Do you have a custom, non-standard pallet that is at odds with pallet pooling? You can still enjoy the cost savings and positive environmental outcomes of reuse with a closed loop pallet management system.
Pain point or opportunity: it’s funny how two different people can look at the same thing and see different things.
When warehouse or plant managers walk through the parking lot and see multiple stacks of fresh-looking custom pallets waiting to be picked up by the wood recycler, their stomachs might grind. They wince at the thought of extra removal costs, wasted management and forklift hours, and lost space in the yard.
When I visit a plant like that, I’m wondering, “Why are they doing that? Have they explored a custom closed loop pallet system?” In this article, we will explain what a closed-loop pallet system is, some variations of it, and why they can help improve your company’s financial and environmental performance.
Introducing the Pallet Systems
Let’s start off by introducing the basic types of pallet systems. At a fundamental level, we have expendable pallets, which are meant to be used a single time, and we have multi-use or reusable pallets. To keep things simple, reusable pallet systems basically include the following:
Open Pallet Pools
Reusable pallets of an accepted standard specification are shipped under load to a customer. Depending upon the agreement between trading partners, the emptied pallets may be returned to the shipper, reused by the receiver or sold in the secondary market. Such pools may be informal, as in the case of the GMA system, or more formally regulated as in the case of other pools such as EPAL or the CP pallet system. Such systems are sometimes called exchange or fungible pools.
Rental Pallet Pools
Rental pallets are owned by the rental company and rented to pallet users. In typical North American models, this is a one-way system, with the renter shipping the pallets to a consignee, who then returns the empty pallets to the rental company for refurbishment. As in the case of the open pallet pools, only standard-sized pallets are available, which may or may not meet your needs. Additionally, using rental pallets may limit your ship-to destinations to those that are served by the rental provider.
Custom Closed Loop Pallet System
A custom closed loop pallet system is one whereby pallets are shipped, recovered and reused by the original shipper. In more complex closed-loop systems, the pallets may be reused by multiple shipping points within the same closed network, but ultimately, the goal is to retain those pallets and reuse them within the closed system. At FALM, we have successfully run select closed-loop programs for years.
Customers are increasingly recognizing the opportunity for a custom closed-loop pallet system. It is a great way to reduce your pallet cost-per-trip and lighten your environmental footprint if you require a relatively expensive custom pallet.
Let’s look at the cost first. In an expendable system, the landed purchase price of the pallet (plus procurement overhead) gives you a basic pallet cost-per-trip. But what if you could use the pallet for ten shipments instead of only one? So instead of $50, the cost is 1/10 of $50 or $5, along with the price of reverse logistics (retrieval, inspection and refurbishment).
From a sustainability perspective, you are avoiding the resources and associated solid waste of buying and ultimately disposing of pallets for each shipment. Often, the environmental impact of reverse logistics is significantly less than for manufacturing a new pallet each time, depending upon the supply chain and accumulation rates. Overall, the results can be a slam dunk in favor of reuse in a closed loop.
A Shift in Thinking
Sometimes saving money takes a shift in thinking. Consider the following:
Customer experience: While you might think that your customers won’t want the hassle of accumulating pallets for return, in our experience, they are usually delighted to have a system in place that eliminates their pallet disposal headaches, with our partners picking up from their sites.
Pallet durability: Some operators are concerned that their pallet is too flimsy. But if your current pallet might not have what it takes, only a modest upgrade might be required to make your pallet sturdy enough for several trips, still resulting in substantial overall savings.
Damaged pallets: One typical worry is that a reusable pallet system will mean you will be dealing with damaged pallets. This is not the case. We ensure that pallets have been inspected and refurbished to your specifications.
Management headaches: Another concern is that managing a custom closed-loop pallet system will be a headache and a drain on management resources. That’s where we come in. Leave the management to us!
A FALM, we are experts at operating closed-loop pallet systems. We work with our pallet supplier partners to retrieve the emptied custom pallets from your customers, inspect and refurbish them, and then ship them back to where you need them.
Just because you need a custom pallet that isn’t a match for one of the open pools or rental systems, it does not mean that you need to miss out on the advantages of a closed-loop system. Contact us today to find out more!
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