Lowering the Cost of Pallet Fleets

The only real solution to managing pallet fleet costs is managing specific supply chain processes and an effective management and control system which can be easily integrated into the existing supply chain operation.

Pallet fleet specifications and costs vary depending on the industry sector, application and budget. However one thing common to many established fleets, is that when originally specified, costed and implemented, a number of elements were not considered, and often still aren’t. These include repair and maintenance costs due to normal wear and tear as well as misuse, equipment loss, stockpiling and extended dwell and cycle times, lifespan of the equipment and the flexibility of the design to adapt with changing supply chain demands. These all have substantial cost impact, however, many companies are either unaware of the real fleet costs, or just accept it and budget accordingly.

The starting point for effective cost management is therefore establishing the objectives of the pallet fleet and the requirements within the supply chain, including operational requirements, now and for the next five years. Once these are confirmed then handling methods and pallets can be specified. Success is facilitated by simple cost effective process design, adding value to existing operations by generating “self funding” fleets, including cost control mechanisms reducing damage, loss and misuse.

Processes are unique to the organisation’s supply chain needs, whether a simple hub and spoke operation or a complex multi-tiered supply chain. Identifying the different needs of an inbound or outbound pallet fleet is crucial to the solution.

Equipment design must take into account the physical requirements of the pallet, as well as lifespan under actual working conditions, ease of maintenance, repair, and handling and, of course, the capital investment. Whilst the initial investment into a reusable pallet fleet compared to a one trip pallet will be higher, it is an asset that can be depreciated over a number of years.

Having specified the right pallet, the challenge is to make every one ‘earn its keep’. Effective management systems increase fleet visibility and cost control, improve accountability for damage or loss and optimise pallet utilisation; reducing overall pallet fleet costs.

In regards to ‘lost’ pallets, it is often correct to say that it is lost only in so far as no-one is able to account for its location within the supply chain, as opposed to having been permanently mislaid or destroyed. An effective management system will identify ‘actual’ loss via audit trailing facilities, thereby negating ‘perceived’ loss.

In terms of damage, it is estimated that 70% of damage to all returnable transit packaging equipment, including pallets, is avoidable. Effective management allows an organisation to identify who is damaging the pallet and to examine and improve handling processes accordingly. Damage data can also identify any design issues with the pallet itself, again helping reduce damage levels and associated costs.

Perhaps most fundamental is the issue of cycle time management – the key to overall fleet size and therefore cost. For example, a small reduction in cycle time of a day or two could result in 15% to 20% savings in total fleet costs. This can be achieved through a combination of process and systems, ensuring synchronous pallet flows integrated with lean manufacturing or production process. Cycle times should not be averaged out across the whole fleet and a good pallet management system will allow individual cycle times to be set for individual users. Minimising cycle times can create a surplus of equipment, regarded as cost avoidance on future pallet requirements.

For a pallet management system or third party pool provider to deliver maximum benefit, the specification process must be thorough, realistic and bespoke to a specific organisation’s requirements and supply chain needs.

In all cases key considerations relate to how, when and where pallet movement data is captured, e.g. via RFID or barcode technology or by manual entry for bulk movements, keeping data entry minimal so as not to increase on-costs and the risk of human error.

The system must manage overall fleet performance, including repair and maintenance, cleaning, and damage inspection procedures. The reporting capabilities, available via a local network or the internet on secure password access, should only include issues and operations that can be controlled and improved, and subsequently measured via KPI’s.

Supply Chain Specialist Gideon Hillman explains “As well as cycle time reduction, the ability to share pallet management system and process data with other supply chain systems and process managers within the business, and ensuring the flexibility to change with the business needs, is crucial. Having worked with many pallet service providers and pallet users over many years, our experience shows that investing in independent specialist consultative and practical operational advice, will negate over-investment and reduce your pallet fleet costs in the longer term.”

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