There are many pallet users who believe that leasing pallets is the best strategic choice for their distribution needs. What many companies may not know is that you may have more options than just blue (CHEP) or red (PECO) pallets. Some innovative white wood recyclers are offering pallet management and rental services similar to what the two big leasing companies provide. Its just on a different scale.
One man who has been on the forefront of white wood leasing and pallet management is Steve Mazza, Bett-A-Way Pallet Systems (BPS). He has been working successfully behind the scenes on a national basis with his customers running a white wood, cost-per-trip model.
Steve said, Shippers today deserve more pallet procurement options than high priced rental programs laden with aging pallet pools and stringent penalties.
Model Overview
Steve works with customers to analyze whether purchasing or leasing pallets is better for their distribution systems. "The cost-per-trip model doesnt work for every customer," he said. An obvious example is a unit load destined for international export.
When leasing is an option for the customer, Steve believes the advantages of employing this method soon become clear to everyone. When the pallet is valued on a cost-per-trip basis, it costs less than a purchased pallet, and the customer clearly benefits. BPS studies the shippers supply chain to establish an overlay of network pallet vendors to supply and retrieve pallets. Bett-A-Way contacts a network pallet recycler in the region of the pallets final destination to arrange to recover the pallet cores, that recovery either ends the lease or becomes a credit toward the next pallet issue. Either way the ability to recover pallets nationally has always been a key to any successful white wood pallet program.
Ownership of the pallet in this model is not the same as it is in the standard color-coded rental model.
"We dont require our customers to return BPS pallets, just like-kind," said Steve. "If we provided a customer with 100 grades-A pallets, we expect that when our designated pallet retriever shows up they will receive 100 grade-A white wood pallets, with customary wear-and-tear from a trip of course."
Pallet suppliers and pallet purchasers alike have been frustrated by an industry structure that has appeared to prevent independent pallet companies from successfully offering a cost-per-trip pallet service that can compete with large pallet rental pools. Many independent pallet companies typically do not have the network or resources to rent and retrieve their own pallets nationally or regionally, thus limiting their ability to compete in the corporate arena. But some of the more progressive companies are working to establish networks or create alliances with other players in distant markets.
Bett-A-Way has successfully operated national pallet programs of its own for over 17 years. Its current customer portfolio is a majority of national beverage shippers and receivers. Bett-A-Way works with a number of major recyclers to complete its network. This includes many members of the National Wooden Pallet & Container Association.
Steve said, It is feasible to expand our current white pallet programs to a wider group of shippers, receivers and independent pallet companies on a national level with resources already in place.
Based on comments from end users and pallet companies, there appears to be a growing interest in finding alternatives to the major rental options available today.
Steve explained, I believe the time is right as companies are ready for a change. The efforts simply need to be reorganized under some type of umbrella organization.
Managing the Pallets
Steve characterized the current white wood pallet sales system as limiting, in large measure because shippers are either unaware of available alternatives or unwilling to break away from current methods. Steve explained that shippers who lack the resources to track and retrieve pallets from end users have been frustrated by full cost for a single use of a new pallet. These shippers, under pressure by large customers to conform to their requirements, took the only option they had.
In Bett-A-Ways rental model, end users lease the required number of pallets from pallet suppliers at a specified unit lease price. The pallet supplier furnishes the customer with a bill of lading specifying the pallet grade and quantity of the cost-per-trip pallets.
Information about pallet under load shipments is provided by the shipper to the pallet supplier, who in turn coordinates the sale and retrieval of the emptied pallets with pallet recyclers in the destination cities.
Bett-A-Ways pallet management product works similar to the rental model; however, the pallet pool is owned by its customers and managed by BPS and its network partners.
BPS uses proprietary software that allows customers to conveniently keep track of pallet flows, inventories, costs, etc. For customers who have a semi-closed loop distribution network of manufacturing plants, DC centers and distributors, this system offers a low cost per trip with a high quality pallet.
According to BPS, each pallet comes from freshly serviced and inspected inventory. These pallets are not just sent back out there without ensuring their quality.
Steve explained, Pallets always need some type of repair prior to reuse. I believe the decline in quality of the rental pallet pools is the result of constant reissue without repair. There seems to be a double standard in the grocery industry, where white wood pallets must be in like new condition and rental pallets can be in disrepair as long as they are painted. You can cover a lot of quality problems with paint.
Hurdles for the Future
There remain some challenges. Pallets are seen as a revenue center by many distribution centers. The end user leasing a pallet on a cost-per-trip basis will see a cost reduction, but distribution centers will not welcome their revenue loss when compared to current practices. Steve suggested that to succeed long term, distribution centers would have to be removed from this financial loop. It may be in the best interests of retailers to do so in order to create an effective large-scale competitor to existing pallet rental, but they will have to be convinced through a bottom-line approach.
The ultimate goal would be to migrate to block pallets, which appear to be increasingly favored by the grocery industry. The current short supply of block pallets would result in a very expensive cost-per-trip in terms of retrieval. It would take some dominant grocery industry companies to pull through the white wood block pallet concept, either manufacturers or retailers.
My business plan saves money for my customer, increases our growth potential, and gives recyclers a network for cores. What could be better than that?" asked Steve.
Editor's Note: This article has been edited from its original version. Karen Wanamaker of National Wooden Pallet & Container Association contributed to the original article.
Steve Mazza and Bett-A-Way can be reached at 908/222-2500 or visiting www.bettaway.com.
