The Hidden Cost 
of Poor Pallet 
Management
The Hidden Cost 
of Poor Pallet 
Management
The Hidden Cost 
of Poor Pallet 
Management
The Hidden Cost

of Poor Pallet
Management
The Hidden Cost

of Poor Pallet
Management

mhd-magazine

They might not be glamorous and often attract little attention, yet pallets are the oil that keeps global supply chains running smoothly. As a standardised storage and transportation tool, they play a vital role for logistics companies of all sizes.

In Australia, the pallet business is dominated by two large players, CHEP and Loscam, who between them control a sector worth tens of millions of dollars each year. It’s not uncommon for a mid-sized transportation company to be paying tens of thousands of dollars a year in pallet leasing fees.

The solution to the complex and costly task of pallet management lies in better collection of data. Rather than relying on drivers to create paper dockets and returning them to the central depot, data needs to be collected and sent each time a pallet changes hands.

For this reason, efficient tracking of pallets is an important yet often overlooked necessity. Failure to accurately account for the usage and location of pallets can result in transportation companies paying leasing fees for pallets that are no longer within their operations.

 

THE TRACKING CHALLENGE

While individual pallets may cost only cents per day in leasing fees, when a transportation company has thousands in circulation, the bills can mount very quickly. Proper tracking allows the transfer of this cost once pallets have reached their final destination or have been handed over to another carrier for on-shipping.

For example, if a truck carrying 50 pallets arrives at a customer’s warehouse, the trucking company needs to ensure that they are transferred and become the financial responsibility of the recipient.

This can be achieved by shifting the pallets from the trucking company’s pallet account to the account of the recipient. Should the recipient not have an account with the relevant pallet company, they remain on the trucking company’s account but a record is generated to show they are now under the control of the recipient.

The situation becomes more complicated when freight is transported to a destination depot before being repacked and palletised for local distribution. It is all too easy for the pallets to be moved on but for the responsibility (and therefore leasing fees) to remain with the original transportation company.

For example, a shipment of 600 cartons of zucchinis packed on 100 pallets may be transported from the Lockyer Valley in South East Queensland to numerous customers in New South Wales as far south as Sydney.

Through this journey, a pallet of zucchinis could pass from the grower to the transport company and through two or three depots. The transport company might stop during the journey at multiple customer sites where some pallets of zucchinis are delivered and some empty pallets picked up from previous deliveries.

At the final destination in Sydney, the remaining pallets of zucchinis are delivered and empty pallets from both CHEP and Loscam pallets are given to the driver for the return journey. At this point the transfer dockets put responsibility (and therefore rental) for the pallets back onto the transport company.

Cost accounting in these scenarios is complicated by the time delays that come into play. The originating depot, which has ultimate responsibility for their pallets, may not be sure whether a pallet has made it all the way through to the end customer. It may also have no way of knowing how many empty pallets have been exchanged and are being returned.

In most cases, it is a matter of waiting until all drivers have returned. Only then can paper pallet dockets be examined to see exactly which pallets are where – and who should be paying for them. Dockets need to be reconciled with the original consignment note, and then reconciled with the physical pallet count once a month. This entire process is highly inefficient and prone to errors.

It should be noted that the pallet providers themselves have absolutely no incentive to track their pallets because they make money regardless of where in the supply chain they happen to be. As long as they are the responsibility of a transport company, the pallets are making money for the provider.

Further challenges emerge as a result of pallet theft which, unfortunately, is rife within the logistics sector. Even when theft is not an issue, it is easy for pallets to be forgotten by a driver and then fall off the radar. This can happen when paperwork is not completed correctly or a load of empty pallets is put on a trailer and simply forgotten.

 

A REAL-TIME SOLUTION

The solution to the complex and costly task of pallet management lies in better collection of data. Rather than relying on drivers to create paper dockets and returning them to the central depot, data needs to be collected and sent each time a pallet changes hands.

Drivers can be equipped with smart phone or tablet devices that allow them to collect data about pallets during pickup, delivery, and when empty pallets are being returned. This then occurs at the actual time of exchange, removing lag and ensuring accuracy.

Data collected on the devices can be fed into the transportation company’s back-end systems, allowing accurate tracking of pallets and efficient charging of lease rates to customers and other carriers as is appropriate.

To further streamline the system, pallets can have RFID tags attached. This allows easy identification of individual pallets and ensures the accuracy of captured data. Tags can be scanned by the mobile device, capturing the individual pallets details and tying it to its geographic location.

By shifting to a real-time data capture system, transport operators can significantly improve their overall pallet management practices and ensure they are not paying unnecessary leasing charges for things that have been handed over to customers or returned to the originating depot. The result is greater efficiency and an improved bottom line.

The solution to the complex and costly task of pallet management lies in better collection of data. Rather than relying on drivers to create paper dockets and returning them to the central depot, data needs to be collected and sent each time a pallet changes hands.

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