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Markets in Transition: What’s the “Point” of Small Pallets?
Pallet user columnist, Rick LeBlanc, explores the reasons for the growing popularity of small pallets and opportunities in the future.

By Rick LeBlanc
Date Posted: 2/1/2014

                Generally speaking, bigger is better – but not always. This column reviews small footprint pallets, their benefits, and in particular, their emerging role as a crucial tool on the retail sales floor.

                For the movement of goods, it goes without saying that with a larger footprint, more goods generally can be moved at a time. There are efficiencies in having a larger footprint as long as the rest of the infrastructure, such as storage systems and transportation vehicles, support that approach. So why a smaller footprint? Let’s look at why in certain applications they might be better:

 

Why a Smaller Footprint  Might Be Better

                1. Where the size of the device being shipped only requires a smaller footprint, such as certain medical devices, retail cash equipment, electronics, etc.

                2. When pallets need to go through normal household-sized doors in small retail formats instead of large overhead doors found at large stores and DCs. One of the earliest case studies I did for Pallet Enterprise was of a paint company that used small footprint pallets for that very reason – to service their paint stores and squeeze the paint pallets through a 36" door.

                3. When there isn’t enough room at the back of the trailer to fit standard footprint pallets. Smaller footprint pallets can be used to fill up partial pallet positions left on a trailer. This is another application I saw firsthand during a Pallet Enterprise interview with a Toyota parts facility.

                4. When a smaller amount of inventory is needed than would be held on a standard pallet.

                5. When a warehouse or retailer needs a narrower pallet width to allow more product facings in the same length of aisle.

                6. When the supply chain is looking to eliminate case picking by utilizing pallet shipments, but a standard sized pallet quantity is larger than the desired amount of product. Translation, a retail outlet needs to only order half as much product to enjoy the benefits of a pallet shipment with a half pallet.  A pallet shipment is a huge benefit for distribution. When a full pallet (albeit a smaller pallet) is shipped intact, this translates into less case picking, which in turn leads to less damage and picking errors, and not only less manual labor cost for picking at the warehouse and stocking at the retail outlet, but potentially less packaging cost where packaging designers anticipate that the product will not have to be case picked and can survive with less transport packaging (think Costco).

                7. When floor and aisle “point of sale” displays at retail are desired to boost sales and make more of a promotional statement. As sales become increasingly competitive, these “point of sale” displays have become a strategic weapon for many retailers.

                Let’s take a closer look at retail, and the potential of smaller pallets for promotion. First of all, retailers generally don’t care that much about pallets. But they do care about sales, and promotion drives sales. CHEP USA recently held a series of meetings with key customers in the manufacturing and retail sectors that it called the Strategic Leadership Forum. According to feedback from these meetings, display promotion drives as much as 50% of retail sales.

                To this point in time, the business of retail displays has been highly fragmented, with different approaches to pallet size and construction, often in conjunction with corrugated cardboard displayers. Most commonly we see quarter and half pallets, but even in half pallets there is no uniformity about the best footprint to use. The 48" x 20" as well as 40" x 24" are both used. As to which one is better, it all depends. A 48 x 20" is terrific for end aisle, while the 40 x2 4" is better for in aisle display, and which, unlike the 48 x 20", is more stable and can move through the supply chain without the need for a 48" x 40" base pallet underneath.

                In the United States, promotional pallets seem to be largely of the white wood variety to this point, although plastic and paper pallets are also used. In September 2013, CHEP launched its new 40 x 24 half pallet in the United States. Given that CHEP reportedly has 100 million half pallet issues around the world annually, the rental giant believes that it should also enjoy some degree of success in the US. This move also makes sense in terms of feedback from the Strategic Leadership Forum, which heard from executives that they were looking for greater standardization of point of sale or promotional pallet sizes.

                Movement of the fast moving consumer goods (FMCG) supply chain to half pallets is well underway in some European countries. Back in 2006, I was told by one European pooling executive that about half of FMCG pallets used in France were half pallets, with about 80% of those rental units. Half pallets occupied about a 20% share in Spain and Portugal.

                In North America, the move to promotional displays continues to grow, and this should translate into a growing pallet segment. CHEP will be in a position to benefit from its half pallet program, although there will still be room for quarter pallets and other sizes. It all comes back to retail sales. To the extent that promotion drives sales, and that differentiation drives promotion, the question becomes whether or not retail marketers feel that this differentiation can be achieved with a standard half pallet. Time will tell.








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