22 PW FEB2022
THE BIG PICTURE
By Sterling Anthony, CPP, Contributing Editor
Pallet Management for CPGs: Part One of a Series The two have similar business models, but there are differences in In the U.S., the workhorse of CPG supply pricing. CHEP charges a variety of fees. PECO charges a flat fee. And chains is the GMA (Grocery Manufacturers always important is a comparison of customer service. Association) pallet. The standardized footprint is 48 in. x 40 in., but Renting is not a viable option if the prospective renter cannot pallet styles differ. Pallets enable efficiencies in material handling, meet threshold quantities. Another quantity-related consideration is transportation, and storage. how the CPG company delivers to retailers that are willing to accept For most of their history, pallets were regarded as commodities— stringer pallets. Will the company ship to all its retailers on rented so much so that pallet management was a contradiction in terms. pallets or ship to non-mandating retailers on purchased pallets? Back then, the wood stringer pallet ruled. The name derives from the If the latter, problems might await—if not immediately, then base boards (stringers) that run the length of the pallet. The stringers down the road. That’s because of a chain reaction. It starts with are notched for fork insertion, resulting in a four-way pallet. (Stringer stringer pallets losing usage to block pallet rentals. Decreased demand pallets also are called white pallets, not because they are painted but for stringer pallets results in decreased supply, including supply of because they are not painted.) new ones. With fewer new stringer pallets, the average age of the In a bygone era, CPG companies purchased pallets, loaded them, inventory increases. Older pallets are more prone to damage and and sent them on one-way trips. The cost of a pallet was allocated failure. The non-mandating retailers’ customer satisfaction decreases. across the load and made a part of the unit price of the product. There is little incentive for a CPG There was a built-in incentive to purchase company to purchase new stringer pallets pallets at the cheapest price, often at the For decades now, pallet that will be used for a single shipment. expense of quality. Pallet failures were management has been evolving A more practical policy is: first to deal common, engendering dissatisfaction from supply chain members, especially retailers. into a more complex function. with suppliers that have reputations for delivering good used pallets, and second For decades now, pallet management The evolution coincides with a to have reliable incoming inspection has been evolving into a more complex function. The evolution coincides with shift in supply chain leadership, procedures. On a related note, CPG companies receive supplies (used in a shift in supply chain leadership, from from major CPG companies production, maintenance, etc.) on stringer major CPG companies to major retailers. to major retailers. pallets. There’s nothing wrong with Circa mid-90s, major retailers were retaining the better pallets for later use. demanding better-performing pallets. When shipping loads on stringer pallets and block pallets together Those retailers decided that the answer to their demand was the in the same trailer (to a distribution center, for example), additional block pallet. Over the ensuing years, some of the giants mandated attention should be paid to blocking and bracing. Block pallets are that shipments be received on block pallets. A seminal event was taller than stringer pallets. When the two are abutted, the height Costco’s Block Pallet Initiative of 2011. difference can allow load contact and subsequent load sliding. It’s Block pallets are constructed of wood. Named for the blocks best to section block pallets together and stringer pallets together. in the base, they are four-way platforms. Block pallets are sturdier Rental block pallets are assembled with a greater degree of than stringer pallets and hold up better against the physical rigors mechanization than is done with stringer pallets. The tighter encountered throughout supply chains. dimensional tolerances of the former benefit a CPG company’s Retailer preference for block pallets has proven to be a boon to automated palletizing and automated storage rack systems. the pallet rental industry. Supply chain specialist company CHEP, with None of this discussion is meant to suggest that stringer pallets its blue-painted pallets, controls close to a monopoly. PECO, CHEP’s will become obsolete. There is no denying, however, that their use for competitor, supplies red-painted pallets. Both manage a pool within CPG will continue to decrease. Yes, it will be due to retailer mandates. a closed-loop system in which pallets are delivered to user facilities, It also will be due to the increasing diversity of categories and SKUs collected when empty, and finally taken to depots where they are carried by retailers and subject to those mandates. inspected, cleaned, and repaired. The time is now to acknowledge pallet management as an Pallet rental allows CPG companies to gain business while important component of supply chain management. Check back next sidestepping the upfront outlay required with purchasing. Such month for part two on this topic, with more tips and best practices on benefits notwithstanding, there are a host of considerations pallet management. Specifically, I’ll discuss pallet recycling. PW associated with the decision. There’s the choice of rental company.
BigPicture_0222.indd 22
1/26/22 9:47 AM
