Platform for Progress

Jenny McTaggart

4/9/2016

The pallet is a seemingly simple tool used day in and day out in grocery distribution, and normally given little thought by the typical retail exec. As it turns out, though, these pillars of the retail supply chain — and the companies that provide them — are poised to help retailers achieve greater efficiencies in transportation, operations and even in the store environment.

Indeed, in this day and age of increased supply chain efficiencies, as retailers are encouraged to constantly re-evaluate their supply chains from a systems-based approach, pallet companies have evolved to become supply chain service providers themselves.

Led by Atlanta-based CHEP, which is part of supply chain logistics company Brambles Ltd., and joined by Peco, iGPS and several smaller companies, including a new not-for-profit network of pallet providers, the industry is helping its manufacturer, distributor and retailer partners tackle challenges while developing innovative solutions, including smaller pallet sizes and enhanced food safety measures.

“Pallets are the literal foundation of the fast-moving consumer goods supply chain,” asserts Vishal Patell, VP of retail supply chain solutions for CHEP, which now serves more than 60 countries and provides around 300 million pallets in total. “Most, if not all, material-handling, storage and transport systems in the domestic supply chain are heavily reliant on good-quality pallets — the combination of which is what results in continuous productivity improvement, helping keep the cost of goods lower for the end consumer.”

Today, CHEP provides its customers comprehensive supply chain solutions to help them become more efficient, reduce end-to-end supply chain costs and be more environmentally sustainable, according to Patell. Services CHEP provides include value stream mapping, platform mix optimization, product damage reduction, packaging performance testing, store fulfillment solutions, unsalables reduction and reverse logistics.

Patell is particularly excited about CHEP’s work in freight collaboration. “We’re leveraging our unique position in the supply chain to drive significant cost reduction to both manufacturers and retailers by optimizing private feet movements for individual entities or through three-way collaboration,” he says.

“Retailers deliver CHEP pallets to manufacturers, and on the return, they pick up product — this eliminates empty miles and helps them unbundle inbound logistics costs,” explains Patell.

Orlando, Fla.-based iGPS, which specializes in plastic pallets, likewise has been looking for ways to provide “customized supply chain solutions” to its clients, according to CEO Jeffrey Liebesman.

“We work directly with our customers to assess their individual businesses and make recommendations accordingly,” he says. “We are seeing a concerted and significantly aggressive effort in the grocery supply chain to drive down the total cost of business — from both the manufacturers and retailers.”

In addition to “making every penny count,” food companies have been placing a growing emphasis on product hygiene, Liebesman observes. “iGPS has been helping our customers address each of these issues through reduction of pallet/shipping weight, uniformity in automated facilities, minimizing product damage, eliminating splinters and preventing absorption of bacteria, to name a few,” he notes.

One Size Doesn’t Fit All

While pallets have traditionally come in uniform sizes, a new trend in the industry is the introduction of smaller, half-size or quarter-size pallets. These designs have been driven by the boom in smaller retail formats, as well as the need for more agile designs to move in and out of stores. Some pallets are even finding their way into stores as elements of end caps or displays.

“We’re borrowing a little bit from the European model,” notes Marshall S. White, president of White and Co. LLC, an independent packaging research and consulting firm based in Blacksburg, Va. “I think it’s an impressive trend.”

CHEP’s Patell says he sees fractional pallets, which are being used to drive in-store growth, as the biggest trend in the industry today. “CHEP’s half-pallet platform solution is proving to be a popular option for manufacturers and retailers, because it increases delivery flexibility and decreases operational costs, especially with inventory optimization and pick operations in multiple store formats,” he explains. “It can also be used as a platform to build merchandising displays at the end of an aisle or in high-traffic areas, as well as a platform for storing and displaying bulk produce.”

Patell estimates that CHEP’s half pallets can reduce labor and handling costs in warehouses by 25 percent. He also links the half pallets to reduced out-of-stocks for high-volume products and better sell-in for new products and seasonal promotions.

Another company that’s rolling out smaller pallets is Oconomowoc, Wis.-based Orbis Corp. Orbis specializes in reusable packaging and runs a reusable plastic pallet program. Its newest product, Pally, is a mobile pallet designed for quick load at the distribution center and quick unload at the retailer, according to Samantha Goetz, Orbis’ marketing communications manager.

