SmartReturn (SmartRetur in Nowegian) is a company that believes in living up to its name. This February, it placed an order for its first Pallet Inspector automated vision inspection system with plans to install more at other facilities in Sweden and Denmark in the future.
The company likes to bet on new technology, but as with other purchases such as its Pallet Sorting Systems automated sort and repair lines, SmartReturn takes a measured approach rolling out after testing at one location.
SmartReturn has never shied away from bold moves. Over the years, the company has progressed from a small pallet supplier to its current position as a leading Nordic reverse logistics provider for pallets and supply chain packaging. The vision system is manufactured by Ivisys Vision Systems, a Swedish supplier and “Top 10” ranked European vision system provider to various industries.
The purchase of automated vision sorting addresses a long-held desire of the company to take the guesswork and potential for “padded” pallet recovery reporting and other irregularities out of the pallet recycling industry.
Søren Eriksen, CEO of SmartReturn, commented, “Pallets are like money. They are currency. Would you leave counting your money up to one of your trading partner’s employees?” Eriksen says his goal is to take the potential for human discrepancies out of the equation.
Making the Pallet Business More Trustable
Eriksen, now over 10 years in the pallet business, previously worked as a sales executive in the Norwegian television industry. At that time, a friend asked him to help run the friend’s small pallet business, and he was quickly bitten by the pallet bug. And as luck would have it, the pallet industry resonated with some advice he had previously received from a television celebrity. He told Eriksen that if he ever came across a high-volume business that was flying under the radar, he should sink his teeth into it. With these words still in his head, Eriksen agreed to help his friend in return for shares in the company.
Eriksen was initially taken aback by the lack of sophistication he found in the Norwegian pallet sector. “The industry was very immature,” he recalled. “There was little technology and no investment in the future.” Eriksen started to make changes, and in the short term, the company’s profitability plummeted. “We had to clean up our own house first,” he explained. Eriksen ended up buying out the previous owner.
Through his television connections to major food and beverage brands, Eriksen began to make inquiries about their experiences with pallets and pallet providers. He heard that there were considerable frustrations regarding quality and loss in the Norwegian marketplace. While millions of pallets were being imported annually under load, grocery sector companies were losing 30% of their pallets each year. There were reports of some unscrupulous truck drivers pocketing $2,000 per week by illicitly selling pallets. Poor control, theft and black-market activities made pallet management a headache.
Collaboration Critical to Growth
In response to such concerns, the Norwegian grocery industry in 2006 launched a cooperative industry rental pool – Norsk Lastbærer Pool AS (NLP). It began with wooden pallets and in 2010, it introduced plastic pallets from Shuert Technologies, a Michigan-based plastic pallet manufacturer. SmartReturn, by that time establishing itself as a forward-thinking pallet company, collaborated with NLP as its reverse logistics provider. Norway is a very long and sparsely populated country. Grocery industry stakeholders recognized that for a reverse logistics program to be viable, it would be necessary to collaborate. They worked together to avoid competing trucks running partially empty relocating NLP pallets, other pallets and containers used by the sector.
Today, SmartReturn shares its main warehouse with NLP near Oslo, as well as operating major facilities in Sweden and Denmark with a total of 13 locations across the three countries. The company employs 250 people and handles the return of rental pallets and proprietary equipment. It also manages pallet banking services and the purchase, repair and sale of used pallets. In its effort to build additional transparency and trust in the marketplace, SmartReturn was an early adopter of digital asset management software to a market that previously relied on handwritten receipts and Excel spreadsheets. The company processes over 10 million pallets annually and repairs in excess of three million units.
Automated Sorting Systems and Vision Technology
While the company consolidates and sorts retrieved pallets at its smaller sites, repairs are sent to its major hubs. Eriksen is a firm believer in the need for volume in order to drive the cost justification for automation. The company has rolled out Pallet Sorting Systems (PSS) automated sort and repair lines for both Norway and Denmark and has placed an order for another system for its Swedish operation to arrive later this year.
The company has been very happy with its PSS sorting and repair lines. The first was installed in Norway in 2017, designed to handle standard 800×1200 Euro and rental pallets and 100×1200 sizes. The system features a buffer between stacker and inspection site, which helps achieve a 20% gain in sorting productivity, as well as rotating table and pallet turning unit at inspection position. A pallet weight unit identifies wet pallets so they can be segregated for drying. The system includes over/under conveyor, eight workbenches and eight stackers, a pallet press to push in protruding nails, as well as an overflow stacker for excess damaged pallets.
