Last year, Honda began using radio frequency identification (RFID) tags and tracking technology for over 500,000 reusable metal cages and plastic containers for its automotive supply chain in the United Kingdom. Like most RFID projects reported to date for pallets or containers, they involve tracking expensive inventory or, as in the case of Honda and some other applications, control of costly reusable containers, such as beer kegs, air freight unit load devices or automotive racks.
“Honda’s problem was that its assets are very expensive and also very specific to each part,” explained Andy Chadbourne, marketing and communications manager for Intellident, a UK-based designer and supplier of asset tracking software. “For example, a container for dashboards can only carry dashboards. The return on investment for the project was entirely based around loss prevention and better utilization of the assets, not the content.”
Since the RFID technology was implemented, Honda has enjoyed significant payback, and it has expanded the program to track automotive parts in addition to containers.
Andy agreed that the economic case for tracking relatively inexpensive containers and others assets has yet to find a degree of acceptance. “Generally speaking, in lower cost asset applications (such as plastic food trays or pallets), the return on investment is based around product delivery rather than asset tracking,” he said.
Results are still quite mixed as to whether RFID tracking is helping spur plastic pallet sales. RFID is clearly playing a part in the pallet industry. For example, Intelligent Global Pooling Systems (iGPS) launched a pool of plastic pallets equipped with RFID tags. Innovative tracking technologies are aiding sales of Primepal’s Diamondback plastic pallet, according to Primepal’s J.D. Swanson.
Other plastic pallet manufacturers or distributors are quick to stress the importance of RFID’s ability to control reusable pallets, and they are enthusiastic about the potential for the future. However, they are more guarded about the impact that emerging tracking technologies are having on plastic pallet sales so far.
Asset Tracking, Plastic Pallet Applications
A number of people in the plastic pallet realm who were interviewed for this article agreed that asset tracking — whether using state-of-the-art or traditional methods — can be integral to the success of a returnable pallet program. One of the main attractions of reusable pallets is that the cost of the pallet can be pro-rated over a substantial number of trips.
“Let’s face it,” said Hartson Poland, general manager of PDQ Plastics, a New Jersey-based manufacturer of extremely durable plastic pallets, “the benefit of a plastic pallet is predicated on cost per use. The longer the pallet stays in the system producing trips, your cost per trip goes down, down, down. Long-term retention will drive costs down.”
A pool or ‘closed loop’ of durable pallets that can be controlled is cost effective; the more trips a pallet can make, the cost per trip becomes cheaper. While the initial purchase price may be considerable, it can offer superior value over time.
One of the sticking points for getting customers to buy into such a program is the difficulty in “closing the loop” in certain applications, such as retail distribution or other, more complex, supply chains. That is why pallet control is so important. A logistical system also can be ‘closed’ with the aid of technology to track the pallets or containers.
The basis of effective pallet control is a good inventory control system, regardless of how sophisticated the technology behind it, said Hartson. “You can have a clerk who writes down information on a piece of paper, puts a copy of it on the load, and it is checked at the other end,” he said, describing a simple pallet control process. “Given a SKU (stock keeping unit) number, the pallet can be controlled.”
High tech tracking capability is not a prerequisite for a return on investment in plastic pallets, said J.D. Coult, national sales manager of material handling for Rehrig Pacific Co., which manufactures plastic pallets. Traditional pallet control practices can go a long way to effectively manage pallets and prevent losses, he noted. For example, educating retail employees not to store empty pallets in alleys or other unsecured areas can prevent losses. Some of Rehrig Pacific’s customers use more sophisticated pallet control tools, such as deposit systems and bar code systems.
“Tracking is critical,” said Rick Sasse, business development manager for TriEnda Corp., which manufactures twin-sheet thermoform plastic pallets. “The driving forces have been the Department of Defense and Wal-Mart, who track product on the pallet.”
There is no single, best solution for controlling pallets, he added; there are many methods, and they all have advantages and drawbacks.
“It is a matter of including the pallet into the inventory control system you have, whatever system you have,” added Hartson. “RFID is simply a higher tech way of doing what the clerk has done with a piece of paper. Pallet control should have happened before the technology curve — not just for plastic pallets, but for wood pallets, too.”
If technology can provide a way to improve control of plastic pallets in more challenging applications, customers may be willing to expand plastic pallet use into other applications that previously may have been too difficult to control.
iGPS, New Mindset
iGPS, with its use of RFID technology to manage and control a pallet rental pool, has clearly and significantly changed the plastic pallet market. The company came into the market with a multi-million dollar capitalization to launch its business.
In an interview last year with Pallet Enterprise, iGPS CEO Bob Moore indicated that the capital commitment was in excess of the $160 million that CHEP USA made when it entered the U.S. market in 1990.
Last year iGPS contracted with Schoeller Arca Systems as its primary pallet supplier. Schoeller Arca recently indicated that it is operating 10 production lines to supply iGPS with plastic pallets.
Rex Lowe, president of iGPS, recently said that iGPS will revolutionize how goods are moved in the supply chain. He listed four key benefits of the iGPS pooling model: efficiency, superior pallets, the power of RFID, and sustainability. “Our cost model compares very favorably to CHEP and is priced competitively,” said Rex.
