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Best of 2011 – Short Highlights From The Best Articles, Innovations and Ideas of 2011
Short Highlights From The Best Articles, Innovations and Ideas of 2011
Date Posted: 1/1/2012
Va Tech Pallet Lab Undergoes Changes
By Chaille Brindley
Amid the economic chaos of the last few years, the Center for Unit Load Design (Center) and the William H. Sardo Jr. Pallet Lab at Virginia Tech (VT) have suffered budgetary pressures. But these valuable institutions always seemed to keep going despite shortfalls resulting from the economy and the loss of Pallet Design System revenue. The Center and the Pallet Lab are interconnected and among the most important institutions in the industry given its research expertise and reputation through the years. Both the Center and the Pallet Lab underwent change in 2011 as the existing Center staff was replaced by faculty members. This move was designed to shore up funding as private donations and sponsored research could no longer guarantee sufficient operation.
VT sees the Center and the Pallet Lab as a critical part of its new packaging program according to Dr. Barry Goodell, the head of the VT Wood Science and Forest Products Department. The university brought on two new faculty members Dr. Young Teck Kim and Dr. Laszlo Horvath. In addition, Dr. Bob Bush, who had previously worked on forest products marketing realigned to focus on packaging. It does appear that both the Center and the Pallet Lab may experience some transition pains as new staff ease into their roles. But this is nothing new for these institutions which have experienced some transition challenges in the past.
In September 2011, VT named Laszlo Horvath as the new director of the Center. Horvath, who has strong expertise in secondary packaging, advanced wood mechanics, timber engineering, and industrial engineering, has been tasked with expanding the center and opening up new dimensions for packaging distribution research.
Changes Proposed for Trucking Regulations
By DeAnna Stephens Baker
The Federal Motor Carrier Safety Administration (FMCSA) proposed in 2011 both a change to the hours-of-service (HOS) requirements and mandatory electronic on-board recorders (EOBRs) to monitor drivers’ HOS compliance for commercial truck drivers.
These changes could affect the entire supply chain, as they would incur additional costs to the carriers as well as adjustments to shipping timetables and routes.
The new HOS proposal would require drivers to complete all driving within a 14-hour workday and complete all on-duty work-related activities within 13 hours, allowing for at least a one hour break.
“The significant changes proposed by FMCSA would seriously disrupt parts of the nation’s supply chain and require the business community to incur costly adjustments to their transportation systems – adjustments to make their distribution systems less efficient,” said a letter sent to Congress by over 30 organizations, including the American Trucking Association (ATA), Fed Ex, and the National Association of Wholesale-Distributors.
The EOBR proposal would require interstate carriers that currently use Records of Duty logbooks to document drivers’ HOS to use EOBRs to automatically record the number of hours drivers spend operating the vehicle. Under the proposal, short-haul interstate carriers that use timecards to document HOS would not be required to use EOBRs.
Many small companies and independent drivers contend that EOBRs cannot accurately and automatically record a driver’s hours of service and duty status as they only track the movement and location of a truck and require human interaction to record any change of duty status, referring to them as over-priced record keepers and calling the proposal an overly burdensome regulation that simply runs up costs.
Federal Officials Reject Proposal to Require Domestic Packaging Treatment
By Chaille Brindley
The U.S. Animal Plant Health and Inspection Service (APHIS) has decided not to require domestic treatment of solid wood packaging material (WPM), such as pallets and dunnage, citing the inability to prove domestic WPM as a major contributor to the spread of invasive pests.
Rebecca Bech, deputy administrator of AHPIS, wrote, “Because the pest risk cannot be demonstrated with certainty, any regulatory scheme to mitigate the pathway would be complex and limited in its effectiveness. Also, the costs and other burdens and impacts of regulations would be significant.”
