Companies are starting to get serious about reusable container and pallet loss, particularly as it relates to outright theft. For pallet recyclers and pallet users alike, this turn of events is really a double-edged sword.
It speaks to the opportunity for asset recovery for leaky proprietary systems, but it also foreshadows the risk of new legal challenges for unlawful possession of proprietary containers or pallets in recycling yards. The problem is that many pallet users and their investigators really don’t understand how pallet recycling works. There is also liability risk for pallet users who might find themselves with exposure because of success. But more on that later.
Plastic pallet and container loss has been an increasingly important issue as companies have started to look at replacement costs. Pallet Enterprise has covered the trials of U.S. Postal Service in some detail as it switched to recycled timber and presswood pallets in order to control their spending. I recently heard from a reliable source – unofficially of course – that some major grocery retailers are postponing purchase of plastic downstream pallets and substituting wood pallets until they can get their losses under control.
As with USPS, one vendor told me, it still appreciates the benefits of plastic pallets, but for the short term it is just a matter of cost control. Meanwhile, in the dairy industry, the International Dairy Foods Association (IDFA) estimates reusable crate and roll cage losses to the U.S. industry at around $100 million per year. Other industries such as automotive are certainly shouldering even larger numbers.
Some companies have become proactive. A group of frustrated food products shippers hired a private investigator to investigate an ongoing problem with pallet and container theft in the Baltimore area last year. To summarize the story, a group of Maryland businesses, including Coca Cola, Pepsi Cola, H&S Bakery and Cloverland Dairy contracted with J.R. Investigative Services to investigate unacceptably high levels of container loss.
James Rood, a private investigator and principal with the firm, observed a recycling company taking pallets into its possession that were marked as property of assorted other companies. As a result, five individuals were indicted for stealing $400,000 worth of reusable plastic pallets and containers from local businesses. The actual value of the packaging in the case is thought to be over $1 million.
James discovered that plastic pallets and containers were repeatedly being taken from retail locations and being delivered to a plastic recycler. The recycler was reportedly warned on at least two occasions to stop the practice of purchasing proprietary assets, but it failed to comply, resulting in the indictments issued last November.
Usually these sorts of initiatives are short lived, but this one seems to have some momentum. In April, Rehrig Pacific, a major manufacturer of reusable plastic pallets and containers, hosted an event in Chicago called “The National Coalition on Plastic Container Theft,” according to a news release by IDFA. With 60 attendees, the agenda focused around what companies could do to limit losses and improve management.
Companies represented included Anheuser-Busch, Dean Foods, Coca Cola, PepsiCo, Sara Lee, H&S Bakery, Upstate Niagara Cooperative, Inc. Speaking at the event, James Rood recommended that local firms collaborate, and meet with state lawmakers to propose bills to deter theft.
Government officials in Maryland have attacked this issue by signing House Bill 1267 into law this April. “It limits the sale and purchase of plastic pallets and places recordkeeping requirements on those who do,” explained Representative Doyle Niemann, who had introduced the bill into the Maryland House.
So here is the hitch. Companies really value the benefits that reusable plastic pallets and containers bring to the table, but loss is a common problem, either through theft, as users like to key on, or due to lack of management. More often than not, where theft is ongoing, we would have to say that the theft is a symptom of an inadequate management system. The user community has generally been slow to accept this idea.
Clearly, there is a business opportunity to help businesses hang onto their reusable pallets and containers. This may be with respect to helping them recover the lost assets, or it may be with respect to helping them establish systems to deter loss in the first place. I know this is territory that many pallet companies have already broached with their customers, but as losses escalate and become publicized, perhaps the issue will take on a higher profile and there will be greater interest in correcting the problem.
At the same time, there is a danger that an increasing “theft” focus could lead to more legal action against pallet recyclers. Proprietary pallet and packaging owners would then be watching pallet recycler yards more closely. They would likely challenge possession of proprietary assets as Coca Cola did in Los Angeles a few years ago in having a pallet company manager arrested.
It may be worth taking a closer look at the proprietary items you are accumulating, and those from customers which you potentially could accumulate. If you are accumulating those assets through normal courses of business, and there is a will of the owner to compensate for handling services, then perhaps there is a business opportunity for you to explore. The same goes for other proprietary containers that a customer might wish you to accumulate on its behalf.
As I mentioned in a previous column, a beer distributor that I know would happily outsource the empty keg accumulation part of its business. If there is no interest in compensation for services rendered, your best strategy at that point is to make every effort to prevent those stray assets from ending up at your location.
Things seem to have gained more momentum in the container theft prevention movement of late. The irony is, however, if companies are successful in deterring theft, yet continue to have poor recovery systems, potentially those name branded plastic pallets could end up in unwanted places. Stray packaging assets are a hazard and liability to the supply chain. Logistics is a complicated business, but that doesn’t excuse packaging owners from their responsibilities. Likewise, pallet recyclers must be careful to run their businesses in an ethical, legal manner. This can be particularly difficult with stray assets because who owns what tends to be more a shade of gray than a black-and-white situation.
