The nation’s largest pallet rental pool is making changes to its compensation packaging to encourage greater returns from recyclers.
The problem is that recyclers are busy focusing on their core business, have limited labor and trucking capacity, and may not think the compensation they receive is worth the effort. Those are some reasons that I think CHEP is overhauling its Asset Recovery Program (ARP). The big question for recyclers across the country is: Are the changes enough?
Seeking to incentivize the return of stray CHEP-marked pallets, CHEP USA revised its ARP to compensate the pallet industry. Starting on March 6th, CHEP raised its standard compensation from $2.24 to $2.84 plus a fuel surcharge for stray pallets returned to a CHEP service center. The pallet rental company has increased its basic recovery compensation from $1.15 to $1.75 per pallet loaded onto a CHEP collection truck.
The most recent changes to the ARP are based on a third-party study that a supply chain consulting company conducted on behalf of CHEP to assess the fairness of its compensation rates.
In a letter to recyclers, CHEP stated, “The rate increase is focused on collection and handling costs for recyclers and will now be reviewed semi-annually. The costs are tied to published rates in CASS National and DAT regional freight indices, the Department of Energy Diesel Price Index and the Bureau of Labor Statistics Metropolitan Statistical Area (MSA) labor rates.”
Jim Congrove, director of asset control for CHEP, recognized that some recyclers are concerned about delivery schedules and time spent waiting to unload at a CHEP depot. He suggested recyclers contact their asset recovery rep to assist in getting timely appointments at service centers or call CHEP directly to arrange for collection at a recycler yard.
Why is CHEP raising rates now? Although CHEP never stated this outright, the rental giant’s network is stretched thin. Last year, CHEP reduced shipments to some customers, particularly in the ag sector, that forced many rental users to look to the white-wood market. The parent company’s CEO admitted in a recent earnings call that the company faces significant supply pressures. CHEP also recognizes that inflationary pressures are driving up costs for recyclers, including handling stray CHEP-marked pallets.
When asked about differences in regions for pricing, CHEP said that it is offering the above prices nationwide except for four Metropolitan Statistical Areas, where its analysis suggests that labor, transportation and other rates are substantially higher. These areas are San Francisco, Los Angeles, New York City and New Jersey. Those areas will receive a 60 cent local market adjustment.
Dan Gormley, vice president of asset control and retail services, said, “I have reviewed this program with a number of recycling leaders, and many of them were supportive of the improvements.” Gormley added that CHEP has already hired over 70 low volume recovery drivers with plans to double the size of this fleet over the next 12 – 18 months.
Gormley suggested that recyclers encourage low-volume distributors to contact CHEP directly for this recovery service to reduce the strain on white-wood trucks.
It seems that another major reason for CHEP’s ARP changes is what is taking place in the industry. Transportation challenges make it harder for recyclers to have spare trucks available to make deliveries to CHEP depots. Recyclers are having a difficult time shipping their own loads due to truck driver shortages and higher driver and transportation pricing. It is up to individual recyclers to decide if the higher compensation and fuel surcharges makes the hassle worth the effort. With cores selling for $4-7 in many regions, handling CHEP pallets is taking up space for precious white-wood pallets as well as staff and transportation resources. I would love to hear from recyclers their thoughts on the new ARP. E-mail me at chaille@ireporting.com.
CHEP is also concerned about recyclers selling its pallets to third parties. Gormley stated, “We know that there are individuals out there stockpiling CHEP pallets to sell on the black market.” He said that CHEP is working aggressively to identify these companies. For example, he said that CHEP identified a company in southern California that was sending 2-3 truckloads per month to Mexico over the past five months. “We are expanding our focus on this type of activity big time.”
CHEP has hired more asset protection staff with law enforcement backgrounds. Gormley suggested that CHEP would rather work with recyclers, but the pallet rental company will work to bring any criminal activity to the attention of local law enforcement.
To be clear, merely possessing CHEP-marked pallets is not a crime. Whatever you decide to do with them, you should document your correspondence with CHEP as a legal paper trail. If CHEP does not pick pallets up on time, send a letter to CHEP addressing that fact. If CHEP ARP rates are not sufficient for your needs, let them know. Consider having them pick up the pallets instead of delivering them. To ensure prompt service, please make an appointment at your local CHEP service center prior to returning pallets. If you are currently not set up for payments, please contact CHEP at 866-855-2437. If you have any questions, please contact your asset recovery representative or email arp@chep.com.
The staff of the Pallet Enterprise is still investigating the implications of these new rates and policies. At least, it is a step in the right direction.