The automated sort and repair lines will be modified to allow for the installation of the Pallet Inspector vision systems, each valued at close to $200,000. Once Pallet Inspector is validated in Norway, the company’s intention is to also install them in Denmark and Sweden. IVISYS, the equipment vendor, currently has a unit operating at ICA, a major grocery retailer, for sorting empty pallets, with another unit on order. The throughput at ICA is about 350 pallets per hour, according to IVISYS.
The Pallet Inspector can rapidly identify protruding nails, missing, damaged or misaligned components, stains and stamps. Cycle time is as low as 7 seconds.
Eriksen’s interest in technology, as well as acquisitions of other pallet companies to build the volume necessary to justify its introduction, has required considerable financial investment. In just three years, sales increased from $23 to $58 million, and earnings from $1.7 to $4.1 million. In 2020, the company undertook a transaction with a leading Norwegian investment firm to further increase its access to capital. Martin Andresen, Eriksen’s business partner, sold his 50% share in the company to Norvestor, while Eriksen sold half of his interest, retaining a 25% share in the company and continuing in his role as CEO.
“We have followed the company since before Søren Eriksen and Martin Andresen bought it,” a Norvestor partner told the Norwegian press at the time of the transaction. “We liked the niche that is about return, logistics, reuse and the environment. It is an unstructured industry where there is a lot to do. Now they have reached a size and digitization that suits us, and we have a setup to expand further,” he said, explaining that they are looking to more than double the company’s sales in the next five years.
Plastic Pallet Pooling and Construction Sector Pallet Retrieval
The next bold step in SmartReturn’s journey will be the introduction of a plastic pallet pool in Denmark, where the company has been in serious conversation with industry leaders. “Basically, we are now at a point where we are going in two directions,” Eriksen stated. “One is the normal pallet business, and the other we are entering the plastic pallet business in Denmark now, and hopefully Finland in the near future.” The company, already having pallet operations in Denmark, also has a Danish reusable crate washing facility where it processes 80 million crates annually for a major European crate pooling provider.
Given his role with plastic grocery pallet pools already established in Norway by NLP and in Sweden by SRS, Eriksen is highly familiar with plastic rental pallet logistics. That experience has been fortified by the addition of Tom Romanich, SmartReturn’s chief technology officer, who previously played a key role at NLP. Eriksen sees Denmark as a logical expansion of the same pallet model manufactured by Shuert, enabling pallet flows between the three countries. With plastic pallet prices in the $50 to $60 range, the introduction of the pool will require a hefty investment.
While he believes that plastic pallets are a good fit for a domestic grocery system in Nordic countries, he does not foresee wood pallets being displaced anytime soon for imported goods.
Aside from its focus on the grocery industry, SmartReturn has also expanded into the construction sector in Norway. It is working with a leading construction company to retrieve empty pallets for return to building products suppliers – pallets that were previously considered single-trip only. Another success has been the recovery of 45×45" brick pallets, a size not popular in Norway. The company accumulates full loads and returns them to the brick producer in the Netherlands, a cost-effective and environmentally superior solution to a single-use system.
“With our environmental focus, it was unsustainable that such large amounts of wood went to incineration; 29% of all our waste is from packaging,” stated Morten Trosterud, logistics manager at JM Norway. “It is therefore gratifying that together with SmartReturn we have found a recycling solution for all wood on the construction sites.”
Eriksen’s goal is to fully automate as many processes as possible and make their businesses fully trustable. It is a message that resonates with grocery industry executives. “Many of those companies are investing in automated warehouses and other new technologies,” he said. “Why should we, as a pallet supplier, be any different?”
Ultimately, he said, his company lives by three simple rules: “One, produce the best product and services; two, do it with the best people, and three, a good idea is not good until you have done it right. It is as simple as that. We can talk from now to next year, but we can only improve by actually doing things, and there are so many things we are trying to do.”
While acknowledging that not all of SmartReturn’s plans have been successful, Eriksen believes that they collectively have set the company’s path in the right direction to support its ongoing growth.