Some in the wooden pallet industry, including leaders in the National Wooden Pallet & Container Association (NWPCA) have lobbied for a domestic treatment requirement to remedy the confusing maze of local restrictions caused by the emerald ash borer and Asian longhorned beetle among other wood pests. The NWPCA suggested that treating domestic packaging would reduce the risk associated with shipping WPM while equalizing various local standards that sometimes give producers in non-quarantine areas a market advantage.
IFCO Systems opposed the proposal to require treatment and marking for all domestic WPM, challenging the science behind the proposal and contending it would not solve the problem and would cost too much for the industry to comply.
The lack of a domestic treatment requirements suggests that local quarantines will continue to be the dominant way that domestic shipments will be regulated.
Hardwood Industry Marketing & Checkoff Initiative
By Chaille Brindley
Two major initiatives to spur hardwood market growth are in the works. This includes a Blue Ribbon Committee (BRC) on Hardwood Check-off tasked with developing a hardwood checkoff program and the Unified Hardwood Promotion (UHP) designed to develop unified messaging for the hardwood industry.
Generally, most people in the hardwood sector agree that the industry needs to do a better job of promotion. But a big problem has been a lack of resources.
The BRC hopes the checkoff will raise about $10 million annually from the industry to fund the promotional and research programs. It would be funded by industry participants at an estimated fee of about $1 for every $1,000 in sales for hardwood mills. Sawmills under $2 million would not be covered nor have a right to vote on program oversight.
The UHP seeks to give the hardwood industry a recognizable brand and consistent marketing approach to drive awareness and sales. More than 20 hardwood trade associations are involved in the campaign, with the common goal of inspiring increased usage of American Hardwoods in products from cabinetry to furniture to flooring by developing in the minds of customers a recognizable identity to the whole industry from the forest to the finished product.
Both promotional efforts are designed to boost domestic hardwood markets. This should help encourage growth and stability which is good for low-grade users that depend on mills for supply. Hopefully, this will provide increased market potential to ramp up more capacity or at least reduce the amount of mill closures.
Although the costs of the checkoff fees could be passed down to buyers, the added cost is expected to be minimal.
Perspectives on Pallets and Food Safety from Grocery Industry Auditors
By Rick LeBlanc
In view of the debate about plastic and wooden pallets, I asked some 3rd party food safety auditing providers to weigh in about pallet material and what they are looking for with respect to pallets when they conduct food safety audits.
Gary Smith, vice president of supply chain at The Steritech Group, Inc. said “You don’t want to have direct contact (of food products) with a wood pallet in a food production plant. But if wood pallets are managed properly you are not going to have a problem. In a well-managed pallet program, wood pallets are going to pose extremely low risk.”
This paralleled the opinion of Louis Stratford, western regional director, AIB (American Institute of Bakers) Audit Services. “Reuse of pallets should not be an issue as long as they are in good condition,” he commented.
Best practices in pallet management, Gary continued, include such routines as not storing outside, or washing them before putting back in use. “In a high risk, ready-to-eat environment, plastic or non-porous pallets are usually preferred in processing,” he added. Again, this has been practice for years, and doesn’t present a shift in pallet usage, other than with respect to the growth in the ready-to-eat segment.
Louis noted that AIB requires a risk assessment for wood pallets. This covers issues such as dry storage and inspection for damage and cleanliness. He noted that they do not have the same requirement for plastic pallets, so auditors would not score them negatively, unless a problem was noted.
Looking at the science behind the wood versus plastic debate, I talked with Dr. Dean Cliver, professor emeritus from University of California - Davis, who conducted studies to compare the hygienic properties of wood and plastic cutting boards used in commercial cooking operations. Cliver said his findings have been largely upheld by later studies.
Cliver said, “I believe, for want of evidence to the contrary, that wooden pallets are at least as safe as plastic, if not more. I also regard this as a low-priority consideration, given that the pallets do not contact food.”
