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Pallet & Logistics Industry 2031 - A Look into the Future...Redundant Supply Chains, Global Markets, Automation, Tracking & Human Errors
Look to the Future: Writer Rick LeBlanc takes an imaginary look at what the pallet industry might look like 25 years into the future.
By Rick LeBlanc
Date Posted: 12/1/2006
Editor’s Note: The following is a fictional back-to-the-future type story where Rick LeBlanc, Pallet Enterprise’s grocery/end user expert, looks at what may be the future.
Where does time go? It is nice of Chaille Brindley at Pallet Enterprise Magazine to invite me back after all these years, on the occasion of its 50th anniversary here in 2031.
The truth of the matter is that the labor situation hasn’t gotten any better for anyone over the last three decades. This is in spite of the foreign worker program and the Supply Chain Initiative introduced in 2015 by then U.S. President Arnold Schwarzenegger. He led the effort to really ‘pump things up’ by dramatically upgrading and automating the tired U.S. logistics infrastructure. We are still paying for that infrastructure of course, and we will be a drain on the economy for another 20 years at least. Whatever happened to the two month ROI that everyone used to demand back in 2008? But in retrospect I guess it was that type of mentality that ultimately led to the chronic lack of infrastructure investment over time.
Like many companies in most industries, the materials handling industry has been sifting through its old retirees and other former employees to see if someone would be willing to come back and help out. That trend in itself is nothing new since the early 2000s. The thing that is different now is that companies are digging deeper than ever, tracking down retirees of 20 years or more. And if you are not pushing up daisies or drooling onto your Converse GeriatricTreads, then you are a potential solution.
Supply Chains Designed for Redundancy, Flexibility, Synchronization
The first speaker was a young executive from FedEx Reliability. There was a time, back in the 2000s, he explained, when the global supply chain concept was as contagious as chicken pox.
All the kids were catching it, stretching long, single strand-like supply lines around the world. At the same time, “pipeline” inventory levels were cut to alarmingly low levels in order to free cash that was tied up in inventory. There were problems of course, when that single supply chain strand inevitably was pinched or severed by any type of disruption. Delayed shipments of components resulted in unplanned production shutdowns, and ultimately empty store shelves or vacant show rooms.
Companies gradually figured out they had to plan to work around such emergencies. Supply chain executives came to realize they had to build in redundancies for all strategic operations in order to increase resiliency. At first they put some extra safety stock back into the supply chain closer to the customer to make it less vulnerable. Then over time, they looked at alternate regional sourcing, as well as domestic backup production capabilities from third party operations.
Companies found out the hard way that in the long run it was good business to build back-up plans and alternate production contingencies into their distribution networks.
The good news is that it got easier over time as the market place recognized that companies would be willing to invest in backup domestic manufacturing capability. At first the market was quite fragmented, but more recently, larger players, with powerful production on-demand customized manufacturing capabilities, have made their presence felt. Other companies have provided the robust software solutions that allow these highly complex and synchronized, resilient supply chains to flourish.
International Shipments: To Palletize or Not to Palletize, That Is the Question
The second speaker from Microsoft Port Strategies, Toby R. Notobee, took a historical look at international palletization options over the last 30 years. Many older readers will recall the commotion that ISPM-15 created back in the first decade of the 2000s. Timber pallets had to be heat treated.
Alternative material pallets such as cardboard and plastic made some inroads during the flux period. But as freight became increasingly expensive, a lot of lighter weight consumer goods were arriving unpalletized.
Just to complicate things, labor shortages made destuffing more expensive, which motivated people to look at increased automation of auto conveyors, auto-unload, and de-stuff robotics. It really became a case of pricing out the logistics options on a product by product basis, rather than a ‘One size fits all’ approach. Thirty years later, practices are still quite mixed. Certainly the international pooling of pallets has become well established, but is far from ubiquitous.
The biggest gains have been in optimizing the equation of sea container, product size, pack size, pallet size and customer logistics and merchandizing requirements in order to provide best value, but things are still all over the map in terms of preference.
Terrorism and Product Safety: RFID Visibility Left Supply Chain Knickers Flapping
Surprisingly, Toby noted, product safety and terrorism control was achieved without much of a battle, riding on the heels of the supply chain visibility initiative and the RFID evolution. Visibility, along with total quality, lean logistics, and other approaches all coalesced to pretty much expose weaknesses and leave the supply chain’s knickers flapping in the wind, liability-wise.
Unrefrigerated docks, under-refrigerated warehouses and mislandling in transit were all quickly red-flagged. It was this legal exposure that helped spur new facility investment in a relatively dated food distribution system. In the process, better temperature and tampering controls were instituted.
Some veterans may remember the huge product recalls that were required before tracking became more precise. I can remember a specific spinach recall back in 2006 that was triggered by some E. Coli fatalities. That operation cost the Salinas Valley growers in the neighborhood of $60 million. As time marched on, such recalls became more narrowly targeted, and initiated further back up the supply chain, before customers were impacted.