The biggest surprise has been the benefits to customers, who, with the data captured by the RFID technology, learn about their own processes. For example, by following the RFID data, one customer became aware of back-ups along one of its conveyor lines.
The plastic pallets used by iGPS pallet comply with the UL (Underwriters Laboratory) 2335 fire rating, according to Rex, which means it burns in a similar manner to wood. Testing by Schoeller Arca indicates the pallet supplied to iGPS is actually less flammable than wood.
CHEP
One company that has been following both RFID and plastic pallet developments very closely is CHEP. The global pallet rental company takes a pragmatic view of pooling.
“It took 20 years for the bar code to reach critical mass,” observed Brian Beattie, CHEP USA vice president of marketing. “Hopefully it won’t take 20 years for RFID to reach critical mass. It is a long journey to get data that we can use in the supply chain, but we are absolutely committed to that journey.”
CHEP began tests in conjunction with the RFID lab at the Massachusetts Institute of Technology in the late 1990s. It has not justified the cost to tag the 75 million pallets in its U.S. rental pool, although it does offer a wood block-style pallet with a 3-in-1 tag that can be read by RFID, bar code or a person. CHEP passes along the cost of tagging – 26 cents — to customers.
In order to get the benefits of RFID, a company must have the infrastructure, including RFID tag readers and software to process the tag data, noted Brian. “A lot of the real traction for RFID continues to be at Wal-Mart,” he said.
Brian sees interest in RFID for certain applications. One is promotional merchandise, where it is important to get the product onto the retail floor in a timely fashion. Another application is intermediate bulk containers (IBC) used in multi-step processes. “Customers with multi-stop processes, co-packers…with no visibility in their process are looking to RFID to achieve that visibility,” Brian explained. RFID also is of interest in the automotive industry, where high value parts and components require real-time visibility.
For widespread adoption, Brian said, it will take both ends of the supply chain – shippers and receivers — to “make it go.” A critical mass is needed in terms of number of participating supply chain stakeholders and number of items tracked.
As for plastic pallets, Brian pointed out that CHEP offers plastic pallets in many of the markets it serves internationally. CHEP also has been researching its potential in the U.S. for many years. “If the market demands plastic pallets in the U.S., then we’ll be bringing them out,” he said. CHEP already has a pool of about 500,000 plastic pallets that it provides for one major U.S. customer, he said.
Breakthrough
Plastic pallet companies, such as Rehrig Pacific and PDQ Plastics, are watching iGPS with great interest. “iGPS is helping raise awareness of plastic pallets and controlling those assets,” Hartson noted. “If they can do it, then we all can.”
“The technology is there,” J.D. observed, “and the reliability is there. The technology has become much better and more inexpensive.” With the technology now in place, it will only take a few large players to invest in it in order to change perceptions. While retailers want plastic pallets, manufacturers must buy in, also.
At this point, cutting edge RFID technology does not appear to be a significant factor in the growth of plastic pallets outside of iGPS and certain other companies, such as Primepal.
Nonetheless, the ability to track and control pallets remains an important consideration for achieving return on investment in many applications, whether low tech or high tech.
Software Tools for Pallet Control
While RFID technology is available for tracking pallets and containers, investment and infrastructure hurdles may make conventional pallet control computer software an attractive option.
Software for controlling pallets includes 2ic Pallets (www.2icpallets.com), the leading Australian pallet control software now available in North America and the U.K., as well as CTSWeb, the Canadian Pallet Council (CPC) software, and custom software from iLogic (www.ilogic.com), an Ontario company that designed CTSWeb as well as enterprise systems for pallet producers and third-party pallet management.
Both Victor Cheng, president of iLogic, and Andrew Whittam, president of 2ic Software, note that traditional ‘batch mode’ software can help companies regain control of pallet programs.
“Many companies needlessly spend hundreds of thousands — or in some cases even millions of dollars — each year on pallets,” Andrew said. “2ic is a solution that helps companies very quickly regain control of their pallet system, helping them to target problem locations.”
“We are obligated to keep up with the technology,” Victor said of RFID systems, “but there is still a lot of ‘wait and see’ going on. It is definitely a matter of when, not if, but it requires a global infrastructure. When are we going to get critical mass?”
Victor has decades of experience in working in information technology with pallet operations, he noted, and customers can benefit from that experience.
The highly customizable 2ic Pallets is used by leading pallet-using companies in Australia, including manufacturers, retail distribution and logistics providers, as well as third-party pallet control companies. It also is used in Canada and the UK. One particular advantage of the product for a customer using multiple pallet programs is that it can be used to manage multiple rental and exchange programs; it is not necessary to have multiple control programs.
CTSweb is the Web-based pallet control system that the CPC makes available to members. It has been enthusiastically received by some of Canada’s largest grocery distributors, including Loblaws and Sobeys.
2ic Pallets: www.2icpallets.com (416) 548-8478
CTSweb: www.cpcpallet.com (905) 372-1871
iLogic: www.ilogic.com (416) 480-2266