Developing a Behavior-Based Safety Approach
By DeAnna Stephens Baker
Almost every week, a forest products company is cited for safety violations that expose employees to workplace dangers. If your company has not been one of them, is it because of safety precautions that work, or have you been safe by accident?
According to Judy Agnew and Aubrey Daniels, authors of Safe by Accident?, an occupational safety book, going a month or even several years without an incident is more likely sheer luck than a predictor of a safe organization.
The book was written to help company leaders identify so-called safety practices that do not contribute to a safer workplace and understand how utilizing behavior-based safety principles can achieve safety goals.
It includes a list of commonly used safety practices that actually waste time and money rather than helping promote safe behaviors. These include:
• Focusing on lagging indicators: Many company management teams measure safety using lagging indicators, such as incident and time lost rates. This puts the focus on the results, putting the attention on fixing, instead of preventing problems.
• Injury-based incentive programs: The biggest problem with incentives based on the avoidance of injuries is the under-reporting of accidents. Instead, replace these with a reinforcement system which may have some tangible rewards.
• Awareness training: Awareness training does little to affect consequences of unsafe actions, resulting in a temporary change in behavior and gradual return to old habits. If employees know how to perform the safe actions but do not, training is not needed. Proper motivation is the critical element needed to make the workplace safe.
• Using safety signs: Though safety signs are required by law, their affect on behavior is usually little or only short-term and they do not guarantee that workers will engage in the target behavior.
• Punishing mistakes: Punishing a worker for one safety mistake may not actually address the real issue that caused a problem and can have multiple unintended side effects. The most problematic side effect of punishment is having the reporting of accidents and near misses suppressed out of fear of punishment.
Chemical Taint, Mold and Pallet Sanitation Update
By Matt Foley, Chaille Brindley
On the heels of another recall by McNeil Healthcare involving an unusual moldy, musty, or mildew-like odor in some products, a group of pallet industry leaders recently engaged in discussions with a pharmaceutical industry task force. This is a collaborative effort to provide information, answer concerns and better understand potential links between the chemical taint and treated lumber making its way into the United States from various off-shore destinations.
Key points the industry leaders focused on in their discussion with the task force include:
1.) The root of almost all of the pharmaceutical industry issues and recalls is believed to be pervasive gases Tribromoanisole (TBA) and Trichlorolanisole (TCA). Both are derivatives of Tribromophenol (TBP) or Trichlorolphenol (TCP), fungicides used extensively outside the US, but banned from use in the US by the Environmental Protection Agency (EPA).
2.) Heat treating has little to do with mold treatment unless it is accompanied by significant drying of the wood. International heat treating requirements are in place to deal with forest quarantine pests. In many instances heat treating can and will make wood more prone to mold. Most woods, even kiln-dried pines, can eventually mold when the right set of conditions exist.
3.) The TBP or TCP based fungicide class of wood treatment should be avoided due to its known issues. Lumber from destinations where its use is prevalent needs to be closely scrutinized. In the US, numerous active ingredients that can be helpful to reduce the risk of mold without jeopardizing product safety, registered by the EPA and intended for use as wood coatings, are available. Many end users of pallets are concerned about the use of chemical treatments on mold, because they fear having to face the costly issues that the pharmaceutical industry has. This fear is unfounded. As long as EPA registered active ingredients are properly used, the likelihood of further adverse chemical reactions is remote. North American end users of pallets should become increasingly more comfortable about the use of chemical wood coatings as a mold preventative measure and value added offering from their pallet suppliers.
Pallet Systems Guru Provides Cold Weather Maintenance Tips
By Jim Gookin
Keeping your people and equipment operational seems like an endless battle during the winter. Here are a couple of suggestions on how to limit the “frostbite” in your operations.
Electronic system controls can have an operational temperature range that will be exceeded in the cold season in many areas of the country. Checking heaters and circulating fans to see if they are in working order is the first step in reducing downtime. If your equipment does not have heat strips, adding a simple high wattage light bulb may be sufficient to heat up the cabinet. Consult the equipment manufacturer for the correct wiring.
