When it comes to determining whether a commercial third party or a cooperative organization is the best choice for a reusable pallet pool, it comes down to a matter of taste. While both types make strong cases to justify the benefits of their approach, a pool with both commercial and cooperative aspects has quietly been providing good value to the Dutch beverage industry for over 10 years.
The
The pool pallet is a 1000mmx1200mm block pallet, identifiable by its red paint and the pool logo. It is a hardwood pallet, not often seen in the European marketplace, constructed of oak lumber sourced regionally. The blocks are constructed of rounded, laminated hardwood boards. Some Nordic pine is allowed for interior deck boards.
“Prior to the start of pool, each brewery used its own pallets, which were basically of the same dimensions,” said Henri Reuchlin of DrankenPallet Beheer Nederland B.V. (DPB), the Dutch pooling company. “There would be some minor differences, and every brewery would use a different color.” The diversity of pallets made it inefficient for retailers, who had to sort and segregate the different types for return to the breweries. It took about six years of discussions among the parties before the pallet pool was launched.
Breweries initially were reimbursed for pallets they owned that were placed into the pool. As these pallets were gradually retired from service, they were replaced with the standard pool pallet.
Organized as a separate company reporting to the trade association of the breweries, which are the shareholders, DPB’s operations are designed to break even and make a small profit. Other users, such as the soft drink companies, enjoy the benefits of utilizing the pool but are not shareholders.
Henri is employed by the brewery trade association, and one of his duties is managing DPB, which comprises about 20% of his time. His background is in engineering. “Like almost every engineering student, I liked beer, so I decided to stick with it,” he joked in explaining how he came to work at the brewery trade association. “I was in charge of technical and logistical affairs, and the pallet pool just happened to be one of my duties — one of the nicest, I might add.”
The pool employs four people who do the equivalent work of more than two full-time workers. “That makes us very inexpensive,” noted Henri, who is also in charge of public relations for the trade association.
The pool generates annual revenues of around 7 million Euros from rental fees but makes only a modest profit. DPB has a supervisory board comprised of representatives of its users, including breweries, soft drinks companies and dairies. The pallet pool does not have a company board because of its small size.
The pool operates predominantly within the
Pallet manufacturing and repair is performed by a few select companies within the
Pallets are rented to pool members on an annual basis and are invoiced monthly. Users must manage their own logistics and quality inspection. Only damaged pallets are returned to designated pallet recycling companies for repair or dismantling.
There is little seasonal fluctuation in pallet demand from brewers. “Whether the crates are full or empty, a pallet is needed to store that number of crates,” Henri commented. “It is the basis of the system.”
The nature of the supply chain lends itself well to good pallet control. Crates are filled with bottled beer at the brewery and subsequently shipped on pallets to a distribution center, where they are unloaded. Retail orders are assembled on dollies rather than pallets, so pallets do not flow downstream from the distribution center to the retail level. Empty pallets at the distribution center are used to palletize crates of empty bottles returning from retail. Back at the brewery, the crates are unloaded, the bottles are washed, and the pallets are inspected. This is typically where damaged pallets are identified and accumulated for return to a pallet recycler.
Pallet control is ultimately the domain of the breweries. “Once the pallet has been released to the pool user, we, the pool owner, do not see the pallet anymore,” Henri explained. The pool’s major responsibilities are pallet repair and replacement.
“Our members get the pallet, they pay the rent, and whatever else they do with the pallet, they are responsible,” Henri said. “The pool provides guidelines on damage tolerances and when a pallet should be returned for repair, but what we say to them is that once you have put product on a pallet, it is your quality control, and you are responsible for quality.”
Members do not see the cost of quality control in the pallet rental invoice because it is absorbed in their internal quality control process. “And, of course, by doing their own inspection, they are much more involved in the pallet pool,” Henri noted.
The pool does not discriminate against members who return higher than normal amounts of damaged pallets. In fact, it encourages members to pull broken pallets and return them to the depot for repair.
“Of course, we find that some renters return a greater percentage of broken pallets than others,” Henri explained. “However, since it is a pool pallet, it is not certain that the renter who has turned in the pallet is the same as the one who caused the damage. It may have happened in retail or somewhere else in the chain.”
Henri believes that if companies were penalized for returning damaged pallets, an incentive would be created for sub-optimal pallet quality control, which would lead in turn to reduced pallet quality and higher costs. “We see this mechanism in the Euro pallet pool,” Henri said, “where the game seems to be called ‘pass on the broken pallet.’ ”
“We therefore do not charge renters that turn in broken pallets. In fact, encourage the brewers and soft drinks producers to optimize their quality control and turn in any pallet that they deem unfit,” Henri added. “In this way we increase the quality of the pool and decrease costs.”
Because the pool does not inspect the pallets after each trip at an off-site depot, it saves considerably in transportation costs and reduced cycle time, Henri commented. There is a cost, he pointed out, of having pallets stored at the depot, as in some other systems. “Nobody is using them, but somebody has to be paying for them,” he said.
Breweries control their pallets through a deposit they charge to retailers. They also put deposits on reusable plastic crates and glass bottles.
Technology for tracking pallet movements within the supply chain varies among brewers and retailers. As far as pallet control with DPB, the pool receives relevant information about pallet movement by e-mail from its renters.
“It (the pool) is very close to them having their own pallets,” Henri said, “the only differences being that we buy them together, we service them together. We send a monthly bill. It’s much easier for them to keep track of their pallet use. Once things go astray, they can see, ‘Okay we don’t have enough pallets; we are going to have to rent extra.’ It makes it clearer for them and easier to steer through the logistical process.”
Refillable bottles and crates are a good application for a pallet pool, but over 20% of beer is shipped in cans, which presents more of a logistics challenge. “That’s where the problems start a little bit,” said Henri, “because when you ship the cans, you’ve got to make sure you get the pallet back again.”
The
Pallet loss is not much of a factor for DPB. “The members send back the damaged pallets to the pool’s repair contractor, who will make a decision as to whether to repair or retire a specific pallet,” said Henri. “The only pallet replacement we are doing is for damaged ones that are taken out of service.”
The pool holds a yearly meeting with member companies, usually mid-level managers. “We discuss how can we improve the pallet, how can we make sure the pallet comes back once you send it out with one-way packaging or if pallets have caused any production line disruptions,” said Henri. Member companies that rent 90% of the pool’s pallets are represented at the meeting.
When asked about other third-party pallet rental companies that may be interested in taking over the pool, Henri said that its current low costs would be a barrier to entry. “In the commercial environment, the brewers are not obligated to use our pallet,” he said. “They stick with us because of the quality and the price.”
“Our costs are lower,” Henri added. “Because control is largely tied to return of the empty crates, we need a very, very low management fee. We supply a solution for a special niche that the others can’t fill, which makes sense to the brewing industry.”
As for possible expansion of the pool outside the
Asked about the possibility of converting to plastic pallets, Henri replied, “Of course, we are following the developments on the plastic pallet market with keen interest. However, we have not yet found a plastic pallet which is both technically superior to the wooden pallet we use today and more cost effective. Developments in the plastic field are interesting, however, so you never know what the future has in store for us.”
Henri pointed to the Dutch model as an example of how both third-party management and industry cooperative approaches can work together. “I think if you have a mixed form between a common pallet pool and a commercial pallet pool, which in fact we are, that, in fact, may be the most cost effective solution. I am surprised that more industries have not taken this route of trying to pool on their own. The proof is in cost reduction and quality improvements.”
Perhaps the spark to get more industries to take a look at such an approach ultimately will be success stories like this one.
