Still No Respect: Australian Industry Survey Continues to Look at Pallets as “Necessary Evil”; Challenged by Pallet Management and Loss

Rodney Dangerfield, circa 1972. No respect.

 

In spite of all the hype about Internet of Things, Big Data, food hygiene and more emerging trends, a new pallet survey from Australia shows that pallets still are viewed as a necessary evil rather than as an opportunity to enhance their supply chains. Offered as an online survey, the Australian Pallet Survey 2017 received responses from 81 Australian business in May and June. Industry consultations generated further insights. The report (citing research from Freedonia) indicates that there are currently about 140 million pallets in the Australian pool with an annual replacement of 56 million pallets (which given the typical rule of thumb of six pallets per person for a developed economy, seems reasonable for a population of around 25 million people – RL).

According to the report, the pallet is perceived as a necessary piece of equipment with little intrinsic value in relation to the product supply chain. This view persists, in spite of indications that companies incur significant costs associated with their inability to control and manage pallet usage.

The report notes that this viewpoint may change in the future as trends such as “whole of the supply chain” product planning, increased material handling automation and tracking technologies become more entrenched.

Survey respondents cited cost as the prevailing concern for companies which buy or rent pallets. Daily rental price (51% of respondents), purchase price (38%), cost per use (15%) and total cost per year (28%) were selected. Other key factors included:

• Customer requirements
• Strength
• Durability
• Rackability
• Ability to reuse the pallet without repair
• Safety
• Availability
• Ability to clean the pallet
• Meeting regulatory requirements
• Contamination
• Weight
• Repairability
• Ease of disposal
• Recyclability and life cycle impacts.

No surprise for the Australian market, 44% of respondent companies reported that the cost of pallets in purchase or rental was a concern. The biggest pallet problem reported by respondents has to do with pallet control, involving the management of pallet inventory and the loss of pallets (selected by 66% and 41% of respondents respectively).

Other concerns, in order of frequency, were:

• Safety
• Quality
• Availability when required
• Poor durability/pallet life
• Limited choice of suppliers
• Managing repairs of pallets
• Contamination risks
• Poor customer service from suppliers
• Variation in sizes e.g. EU standard preferred
• Pallet disposal costs
• Theft.

As the world’s most mature pallet pooling market, pooling dominates in Australia, with two-thirds of respondents saying they use rental pallets. Flexibility and purchase avoidance were cited as benefits of pooling, along with the elimination of repair responsibility. According to the report:

The downsides to the rental model were identified as the exposure to ongoing fees for lost pallets (80%), the total cost of pallet operations (48%) and a lack of transparency regarding costs (32%). Other less frequently selected issues associated with rental were the lack of control over pallet audits, theft of pallets, and the limited selection of pallet types.

Plastic pallets also were touched upon in the survey. Around 22% of surveyed businesses said they expected to expand their use of plastic pallets over the next two years as a result of customer requirements and regulatory mandates related to product and worker safety. Hygiene and avoidance of contamination were primary considerations favoring plastic pallets. Key concerns about plastic included rackability and strength. When questioned on the major disadvantages of plastic pallets, the cost was identified as the primary issue, while rackability was noted by 36% of responses as a concern, followed by repairability and load capability.

One problematic trend identified in the survey is pallet size diversity, creating material handling challenges in storage and freight. The growth of import pallets, retailer-configured pallets, and pallets associated with warehouse automation are contributing to pallet size diversity. The report identified increased importation of pallets from Asia and Europe as being an issue, along with a diversity of pallet footprints created by particular retailers.

The survey results indicated that pallet control remains a significant problem for the pallet owner, renter, and supplier. In spite of the costs involved, the problem is exasperated by a lack of effort in establishing effective pallet control. “While there are technologies available to track and trace the pallet,” a report about the survey in Transportation & Logistics News states, “these have proven too expensive to date to implement. It is unclear whether this is a false economy, given the costs associated with lost pallet inventory and as the technologies become more common.”