensuring that suppliers meet requirements. The person who buys the pallet is typically not the one who has to live with the performance of the pallet. And if customers drive down costs significantly, you should know that the only way pallet companies can offer deeply discounted pallets is to skimp on the quality.
Talking recently with some pallet vendors, here are some “dirty tricks” that pallet buyers should look for when dealing with pallet companies, especially new suppliers that drastically undercut existing suppliers.
• Not receiving the amount of pallets billed. The pallet buyer may become accustomed to getting a certain load quantity, for example 26 stacks of 20 pallets, but after a period of time may start receiving 24 stacks instead while still being invoiced for 26 stacks. Alternatively, the 26 stacks may be only 19 pallets high instead of 20. The busy forklift driver may too often just unload pallets without taking an accurate count.
• Lower grade lumber used or cheaper species.
• Pallets not stencilled or branded as requested.
• Undersized lumber used (i.e., 3-inch boards instead of 3.5-inch boards quoted).
• Shorter nails or fewer nails than quoted.
• Pallets delivered to the pallet buyer’s supplier to put under load for delivery are a lower grade than was originally quoted to the actual pallet buyer. The fact that the pallets were originally delivered to somebody other than the actual pallet buyers makes it harder to police quality and specification compliance.
• Quoting a lower price, but then raising the price drastically when time to place an order. Of course at this point the pallet buyer may choose not to buy, but depending upon need, may be forced to buy at a higher price. Insiders say that this may be a legitimate situation in the current market, which has seen rapidly escalating lumber prices or a tight core market for used pallets.
So what steps can a pallet buyer do to ensure that they are not subject to dirty tricks? It basically comes down to treating pallets with the same respect that is given to other products and services. Given that most companies have rigorous receiving controls, the receiver’s count of pallets received should not be treated lightly. The pallets received should be accurately received, and that information should be clearly communicated to your accounts payable department.
The quality issue is not so easily addressed. The receiver can determine if pallets are stencilled or branded as required, but if the issue is substandard or undersized lumber, faster deficiencies or undersized lumber, this will require more rigorous quality assurance. This may be undertaken by the receiver, or through other means. Some large quantity pallet buyers employ third party inspection services to ensure quality. Another method taken to ensure quality is through the use of rental pallets that have rigorous quality controls such as CHEP, PECO or iGPS, or through pallet pools with quality assurance standards such as CPC, EPAL, or the new 9BLOC program.
At the end of the day, reputation is important, and it is important to deal with pallet companies that have solid quality assurance programs and a reputation for delivering the pallet specified. It may not be the cheapest pallet on the market, but it just might be the cheapest pallet that consistently meets the spec you are requesting.
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