Cold weather can play havoc with pneumatic systems. Moisture and lubricants tend to gum up valves, cylinders, and other actuators. Start by removing water vapor before it reaches the components using air dryers and filtration. Bleed and clean water traps on a regular basis. Make certain lubricants are rated for cold weather applications. Don’t overlook the air muffler. It often collects debris and restricts air flow. If the air cannot exhaust freely, clean or replace as required. I know there is a temptation to operate without mufflers installed, but they also stop debris from entering the air system from the outside.
A pallet system might have issues especially first thing in the morning if the hydraulic fluid is too cold. Either the pumps won’t start because the minimum temperature has not been reached or it is running, but chains and cylinders are barely moving. Disabling the low temperature sensors to get the pumps running is not good for the machine. Instead, set the tank heaters to come on at least two hours before start time so that the machine is warm by then.
AMEX Pallets Reduces Labor Costs with Automation
By Tim Cox
Armando Perez, owner and operator of AMEX Pallets Inc, in Morris, Ill., has dramatically reduced labor costs while maintaining production due to an automated pallet repair line.
With automated equipment, Armando switched to an hourly rate for his repair workers. With the machinery, they would not tire as much and were able to produce more. “We took away the lifting and fatigue,” said Armando.
At the time he put in the system, Armando had 16 employees, including 10 repair workers and production was about 1,600-2,000 pallets daily. Now, he is down to 10 employees, total, only three dedicated to repairing pallets, and production is a little more than that. So, the big advantage is that while production has stayed at a consistent level, even increased slightly, his labor and payroll costs have been dramatically reduced along with the other issues related to managing employees.
Armando recently initiated a new program to upgrade some #2 pallets to #1 condition. If the pallet is in good condition except for a cracked outside stringer, it is sorted out and stacked. On weekends he has one worker who removes the cracked stringer and replaces it with a new notched hardwood stringer. He found it is worth the cost to upgrade the pallet because #2 pallets are, by comparison, so much cheaper. In his market area, #1 pallets currently are priced from $5.15- $5.45 while #2 pallets are priced from $2.90-$3.25. Recently he has been paying $2.25- $2.75 for high quality cores, up from the previous price range of $1.75-$2.50. “Some guys are paying $3 for cores,” he said.
Focus and Machinery Innovation Drive CHEP Plant Production
By Ed Brindley
International pallet pooler CHEP also produces millions of new pallets each year at its facility in Southaven, Miss. Designed to do one thing, and do it extremely well, CHEP’s block pallet plant is the picture of efficiency.
To produce its signature blue pallet, CHEP had a high speed stringer pallet tandem manufacturing system re-designed to make perimeter-based block pallets. In addition, it focuses specifically on automating the materials handling steps in perimeter base block construction, using hoppers and conveyors versus the more conventional approach of hand feeding. Everything is done on “the fly,” with a focus on safety first, and then productivity.
A second design change incorporates a variety of clinching techniques, including roll clinching and crush clinching. In roll clinching the plate moves to guide the nail through its clinch. Crush clinching forces the clinch by driving a nail against an immovable steel plate. For CHEP, this means better pallet durability and reliability for customers.
Most pallet manufacturers dream of having a pallet manufacturing facility where they do not have to change pallet specifications and can focus on efficient manufacturing speeds and product quality. Because CHEP can concentrate on this one pallet design, it can achieve incredible production rates despite the difficulty involved in making this pallet. The factory was immaculate. It buys all its lumber cut to size, so there is no sawdust or scrap lumber as is common with other pallet manufacturing operations. This eliminates disposal problems and makes for an unusually clean atmosphere for a pallet plant.
Recession Recovery Tactics for Small Businesses
By DeAnna Stephens Baker
Now is a good time to begin thinking about where you want your company to be several years from now when, hopefully, the recession will be a memory. Even if you are not seeing post-recession conditions, consider the following strategies to help lead your company through the recovery.
