Pallets: Chaos in the food supply chain network

A few weeks ago, I received an e-mail with an attached article from Richard Kochersperger, the former CEO of a $300 million regional food distributor and a food industry consultant who focuses on supply chain issues.

He described a visit to a 1.2-million-square-foot food distribution center shipping more than 1 million cases of food a week. The facility, he wrote, was in great shape and the workforce was well-trained and highly motivated.

All the same, there was a glaring problem in red, white and blue: Pallets. He saw new ones and used ones, plastic ones and wooden ones, pallets that had been purchased and pallets that were leased from the big three, PECO, CHEP and iGPS.

Not only was there a variety of pallets, the distributor and others like it were allocating valuable dock space, dock doors and trailers, and time to sort the pallets for return to the pallet pool or a recycling center.

“The bottom line,” he wrote, “Stacks of pallets are everywhere taking up space, equipment and manpower.  None of the work is productive.”

Hence, the chaos on the dock, where all those pallets are collected, sorted and returned to the pallet pool facility. “It took the food industry 25 years to standardize on a 48-inch x 40-inch hardwood pallet, as a common platform which significantly improved industry productivity and performance,” Kochersperger wrote. “Now we have messed up the situation big time and it costs every company in the food supply chain a lot of money at a time when all food companies are searching for ways to squeeze out costs from the operation.”

What’s the best pallet? Kochersperger says that after he looked into the matter, he discovered that food manufacturers and distributors were anything but aligned in their preferences. Manufacturers preferred wooden pallets, especially pooled pallets, because they were cheaper, which was a benefit if the pallets never came back to them. Distributors, on the other hand, preferred plastic pallets because they are significantly lighter, reducing worker compensation claims; they enable the dispatcher to put more product on a truck; and they deliver more trips per life cycle than wood. 

When he tried to find out whether plastic was better than wood, whether wood was greener than plastic, which could work better in racks and which was the worst fire hazard, the consistent answer was: It depends.

His conclusion was that years after the introduction of the GMA, the food industry is ripe for a new, effective platform to ship product from the source to the final point of sale. “We need a complete supply chain solution because the piece meal solutions add costs,” he wrote.  “Representatives from every segment of food supply chain need to step up and work towards this common goal.”

That would be a pallet with RFID or another technology for tracking; one that can work in the full range of temperatures; one that is rackable; lightweight yet durable; and one that will work for years with minimal maintenance.

Kochersperger described the development of such a pallet as a major opportunity for the industry, one that would enable all players to share in the efficiencies to be gained. “This is a multi-million dollar issue that needs attention now,” he concluded.  “We need to stop the chaos that currently plagues the entire food supply chain network.”

Pallets and containers: A CHEP off the old block
More than a decade after entering the North American market, CHEP continues to be the leader in pallet pooling.

Pallets: Pallet pooling for the other guys
Upstart PECO Pallet brings competition to the pallet pooling market

Pallets and containers: The plastic pool alternative
iGPS offers pallets users an alternative to wood