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Markets in Transition: How Do Pallet Buyers Inadvertently Shoot Themselves in the Foot?
Pallet user columnist, Rick LeBlanc, explores the mistakes that companies make when purchasing pallets and how to avoid them.
By Rick LeBlanc
Date Posted: 8/1/2014
In times of material shortages and price increases, pallet buyers increasingly feel the heat as they try to hold to their budget spends. Pallets, like other industrial staples, usually are not normally a topic of conversation until that pallet spend cell turns red (over budget) on the spreadsheet. Of course by then, you are really chasing your tail instead of being proactive.
Here is the good news when it comes to looking at pallet procurement. Pallet buyers can be more successful if they consider the advice covered in this column. It is gleaned from a number of pallet people who contacted me over the past few weeks, including Frank Falzone of FPF Pallets Plus, Steve Yelland of J.F. Rohrbaugh Co., Inc., Bob Noland of Plastic Pallet Solutions, and others who spoke off the record.
1. Don’t just think about price, and don’t think of pallets as a commodity. A pallet is not a pallet is not a pallet. Price is important, but the total cost impact of the particular pallet selected is more important in terms of functionality, quality and related services. Depending upon what pallet you choose to buy, your supply chain cost can be significantly impacted. The cheaper pallet may cost you more in the long run if it leads to product damage, rejected loads, or problems with automated material handling systems.
2. Don’t just jump ship. There are a lot of variables that go into a supplier’s value proposition beyond price, such as adherence to the specification, moisture content, sanitation, keeping inventory on hand for immediate delivery, billing and electronic timeliness, drop trailer requirements, recycling services and so on. A lot of these elements evolve informally over the course of a business relationship and may not be obvious until after you shift suppliers.
3. Loyalty counts. Further to the point above, loyalty counts in times of tight supply. Pallet companies tend to look after their best customers first, when there is limited availability. And right now, recycled pallets are in short supply, and new pallets keep going up in cost.
4. “I’m sorry. Our policy is to be inflexible and stupid.” Don’t be shackled by dysfunctional corporate controls. Large companies have controls for good reasons…and for not so good reasons. Even those with rigid procurement processes should have a design that allows for the ongoing analysis and acceptance of new, better value inputs. Are you one of those procurement or operations people that can sell a great idea to upper management? Sometimes that is what it takes. If that is you, then keep reading. If not, skip the rest of this rant.
5. Pallet design software can help. Take advantage of pallet design software such as Best Pallet™ or Pallet Design System™ (PDS), and be flexible to use the options these programs illuminate. In times of tight material supply, there may be other approaches that will provide a more affordable pallet than the specification you may be currently be using. As one contact told me, “As hardwood becomes scarcer, buyers have to become aware and open to using alternative species in pallet design. Some customers are slow to consider it to their detriment.”
6. So can unit load design software. In a similar vein, understand and take advantage of unit load design software, such as Best Load™ or Pallet Design System™ (PDS) Version 5.1 . It just may be that if you spend a little more on the pallet and increase stiffness, for example, it will be possible to significantly reduce overall expenditure on the packaging of the goods resting on the pallet. Pallet guru, Dr. Mark White claims that using systems based design where all elements of the unit load are analyzed can reduce total packaging spend by 8-18%.
7. Pallet flow through opportunities. Look at synchronizing your pallet with your trading partner. There may be an opportunity to share the cost of the pallet with your customer by purchasing a pallet that suits their internal requirements. In that case, perhaps you can sell the pallet under load to that customer. (This isn’t exactly a new concept. Palletizer Magazine wrote about the opportunity to reuse the same pallet in the secondary legs of the supply chain in the classic 1944 article, “Why Use Two When One Will Do.”)
8. Take advantage of closed loops. Some pallet buyers make the mistake of painting their entire system with a broad brush. There may be significant internal loops that can be more cost-effectively served on a cost-per-trip basis by a durable reusable pallet than by a rental or limited-use pallet.
9. Embrace pallets as a supply chain catalyst. And finally, do not equate success with simply hitting your budget numbers. A budget based on a mediocre pallet strategy gives you just that – a balanced budget with no room to truly improve performance or drive costs out of the supply chain. Consider some of the factors listed above, and leverage your pallet system as a supply chain enabler that can help you deliver the best value to customers.
In the final analysis, pallet professionals interviewed for this article urge customers to be open minded about alternatives, especially in light of the current hardwood availability. It is important to be flexible. It is also important to take the broader view when it comes to the various impacts and opportunities that result from pallet selection. This includes overall packaging spend reduction, trading partner impacts and more. Price is price, but a pallet is not a pallet is not a pallet. Vive la difference.