• Determine which products or services have the best growth potential. Study revenue charts from the past few years and see which product lines saw an increase, or at least steady, income. Focus on making these the best they can be and find ways to be different from competitors. Also note which products and services are not doing well and determine why. If a product is not turning a profit, consider reallocating your resources to a more profitable product.
• Consider new markets. This could include expanding your geographical service area, looking for new types of customers, offering new services, or manufacturing a related, but new product. Companies that previously served those markets could have closed or down-sized, creating an opportunity for your company. Looking into the possibility before a recovery is underway could lessen the chance that competitors might fill and monopolize that niche.
• Renew your sales and marketing efforts and start contacting former and potential customers. Due to modern media trends, increasing marketing does not necessarily mean huge cost increases in your marketing budget. Websites and email marketing are low-cost ways of marketing your products and services and keeping your company visible to past and potential customers. Consider sending periodic emails to your customer list and updating your Website to improve its search engine ranking.
Industry Professionals Speak Out About the Future of the Pallet Recycling Market
The Pallet Enterprise staff spoke with several industry members seeking their opinions on the future of the pallet recycling business. We asked industry members to rank the factors that they think will be the biggest industry drivers in five years.
1.) Cash flow is the company life. If you don’t have it your competitors will know and it’s possible they may even take advantage of you. 2.) Core supply for a company that focuses on recycling will be the most significant impact as far as raw materials are concerned. The availability of materials is shrinking and this will cause the core price to increase. 3.) I think personnel can make or break your company. With the wrong personnel your business can develop a bad reputation, poor quality, and if not branded properly it could eventually shrink and may even die. 4.) Market consolidation, mergers and acquisitions are definitely going to come into play in the next five years.
– Gus Gutierrez, CEO, Pallet Consultants
1.) Market consolidation/partnerships: As our customers continue to consolidate, our industry must evolve to provide solutions that cover multiple locations or dimensions of business. Creative partnerships may be a part of this. 2.) Transportation Costs: Increases in fuel costs have forced us to re-analyze our business model in recent months, and it is likely that this will continue to be a significant factor in our industry. 3.) Personnel: The demand for professionals within our industry will continue to increase, as we broaden our exposure to our customer base. 4.) Technology developments: Information Technology will continue to become a more significant part of our business. Our ability to analyze information and to communicate with our customers across any medium will define our ability to do business.
– Buddy Burgess, Vice president, Pal-Serv
Recycled Pallet Market Buzzes over CHEP/IFCO Cooperation
By Jeff McBee
The integration of CHEP and IFCO pallet divisions has generated quite a bit of concern as Brambles now controls two of the largest and most prominent companies in the U.S. pallet market.
Many of our contacts were expecting IFCO’s pallet division to be sold sooner rather than later. Thus far, Brambles Limited, the parent company of both CHEP and IFCO, hasn’t shown any desire to do so and is currently speaking about white-wood operations with a very wait-and-see tone.
White-wood core supplies are in a definite state of flux. Not too long ago some major recyclers saw the economy take a toll on prices for #2 GMA pallets to the degree that some were calling #2 pallets a liability and even grinding large volumes as the value for the fiber produced was greater.
The economy began to show modest signs of life and since no other market fundamentals had shifted much, the core shortage was back and worse than ever. The CHEP/IFCO merger has caused more than a little shifting on this front. According to reports, CHEP is not renewing contracts with recyclers who have taken cores from DC’s where CHEP handled the dock sweeps. It seems obvious that CHEP will want to divert these cores to its new white-wood pallet division.
Core prices registered some concessions at the worst part of the economy, buying recyclers precious breathing room. Recycled pallet prices were already too competitive. Profit compression was taking a toll on many recyclers’ bottom lines. Core prices have remained largely unchanged since, though we have seen some upward pressure in the market.
