Pallets: Pallet pooling for the other guys
October 06, 2010 - MMH Editorial
Are you red, or are you blue?
For pallet pool users, that’s not a political question, even if we are in the election season. It’s a matter of whether you prefer the ubiquitous blue pallet from CHEP or the red pallet from PECO Pallet.
For years, CHEP was the only game in town when it came to leasing or renting pallets from a pallet pool. Today, CHEP is still the dominant player in the market, with a 90% share, according to CHEP’s estimate. But, they are no longer the only player in town.
Launched in 1997, upstart PECO Pallet has offered an alternative to CHEP with its signature red 48- x 40-inch wooden block pallet. Today, PECO has a pool of 5 million pallets, about 8% the size of CHEP’s pool, 136 depots across the country, and is accepted at more than 450 retail distribution centers across North America, including the top supermarket chains and discount retailers.
There are a number of similarities between the two companies, starting with the ordering process: A PECO customer places an order for pallets 72 hours before they’re needed, primarily in full truckload quantities. Most PECO customers place orders on the Web. The rental period begins when PECO delivers the pallets to a manufacturer, and it ends when the manufacturer reports that it has shipped the pallets to its customer. Later, PECO picks up the empty pallets at distribution centers or retail stores and returns them to a depot center, where they are sorted, inspected, cleaned and repaired.
What then is PECO’s competitive advantage? The simple answer is that they aren’t CHEP. “We look at the playing field as an oligopoly, and we bring an alternative to CHEP to the market,” says David Casarez, director of sales. While most of us would love a corner on the market in our own businesses, as customers we know that competition is a good thing.
But beyond that, PECO believes there are a few differences in how they approach the market and customer service, says Casarez.
For one, given that a significant portion of PECO’s business is in the grocery industry, PECO pallets aren’t used to ship industrial products that might contaminate a pallet.
PECO argues that it has a more rigorous inspection, cleaning and repair process than any of the pallet management and repair services on the market. As a result, “we believe we have the lowest total lifecycle cost per pallet in the industry,” says Casarez.
And finally, while PECO declined to discuss rental rates, the company bills customers one flat rate per pallet, rather than an issue fee and a rental rate. “We understand our customers volumes on a monthly basis and how long they stay in the supply chain,” says Casarez. “That allows us to offer a simple, straight-forward, all-in-one price per pallet. When you place an order, you’ll know exactly what it’s going to cost.”
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