When John Swenby, one of the founders and leaders of 9BLOC, talks about the research that went into the creation of 9BLOC as a collaborative pallet pool, he is quick to point out that a number of different pallet pooling models were evaluated. This process included EPAL in Europe as well as Canada’s unique cooperative industry pool, the Canadian Pallet Council (CPC). As a Canadian, my relationship with the CPC pool goes back 30 years, albeit one largely from the front line of pallet operations rather than the board room. In the United States, many recyclers in the course of business will have occasionally come across those heavy duty orange painted stringer pallets with the maple leaf stencilled on the side. The CPC has done a lot of terrific things over the years, but there have been mistakes made as well. CPC’s market share has gradually eroded in the face of competition from CHEP. 9BLOC can learn from both the successes and failures of CPC.
One area of success where 9BLOC has followed the lead of CPC is its choice of iLogic as its pallet management software provider. The 9BLOC organizers opted to go with iLogic’s new masLogic (www.maslogic.com) tracking and management software. Headquartered in Mississauga Ontario, iLogic has continuously developed the CPC’s software from the days of the 5 ¾ floppy disk to the current cloud-based CTSweb application.
Keeping the focus on CPC, there are a number of other notable learning points from the venerable Canadian pallet pool that 9BLOC or other pooling systems would do well to consider as the 9BLOC organizers map out their own strategy.
1. Look for pull through to build the pool.
CPC grew rapidly across Canada in the early 1990s through aligning itself with many or all of the key grocery retailers across the country, and getting them to request CPC pallets as a pallet of choice for inbound product. With such agreements in hand, expansion was rapid, at least for a number of years. So far, 9BLOC has been focused on Costco as the first retailer it wants to convert.
2. Design a pooling system that allows little guys a chance to stay in the game, yet maintains integrity of quality assurance.
Years ago it seemed like many pallet industry insiders in the United States were focused more on owning proprietary pallet systems rather than the cooperative approach deployed in Canada under the CPC. In the Canadian approach, as long as a pallet company was certified by CPC and passed quality inspections, it could manufacture or repair CPC pallets. On the other hand, obviously not everybody can get licensed to build, repair or rent CHEP pallets. And as CHEP market share continued to grow, exclusion from that opportunity has become increasingly painful for those pallet companies on the outside looking in.
9BLOC, like CPC, allows pallet companies to join and participate in a way that many are invariably excluded from in a proprietary rental pool such as CHEP. This more open approach comes with a few notable concerns. One is that you are opening the door to extreme competition, but guess what, that’s what recyclers face every day in the white-wood market. Better the danger of competition than the danger of no cores and no opportunity as the white-wood market dwindles. A second concern comes in regard to quality assurance. With a lot of different pallet providers servicing a system, the uniformity of quality has to be a focus. CPC has dealt with quality assurance challenges over the years, migrating from internal inspection to now enlisting an international 3rd party inspection service. 9BLOC, for its part, has chosen to follow the model of ISPM-15 inspections by using the same certification and inspection agencies, allowing member pallet companies to piggyback on those same providers to reduce the cost of inspection.
3. Have flexible options to provide greater value to niche applications.
One of the attractions of CPC to users over the years is the potential to manage pallet transactions in a number of different ways, depending upon agreements made between trading partners. The original approach for CPC use was either in-house or interchange, but over the years other approaches have emerged. A few CPC member pallet companies began to offer ongoing or one-way rental of CPC pallets, while some shippers, most notably from outside of Canada, began shipping CPC pallets under load to Canada and selling them to product consignees for their own use. Like CPC, 9BLOC is a very flexible platform. This provides creative pallet companies opportunities in abundance to develop customized solutions for each supply chain.
4. Be truly cooperative, engage trading partners through collaborative approaches, but don’t rely on those partners to run the pallet pooling business.
CPC structurally has always been a cooperative system, with the CPC Board including various supply chain stakeholders including product manufacturers, distributors, transport providers and pallet industry members. This approach was undertaken many years ago, and remains the approach today. We see similar cooperative advisory board structures in other pools such as the Dutch beverage pool, Drankenpallet. It is a good way to solicit involvement of supply chain partners.
The downside is that we have seen at CPC a governance structure that at least from the outside, seems agonizingly slow to respond to changes in the marketplace through the introduction of new innovations such as block-style pallets. 9BLOC, on the other hand, is a business model run by pallet people looking to generate sales by providing the best value possible to customers. It should be much more responsive to rapidly changing market conditions.
5. Don’t expect too much from partners.
CPC has been facing a situation where the distribution systems have been changing fast. In the old way of thinking, CPC members could enjoy a lower cost per trip than CHEP through self-management and the involvement of pallet user members. That thinking, however, increasingly was lost in the face of more strategic logistics priorities.
Many member companies were not willing to make the investment in pallet management that they had in the past. In spite of the best efforts of CPC’s field reps, conversions to CHEP were often attributed to eliminating the hassle of pallet exchange, including bookkeeping, reverse logistics, repair and unbudgeted losses. The initiative to develop CTSweb was in large part a response to this recognition that CPC pallet users needed better support. For 9BLOC and others, the obvious message is that customers increasingly are not interested in managing pallets.
In the final analysis, CPC provides a great case study with respect to its cooperative spirit and structure, as well as its continued efforts to make pallet management more user friendly. As a system run by pallet industry members, however, 9BLOC should be more responsive in terms of meeting customer needs as they emerge.
