Know your pallet - It's more important than you think

Kevin Smyth, director, CHEP Middle East.

A high quality wooden pallet is often not given the credit it deserves in the supply chain. Many FMCG companies in the region still do not realise the importance of a quality pallet and are often shocked to realise the hidden costs associated with using a cheap, poor quality alternative. The impact it can have on the day-to-day warehouse operations can clearly be seen once the pallet component has been effectively analysed. This negative effect can impact both the product and the company’s bottom line.

The white wood pallet industry in the Middle East is very poorly regulated. The history of a used white wood pallet cannot be traced back during its life cycle. It is possible that it could have be utilised in the petrochemical industry one month and then utilised in the production of food items a month later, without the manufacturer even knowing there is a risk to the product or the end consumer.

The importance of pallet pooling within the FMCG industry can alleviate many such risks. A quality pallet that can be utilised along the extent of the supply chain is vital. A pallet that can start at the raw material supplier, then be used in the manufacturing of the product, stored up in the racking in a modern sophisticated warehouse, and transported and displayed on the retail floor at the hypermarket – this is the pallet that will make a real difference to the end consumer. This can only be achieved by pallet pooling, whereby pallets are managed in a closed loop, and standardisation and co-operation across the supply chain work hand in hand to benefit the supplier and the consumer alike.

With the Middle East ever evolving and conforming to international standards CHEP is noticing a change. The local consumer population is now more concerned about where and how it’s FMCG products are made and at what price it is sold. Companies are starting to stand up and take note of how their product can be better received and perceived in the market place and more importantly where money can be saved along the supply chain.

Pallet standardisation can greatly decrease product damage. A poor quality pallet can cause major damage to the product, and in the racking that could cost a business millions, not to mention the risk of injury or fatality in the work place. Reducing the number of times the product is handled, moved or over-packed onto a different pallet will be a major factor in reducing product damage, allowing faster turnaround times for transportation.

There have been many studies conducted to show the effects of product damage. One such report from FEFCO (European Federation of Corrugated Board Manufacturers), states: “In Europe process failures, which include damage, are reported to account for 78 per cent of manufacturer’s losses whilst retailers report only 27 per cent. But together these amount to a whopping US$9.07 billion, with over 80 per cent occurring downstream of the manufacturer. These figures suggest that damage could be a major contributing factor in these costs and that in today’s climate of cost reduction and efficiency, the scope for improving profits by reducing damage is very real.”

In the current business climate there is a renewed focus on cost savings. A company that is proactive in finding areas where significant savings can be made will be the company that will weather the economic storm. Pallet pooling has proven to be a very cost effective solution with many companies approaching us during the hard times and making substantial savings on reduced pallet costs by hiring pallets rather than purchasing pallets.

The wooden pallet is still the preferred shipping platform for FMCG supply chains across the world. For FMCG companies to effectively cost manage their pallet pool, it is vital to conduct an analysis of every interaction a pallet has within the business – CHEP has designed such a detailed analysis model. Ultimately, understanding the value of the platform on which the world’s FMCG products are moved around the globe is fundamental to ensuring improved product/food safety, people safety, environmental protection and significant cost savings.

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