Pallet Management
The one thing all companies have in common is the challenge to meet customer expectations. Multiple economic factors have caused pallet recyclers to push lean management practices to their limit. When it comes to pallet vendors, customers want the best quality, correct specification and Best-in-Class service at the cheapest price. Recent wood pallet contamination fears combined with increasing warehouse automation have led to more rejected loads and tighter pallet specifications for some customers. The lack of standardization for the average GMA pallet only complicates the issue. The situation gets even tougher when considering the variance in repaired pallets. As a result, the market needs a set of criteria to audit pallet loads.
It really starts at the beginning when a pallet user and a pallet supplier discuss the specifics of a particular supply chain. A company that uses wood pallets to transport goods to market needs to take an informed and measured approach to conducting a standard pallet audit.
Basic contract negotiations should include pallet specification, cost, quantity, delivery, billing terms and quality expectations. Food manufacture might include high pressure wash or covered storage requirements for pallet loads to meet contamination protocols. Each market sector and company is different. For example, a manufacturer that deals in steel fabrication might need a heavy duty pallet but has no concern if a food-borne pathogen has contaminated the pallet. Some companies only need a skid, number 2 or grade B pallet to meet operational requirements. No matter what the pallet specification, there are a number of pallet variables that the customer should be aware of to ensure proper quality. If you know what to look for, it is easier to spot poor quality pallets.
White Wood Pallet Recyclers
The majority of white wood pallet dealers are small businesses. They are more susceptible to economic conditions and market trends than some of the big players. At the same time, white wood dealers are more flexible in product and service offerings. Higher levels of service often means delivering 24 hours a day, same day deliveries, custom specifications and 3R (repair, reuse, recycle) programs. These are key advantages that the white wood market has over its pooled pallet competitors. Some pooled pallet companies use third party management companies to operate service centers and are limited on what services can be offered outside their contract.
The pallet customer needs to know what they are looking at in a load of pallets. The most obvious is quality, and the first step is to assess the load prior to unloading. While it is true you do not get a full view of the pallet, a trained person can tell if it will be a questionable load. Here are a few items to look at to spot quality problems:
• Chip-back – Refers to how much broken board is allowed on the leading edge board. This is a point that must be discussed during contract negotiations. On a used pallet, a chip-back does not necessarily mean that the structural integrity of the pallet has been compromised. Make sure both parties agree in advance to the percentage of chip-back allowed and how much of the wood can be missing.
• Wood quality – My statements in this section predominantly apply to the West Coast since that is the area I have predominantly covered. On reconditioned pallets component replacement usually does not exceed three parts. The component that is most damaged and most visible is the leading edge board. When the housing market was high there was plenty of wood available for the pallet market.
In the West, lumber mills do not cut wood for the pallet market as a primary source. It is aftermarket wood from housing construction. During the housing boom the quality of economy grade wood was good and plentiful. Because of a decline in new housing construction and the closure of wood mills throughout the Pacific Northwest and Canada, wood prices have raised and quality has suffered. Economy grade boards are often used to repair used number-one and number-two pallets. The result has been limited supply, more bark and wane. When inspecting the load, ensure that neither excessive bark nor wane will affect your operations. If there is an issue request utility grade boards, the price will be higher but your risk of operation disruption will be less.
• Protruding Nails – Whether pallets are newly constructed or repaired, labor functions at a quick pace, which can lead to human error in the form of protruding or misplaced nails. Although some pallets are made by machines, many pallets and almost all repairs are done by hand using nail guns. Sometimes a nail will go through the top board and miss the stringer or block beneath. This can cause a safety hazard, something the receiver should look for. Discuss allowable tolerances during the initial negotiation stage. Specifically, what percentage of pallets can have protruding nails and how far away from the board will the customer allow nails to protrude.
