There is good news and bad news when it comes to pallet exchange as an ongoing source for cores in the years ahead.
The good news is that pallet exchange is still extremely widely practiced and remains entrenched. About 97% of food service distributors participate in pallet exchange, according to a report on food service palletization. The report, released at the Food Distributors International productivity conference late last year in St. Louis, offered tips for better management of pallet programs.
The bad news for recyclers is that some 52% of food service distributors think pallet exchange is a more expensive option than third-party management. This is not all that surprising because they generally see third-party as a cost picked up by the product manufacturer. A slight majority of manufacturers sees pallet exchange as being more cost efficient for the very same reason.
Inconsistent, inequitable practices were at the heart of food service’s general distaste for pallet exchange. One participant, the logistics director for a major poultry processor, noted that a pallet exchange policy often is determined by the size and appearance of a truck driver. If the truck driver is big and ugly, he said, then there is no bad wood on his load. Conversely, if he is not so ugly, then the exchange pallets he gets back likely will be.
This is no way to run any part of a business, especially one that measures productivity in seconds. There is simply no time to stop for a jawing session when the truck with the next appointment is waiting to get to the dock, and a fleet of lift trucks is idle, waiting to put away pallets of product.
At another conference session on dock productivity, the CEO of a major trucking company said that pallet exchange — and the hassles it can encompass — is one of the main reasons his company does not pull loads for the food industry. In fact, he did a stint as his company’s pallet coordinator. He recalled his frustration at never being able to get his pallet ledgers to balance. His most important job as CEO was recruiting and retaining drivers, he said, and he did not want his drivers to have to deal with pallet exchange. The tight labor market is a concern in many industries, including the pallet industry and the food industry, too.
Distribution centers are perennially cash-starved and are looking to squeeze out direct costs, especially high visibility ones such as direct labor and inventory. Just as in the trucking business and other industries, finding and keeping good workers is a big problem for warehouses, too. Expect them to look increasingly to automation and reduced inventory strategies for solutions to labor problems, especially if the much-feared new ergonomics regulations from OSHA take hold.
Speaking of the new ergonomics rules, food industry experts predicted at the conference that they would cost their businesses $26 billion to comply. The food distributing organization was firmly against the OSHA regulations because of the high cost of compliance. The new regs would attempt to reduce repetitive stress injuries by limiting exposure to heavy and awkward lifting — for example, restricting time in freezers. Anybody who has spent any amount of time in a conventional grocery warehouse knows that awkward bending, reaching, and lifting are the way the job gets done in a lot of mature facilities across North America. However, it seems to me that the tight labor situation is going to push food distributors towards automation for purely market reasons, rule or no rule.
Enforcement of the new OSHA ergonomics regulations definitely would help tip the scale more quickly in favor of new facilities and automation. Self-management of pallets as a cost reduction strategy probably will not be on the radar screen of many food distributors if they are faced with potentially huge OSHA compliance issues. Ironically, the automated warehousing and inventory reduction strategies will motivate many grocery chains and distribution centers to specify pallet and container priorities more clearly. It will push them further into the third-party domain as well as get them more interested in case markings and case sizing to facilitate automation and automatic identification.
The food service pallet report is definitely not a pallet exchange obituary, though. The report acknowledged that third-party is one quick route to improving quality. However, it also suggested steps that food service companies can take to improve the quality of their pallet exchange programs, including self-regulation, enforcement of pallet specifications, and on-going communications and cooperation among trading partners.
These steps may seem simple, said Dan Raftery, the consultant responsible for the report, but many food service companies do not take them.
Better management of food service pallets will help stabilize and improve the food industry’s pallet exchange system — and hopefully result in more good quality cores for pallet recyclers.
The report also included a template that food service companies can employ to evaluate their present pallet program. It is available from FDI by calling (301) 843-3084.