Reverse Logistics and RFID: How Can We Still Be Losing Pallets?
Some people thought that the RFID revolution was going to really be the thing to prevent the loss of reusable pallets, according to Y. Whorry, President of Single Trip Pallet Solutions, a Pasadena-based provider of fungible shipping pallets. In fact, he noted, entire pallet business models were designed around the premise of RFID technology ensuring asset retention. Now these ideas weren’t all wrong, but they weren’t exactly all right either, at least initially.
At first people couldn’t figure out how pallets were still evaporating in thin air out of these RFID supply chains that claimed to have total visibility. Early applications of RFID container tracking still experienced a 10% annual loss rates, according to one British researcher in 2006.
Over time, the black holes were increasingly corrected, and it became possible to figure out in what supply chain link the pallets were disappearing, but not before some considerable pain. Even with problem links identified, however, retrieval was still an expensive proposition, involving an expensive asset recovery program. Despite all the technology employed to combat the situation, the problem was mostly due to human error and lack of concern by the workers at the warehouses. This only changed in places where managers measured pallet loss and tied compensation to it.
These kinds of problems really delayed a move to high priced reusable/returnable pallet systems that some people thought would take off immediately in the wake of RFID. The fact that supply chains were getting increasingly complex, redundant and flexible also acted as a drag on the growth rate of returnable pallet programs. As forward logistics became more complex, reverse logistics solutions continued to struggle to keep up.
RFID Solved Some Problems, Caused Other Ones
Speaking of RFID, the technology took longer to take off then expected. Once it did start to become more common, it suffered from its own success. The technology produced tons of information. Companies had difficulties mining good information from the huge amount of data generated by the technology. Many of the theoretical benefits of RFID were hard to achieve until companies began to improve the ability to share information and learn real world action steps from the data. Only some of the larger players have really taken full advantage of the technology the way it was advertised.
RFID did help retailers reduce out-of-stock problems and improve supply chain visibility at a time when certain cogs of the U.S. logistical infrastructure became less reliable.
Automated Supply Chains Impact Pallet Selection
The U.S. was not as quick to invest in warehousing automation as Europe, for several reasons. With cheaper real estate and more abundant, cheap labor in the U.S., the economic drivers were differently configured. With this in mind, conventional, labor intensive warehousing lingered, and even new facilities were often of conventional design.
Things changed over time, however. As the market leaders moved into automated warehousing, there was pressure for others to keep pace. In terms of pallet selection, automated storage drove the need for consistent pallet quality in terms of manufacture and repair. For shipment to retail outlets, plastic pallets continue to play an important role, as well as pallet and half pallet display units.
While some automation involves pick to belt environments with robotic end of the belt palletization, some facilities have become completely “no touch,” involving automatic trailer unloading and storage, as well as automated depalletization to belt, scanning, robotic palletization and automated loading.
Crossdock products can move through the same auto-depalletization process, or come in full pallets ready for reloading. Such systems are still pricey, and limited to stable companies with solid market positions. There are still plenty of conventional operations that are more flexible to take advantage of opportunities as they come up.
Baby Boomer Bastions, Web-Based Home Delivery
Web-based grocery ordering by consumers was one of those ideas that never quite caught on initially, but never would quite go away, either.
The less automated versions like Albertson’s found a smaller, loyal following as people looked to save a little time out of their busy lives. But the funny thing is, that most people still seemed reluctant to give up the shopping experience. They wanted to be able to ‘hunt and gather’ their own provisions in the market.
It was kind of a primitive ritual that many people wouldn’t relinquish, especially as all of the baby boomers retired, predominantly in higher density communities within short distances of the food store. I could never quite follow it myself but like they say, people speak loudest with their debit chips, and those chips are still making clicking noises as throngs of people walk out the front door of the supermarket with bags of groceries. Home delivery remains a niche business.
The Pallet Business Solution
“It’s the network stupid.” That became the understatement of the decade as pallet companies learned one of their greatest assets was who they know and how they could help customers get the necessary pallets on demand. Pallet companies began developing informal networks in the early 2000s. The trend took off in the following years as most major companies joined some kind of network. These alliances helped them serve large companies with a fairly consistent level of service.
In a nutshell, it came down to making business and social networks inclusive instead of exclusive. It was about involving more people instead of fewer, and making association mutually valuable to everyone involved.
People across the country finally understood that costs associated with lack of trust and uncertainty about ethical business behavior had become an enormous drain on the economy nationally and globally. To the extent that companies could grow inclusive business networks based on mutual respect (and having fun), the better off everyone would be. It was all just common sense really, but in the early 2000s there seemed to be a common sense black hole that was depleting global supplies of that stuff to dangerously low levels.
Increased competition and customer demand forced changes that helped smart companies take advantage of opportunities. Those who refused to innovate suffered the consequences.
Well, it’s getting late, and I need to take an afternoon nap. It sure has been a fast 25 years. I am kind of glad to have my opportunity to watch from the sidelines instead of being stuck in the middle of the daily fight for better returns.