It goes almost without saying that any successes that CHEP/IFCO enjoy in obtaining further core supplies tightens the same supplies in the current market. This in turn will increase competition for cores in the open market and prices could press upward again.
Hardwood Exports Help Bolster Sawmill Industry Amid U.S. Downturn
By Chaille Brindley
Michael Snow, executive director of American Hardwood Export Council recently talked with Pallet Enterprise about the growing global market for American hardwoods. His comments are sure to interest any pallet or lumber company looking to take advantage of international markets.
Snow said he sees mostly bright spots in international demand and that overseas market growth has helped offset domestic market difficulties. In addition, significant growth is still being seen in places like China, which is consuming most of its imported wood, instead of manufacturing it into other products and shipping it back out. He also noted Vietnam has seen tremendous growth over the last few years and that some European countries are also showing promising signs.
Snow said he thinks international demand is the key to maintaining and driving domestic production. He stated, “Right now about 40% of the graded lumber is exported. Ten or fifteen years ago that number was close to 15%. We think that that percentage is going to be well over 50% within the next five years.”
The number of potential wood consumers is growing in international markets as millions of people move from poverty to middle class lifestyles in places like China, and American hardwoods are well placed to meet that need, Snow said, noting that the U.S. Timber Committee Market Report found that the U.S. may be under utilizing its forest resources.
Snow said that the benefits of globalization can be overlooked when it is seen as only a threat to U.S. manufacturing. He said, “We forget that there’s a lot of global consumption now where foreign markets show promise for increased demand for U.S. products.”
Industry Prepares for Increased Biomass Demand
By DeAnna Stephens Baker
With the deadlines for various existing renewable portfolio standards getting closer, new ones being passed and government incentives increasing, the expected increase in global biomass demand cannot be ignored.
Biomass demand is expected to grow by leaps and bounds as numerous new bioenergy facilities have been built, more are in the process of being built, and plans for even more continue to be announced on a regular basis.
“There’s going to come a point when all of these projects start to come online and hit markets with half to one million tons of wood demand all at once and it may or may not be easy going,” said William Perritt, executive editor of RISI’s Wood Biomass Market Report.
Pellet production and electric generation are anticipated to cause the majority of the boost to demand. But the degree and main source of the demand will vary between regions. About half of the new demand is projected to occur in the Southern United States.
The impact that future biomass demand will have on existing wood products markets depends on several issues. With the U.S. housing market in a slump and sawmills shutting down across the county, wood residuals that are usually used in pellets are currently running low. However, a weakening in traditional biomass-using industries may offset that somewhat.
Forward-thinking companies must consider how the rising demand will potentially impact their raw material supply and markets for their waste material. Smart pallet recyclers have ground up old pallets for years turning them into mulch, animal bedding or boiler fuel. Biomass for commercial energy offers another good market for waste wood, possibly increasing the financial return that recyclers see. That largely depends on the local market. Most biomass facilities draw from a 50-75 mile radius for material. You can’t cost effectively transport wood biomass too far unless it is in a highly dense form, such as a pellet.
Companies in areas with a number of paper mills and biomass facilities might see increased competition for scrap material and pulp. And slash may be harvested more frequently as a good source for biomass. This is already done to a greater degree in other parts of the world, especially Europe.
Odd-Sized Orders Can Secure Specialized Business, Decent Profits
By Clarence Leising and Dick Burns
Service is the name of the game in the non-pooled pallet market. Customers define service primarily by being able to bail them out of a jam. If you can put together odd-sized pallets to fill emergency orders, you can secure customer good will and decent profits.
However, you can’t meet the emergency demands unless your operation is set up to be nimble and respond to odd-sized requests. It all starts with having plenty of scrap lumber to cut into whatever size you need. This can be obtained from your own operations or by cutting apart odd-sized pallets or material that comes in the door that you can’t immediately resell. If you find pallets that have limited use, you can source good looking material that can easily be broken down and rebuilt into a new pallet. You don’t have to save everything. But it is generally best to keep as much scrap lumber as possible from disassembled pallets. That material can be used on bottoms of new pallets as long as it is all the same thickness.