The company has also launched a 42-by-30-inch small-format pallet. “Our small-format pallet was specifically designed for frequent product deliveries into smaller-format retailers,” explains Goetz. “It enhances maneuverability in tight spaces. The mobile Pally was also designed for this application.”

Pally is additionally being used for omnichannel picking and staging for store pickup of e-commerce items, notes Goetz. She expects its popularity to grow as omnichannel operations and smaller-format stores increase.

Along with new product development, Orbis remains focused on safety and efficiency, according to Goetz. “The need to safely and efficiently move product from the DC to the retail aisle is more important than ever, to avoid product damage and to reduce labor costs associated with deliveries and merchandising,” she says. As such, Orbis offers a full suite of asset-tracking, management and cleaning services to support its pallet programs.

New Model on the Market

In addition to the major players and niche providers, there’s a new pallet company on the market — but this one is a not-for-profit, consisting of a nationwide network of hundreds of certified pallet manufacturers, recyclers and distributors. Woodbridge, N.J.-based 9Bloc was founded in 2011 with a mission “to provide a high-quality, independently inspected pallet pool to U.S. manufacturers and distributors, with on-demand services and transport logistics at the most competitive pricing structure.”

9Bloc’s white presswood pallets were designed to meet the specifications of major warehouse club chain Costco, based in Issaquah, Wash. The pallets can be leased, rented or purchased. The company also offers web-based tracking software to help kee tabs on its pallets.

White and Co.’s White says he believes the 9Bloc model will grow, as “it’s another alternative that can help retailers control, if not reduce, their supply chain operations costs.”

“Pallets are the literal foundation of the fast-moving consumer goods supply chain.”
—Vishal Patell, CHEP

“We are seeing a concerted and significantly aggressive effort in the grocery supply chain to drive down the total cost of business -from both the manufacturers and retailers.”
—Jeffrey Liebesman, iGPS

Forward Thinking

One pallet expert is making it his mission to ensure that pallets and their interactions with packaging and unit-load handling equipment deliver the most efficiency, safety and cost savings possible.

Marshall S. White, a professor emeritus of packaging science at Virginia Tech and president of Blacksburg, Va.- based independent packaging research firm White and Co. LLC, regularly speaks at industry meetings to share his vision.

“We have found in our studies that pallet packaging spend can be reduced by 8 percent to 18 percent when you take into account how the pallet interacts with packaging and automated equipment,” he says. “This is an opportunity for the grocery industry to start to focus on the fact that a pallet’s not just a pallet. You have to consider how the pallet interacts with the packaging. Are there opportunities to change the pallet that might improve the efficiency of the supply chain?”

As far as current pallet trends go, White says that rental programs continue to dominate the U.S. market, with about 60 percent of pallets in the U.S. food industry being rented. The other 40 percent are purchased. (His statistics come from a Modern Materials Handling magazine pallet survey.)

The trend of renting pallets is likely to continue to grow, according to White. That’s because the rental companies’ design, based on the block class of pallets, tends to be preferred in the industry. In addition, the rental system has been more efficient, especially for companies that have to ship more frequently.

As he looks ahead to the future of the industry, one of White’s chief concerns is the need for global standards. “We’re already palletizing food internationally and intercontinentally,” he notes. “If this trend continues, we’re going to need a greater level of standardization in packaging and pallets. We unfortunately use different-sized pallets in different regions of the world.”

Yet White admits that “it has to be an evolutionary process — it can’t be revolutionary.” He’s already quite involved in the process himself, serving as head of the U.S. delegation to the International Organization of Standardization (ISO) TC51 Committee on International Pallet Standards.

“We started the process years ago of trying to get countries to start to consider one size of pallet globally,” he says. “But we’ve got a long way to go. I think the ISO needs to make a commitment to at least endorse the idea. When I brought it up a few years back, it was voted down summarily by the other countries. It will come up again, though.”

Global standards would not only eliminate re-palletization costs and the disposal costs of packaging, they would also make a significant impact on energy consumption, as well as the safety and health of the workers moving product, notes White. “This crosses over all socioeconomic classes,” he contends.