The next big thing for pallet recyclers may extend well beyond the typical wooden pallet. Reverse logistics, the process of helping companies manage the reverse flow of unsaleable goods, packaging and waste products, has been the next big thing for a long time. But many recyclers have struggled to figure out how to make this a viable business. However, that reality is starting to change as a number of innovative recyclers are finding solutions to common problems.
reLogistics Services recently opened its new reverse logistics center in Fontana, California, serving as a fresh reminder of the increasing importance of reverse logistics to the pallet industry. More than just an afterthought, reverse logistics services may be something you should embrace as a key element of your business strategy.
The new reLogistics facility, adding to the company’s other locations in Texas, Louisiana, Georgia, Florida and Kentucky, provides 24 dock doors and the ability to serve key retail customers to process pallets, RPCs, reusable totes, trays, and other distribution residuals.
“We are proud to broaden our U.S. footprint into the Southern California market with our new Fontana RLC,” commented Mike Hachtman, president of reLogistics Services. “It is an ideal location logistically as it enables us to meet the growing demands of our customers while maximizing customer backhauls and reusing many transport packaging assets contributing to their sustainability objectives.”
While the pallet industry has been effective in offering reverse logistics solutions for pallets, especially in higher volume applications, the reLogistics experience serves as a reminder that it might be appropriate to take a broader perspective when it comes to reverse logistics opportunities.
“Eighteen years ago when I started in the business, I don’t think anyone anticipated the growth in returnables and reusables including pallets, Mike observed. “We have seen this with the evolution of the recycled pallet. Initially, surplus pallet retrieval was a cost-avoidance activity to reduce disposal cost. As the acceptance and use of recycled pallets grew, the retrieval value of these pallets increased as well into the competitive landscape we see today.
“I would like to think that we identified the growing trend early. As pooled pallets grew in the marketplace, we heard retailers start to comment on their efforts to handle the various pallets. We saw the early transition from corrugate to RPCs for produce and heard retailers reference their additional work to return the assets. In addition, we have seen the increased cost of waste disposal – both economic and environmental – and the increased value of recyclable material. Today, we have one retailer for whom we handle 18 different reusables and recyclables as they are returned from their stores.”
While there are many examples of companies expanding their dock sweep efforts to include other distribution residuals such as old corrugated cardboard (OCC) and stretch or shrink wrap, for many, the approach often seems more opportunistic than strategic. On the other hand, some companies such as reLogistics, First Alliance Logistics Management, and others, definitely are looking at reverse logistics across a broader spectrum than pallets – as a core business.
Case in point, Glenn Merritt off First Alliance told me recently that its subsidiary, One Man’s Waste Recycling (www.onemanswaste.com), has just installed a horizontal baler to complement the four vertical balers already installed in its recycling operation. Its volume has grown 50% in the last year. Aside from the usual high volume materials such as OCC and shrink wrap, the company prides itself in finding solutions for customers seeking to recycle ‘difficult to recycle’ or ‘exotic’ materials that they are having trouble diverting from the landfill.
Why Is Reverse Logistics Emerging As Something More Interesting to Pursue?
1. Distribution centers need to free up doors and dock space. To the extent that these returns can be loaded onto the same trailer, that means only one door to be tied up with a drop trailer. The benefit for the recycler, in addition to winning the business, is a quicker cycle time, which is beneficial in a tight core market.
2. Distribution centers are looking to reduce inventory on-hand of excess pallets and containers, as well as unsanitary returns such as organics waste. Excess pallet and container storage can be an issue in terms of competition for storage space and fire safety. Leaky or smelly organics returns from retailers may be a concern in terms of sanitation.
3. More reusable assets and recyclable materials flowing back to the distribution center translate into more complexity. As such, they become increasingly attractive to outsource. Given the labor turnover challenges and growing stream of returns, an opportunity to reduce labor requirements and management complexity is increasingly attractive to many DCs.
4. A reverse logistics partner strategically located, can allow free delivery fleets from the obligation of empty packaging and residual returns, making cargo space available for more profitable product backhauls to the distribution center. Typically, trucks return to the DC only partially loaded with returns such as pallets, containers and bales of OCC, and therefore under-utilized. As such, the ability for trucks to drop returns at a reverse logistics provider can make a lot of sense.
5. Better asset management, data collection and bragging rights are all drivers behind increases in reverse logistics. As a core business, third party providers can champion control of assets and help customers reduce loss. Additionally, they can provide detailed reports on recycled material recovery, giving them the tools to tell a better sustainability story.
6. Under-served reverse logistics markets? Aside from grocery distribution, there may be room for reverse logistics improvement in other supply chains. “It always surprises me how inefficient (or non-existent) reverse logistics are in U.S. retail, with the exception of the retail grocery channel,” wrote Lane Pence of CHEP. “For typical national or super-regional chains, there is no one optimal reverse logistics solution. DC’s are best for forward logistics and reverse logistics is usually viewed as a necessary evil. Outsourcing can be a good option, but options are limited.”
Ideas for Reverse Logistics Services
• Pallet, container and shipping rack refurbishment, washing, storage and repositioning
• Scrap wood recycling and retrieval
• Reusable asset management, including tracking and training of customer employees
• Sorting, baling and staging of other residuals such as OCC and plastic wrap or hard plastic containers for shipment to recyclers
• End of life retail store fixture storage and disposition
• Scrap metal removal
• End of life retrieval of other recycling stream items
Ultimately, a bigger play in reverse logistics requires a careful business analysis of the opportunity. To the extent your relationship with pallet users allows you to expand the offering, you have the opportunity to determine how to price and sell this service to your customer and if it can become a key plank of your business strategy moving forward.