One factor to consider is the handling and storage of odd-sized pallets and lumber that you will never resell or use as is. You can’t afford to spend too much time on handling or warehousing lots of odd-sized pallets or pay for space that will eat up your efficiency and profitability. If you don’t need that size and don’t realistically expect to use it, cut it down and use it for half sizes or smaller-sized pallets.
Our operation would take forty two inch brand new boards on pallets that were used only once. We would cut them down to a thirty six, use them on a brand new pallet and sell a brand new thirty six square pallet made from mostly scrap material. Even if you are using new runners, you can’t beat the profit margin.
Block Pallet Repair Tips
By Brad Kirkaldy
Few U.S. pallet recyclers have done much block pallet recycling in the past 20 years. That may be about to change with block pallets gaining popularity and the potential for a white-wood block pallet pool developed by the industry.
There are some key differences between the processes for stringer and block pallets. First, block pallet dismantling is a two-man process because of the close proximity of the deckboards. You want to ensure that the operator’s hands are always twelve inches from the blade.
The best machines for the job are band saws with an extended drop table, dropping as low as six inches below the blade. These allow you to hang the blocks from the mat so that the mat rides across the top of the blade and the block or stringer boards hang and fall free. This is safer than a band saw without a drop table which puts the block above the blade, and allows for traveling or spinning on the sawblade.
If you want to remove one of the perimeter blocks from a pallet, a machine with an extended drop table is ideal. You can remove them with a bandsaw by going in the gap between the blocks and the stringer board or the blocks and the mat. You pass the blade over the block and bring the pallet back out through the same gap. Ideally, you will drop the table down and go into the top of the block and back out and make that perimeter block free.
A low-speed band saw with high torque is better suited for cutting block pallets. It doesn’t generate as much heat in the cut, and will extend your blade life. The case-hardened steel nails seem to cut easier with the low-speed machines and bi-metal band saw blades. They may cost more, but the blade life is typically about double of the carbon steel blades, which run primarily on the high-speed saws. Bi-metal blades can run on both and tend to deliver the best performance for dismantling block pallets.
Rising Transport Costs Make Pallet Logistics More Critical for Success
By Chaille Brindley
When it comes to serving the new supply chain reality, position is everything. This means having the right number of pallets in the right place at the right time. Pallet availability is king because if you don’t have pallets you can’t keep the customers happy. Compounded by rising fuel and transport costs, pallet logistics has become one of the most crucial aspects of being in the pallet business. While it has always been a critical concern for poolers, it is now a major driver for even regional players as core supplies become tight in most areas of the country.
David Lee, the CEO of PECO Pallet, said, “The key to the game of pallet pooling is to control redistribution costs.” This requires active management to eliminate empty miles, reduce asset loss, and minimize storage costs.
The numbers of pallets needed can vary significantly depending on seasonal issues. For example, after Christmas retailers are flush with pallets that flow back into CHEP’s network. Some areas can experience strong seasonal variances based on agricultural markets.
Despite years of experience and a high rate of forecasting success, Bill Wade, vice president of logistics for CHEP, admitted that some macro economic events can catch forecasters by surprise. When logistics flows are out of whack, sometimes you have to cut pricing or even allow customers to ship pallets long distances just to get them better positioned for free.
Wade said that CHEP primarily watches two key logistics measurements – service and inventory availability. Wade explained that CHEP averages on-time performance in the high 90% range. If performance drops below these ranges, responses are triggered to remedy the situation.
Storing pallets is sometimes necessary especially for pallet poolers as seasonal needs change. Placing a pallet in storage closer to the point of future use requires accurate forecasting and is a necessary step to ensure lower repositioning costs.