• Specification – The pallet spec for some customers is ex tremely sensitive. For example, the agriculture sector uses corrugated boxes. In many instances, it requests deck board spacing designed to provide support. When produce is stored in coolers for weeks at a time, moisture can cause the boxes to weaken and floor stacked product to tip over. Cement block manufacturers will require thicker top deck boards and double stringer boards. Companies that export products will request ISPM-15 compliant pallets and/or pallets treated to prevent mold formation.
• Contamination – Contamination is a subject that has surfaced in the mainstream media, and pallets have been unfairly targeted as a potential source. Some types of contamination are bacterial, debris, animal droppings, dirt and dust. Debris would include pieces of shrink wrap and old cardboard on used pallets from previous loads. Because most pallet recyclers are small business and have limited resources, pallets are stored outside leaving them susceptible to contamination. It is the responsibility of the pallet recycler not to send in contaminated pallets. However, it is the job of the receiver not to accept them. Government intervention doesn’t appear to be the answer due to the shear number of pallets in transit and the scope of the challenge. Instead, it will take both pallet suppliers and customers to work together to eliminate any cross contamination risks where they truly exist.
• Beware Too-Good –To-Be-True pricing – The two biggest cost factors for most pallet orders are lumber and labor. There may be some variation among suppliers. But many of the cost structures are similar. If you are quoted really cheap pricing, beware. There is only so much that volume lumber buying and efficient operations can save.
When a customer audits a load from its white wood dealer, the company needs to remember its initial negotiations. Problems arise when a customer wants maximum product for minimum price. The old saying “You get what you pay for” certainly applies here. If you are looking for the lowest cost solution, you might get an inferior product. Do you really want to damage the shipment or your company’s reputation over a few nickels per pallet? Cutting corners could ultimately put your operations and the general public at risk. The lowest cost option is not always the best deal.
Rental Pallets
Keep in mind that all rental pallet companies are really just big pallet recyclers. They have the same business challenges as the small guy. The difference is large rental pallet companies have vast resources that protect their operations should there be quality issues. Pool operators have a more limited range of specifications and sizes. The very nature of a pool tends to encourage greater reliance on one specification and tighter repair standards.
Should a load arrive with a damage rate beyond the agreed amount, the company has two choices. First, the receiver can separate and set aside the pooled pallet until a full load is accumulated and collected. Second, the load can be rejected and an emergency load dispatched.
Naturally, the rental pallet company would prefer for a customer to separate damaged pallets instead of reject an entire load. If in the course of continued pallet audits loads are still not meeting agreed criteria, the load rejection option will get the attention of the rental company. The main damage points on a wood pooled pallet are the leading edge board, blocks and protruding nails.
When it comes to the damage rate, the rental pallet company is exact in its assessment. For example, the leading edge board can be missing 2.5 inches half way across and if it is not exactly half way it is considered a good pallet. Damage criteria education is imperative if you expect to maintain the quality of pallets entering your supply chain. If damage criteria are not understood and the load is accepted, then labor costs and resources to separate and stack is the customer’s responsibility. A key thing to remember is that all rental pallet accounts are self-managed. This includes not only management of pallet flow, but audit and pallet quality control as well.
The nature of how the pallet interacts with the supply chain is changing. More demanding supply chains and heightened concern on pallet quality and contamination concerns will force the implementation of better product handling practices. Pallet users can’t just blame the supplier for poor pallet quality any more. Both supplier and customer must realize that they are both responsible for the end result.
Ford Motor Co. used to have a slogan, “Quality is Job #1.” If the pallet industry wants to meet the challenges of the future, quality must become something more than just a slogan. It has to become a reality. And the best way to ensure quality is to develop precise specifications from the beginning, to stick to them and to monitor progress through careful audits of delivered loads. So at your organization, is quality a reality or only a slogan you use to sell some units?
Andrew Mosqueda is a former Inventory Project Manager and Customer Service Rep for CHEP USA. He has extensive experience with pallet rental and recycling programs for major shippers. Andrew is now an independent consultant. He can be reached at Andrew.mosqueda@morethanpallets.com.
