Pallet pooling

Expert:Kevin Smyth
Director, CHEP Middle East

The history of pallets

The simple wood platforms, known as ‘pallets’, were initially developed during the Second World War, designed to increase the speed of product handling. Since this time, pallets have become integral to the handling of unit loads in several industries throughout the world, including the Middle East.

Low quality, disposable pallets have been used to ship all sorts of products to the Middle East for years. This is particularly true for companies operating in the FMCG (Fast Moving Consumer Goods) sector. As a result, there is considerable demand for recycled pallets, which are used for the onward shipment of goods. In certain territories, custom laws even stipulate that products entering specific countries must be palletised to ease the inspection process.

Unfortunately, many companies in the GCC use pallets by default, rather than design. Very little attention is paid to quality, hygiene or specification. The pallet is simply a platform that enables a forklift to handle a unit load and will be dumped or recycled again.

Increased standardisation

The need for a cost effective pallet pooling service became apparent when companies increasingly searched for ways to improve the handling and distribution of their products. The main criteria was reducing product damage, lowering pallet costs, improving transport utilisation, addressing quality issues, improving inventory management and reducing labour costs, whilst increasing customer satisfaction.

The FMCG industry adopted standard pallet specifications around the world to enable companies to handle pallets on production lines, place pallets in racking systems, containerise pallet loads with the minimum of downtime and move products as cost effectively as possible.

The pallet pooling concept

A pallet pooling company issues ready-for-use pallets and containers from its service centres to manufacturers and growers. The manufacturers and growers load their goods and ship their products through the supply chain using the pallet or container. At the end of the supply chain, the receiving retailer or distributor offloads the goods and returns the pallets or containers to the nearest service centre. The pooling company then inspects the pallet or container and ensures it meets quality standards for the next customer use. The ready-for-use pallet or container is then issued to the next customer for its customised use and movement through the supply chain.

The pooling effect

The concept of pallet pooling adds value to the supply chain by allowing companies to concentrate on their core business and not sourcing, repairing and recovering pallets. It is also indicative of a market’s competitive stage. Where companies cannot pass on costs to consumers, it becomes essential to reduce marketing costs or increase efficiencies in production.

The benefits of pallet pooling are intangible and will not be obvious if looked at departmentally. The simple pallet that “cost nothing” is actually the key to reducing supply chain costs and substantial savings that drop down to the bottom line.

Evaluating the benefits

A careful examination of your current supply chain costs is not only good business practice but also important to a company’s competitive position, especially given the speed at which the GCC market is developing. GCC companies have the added advantage that they can make quantum leaps in adopting “best practice” methodologies as they can often start green field projects, whereas companies in the more mature markets are limited by their existing infrastructure. If a company is serious about evaluating it’s supply chain costs, it must be prepared to determine the actual and intangible costs incurred in using second hand pallets.

Pallet pooling in the Middle East

The GCC is an important FMCG export market, and there is also a substantial and growing manufacturing base that is starting to adopt modern supply chain practices. CHEP established a pallet pooling service in the GCC some five years ago and is proud to have earned the support of well over 200 manufacturers and retailers in a relatively short time frame. There are pockets of excellence throughout the region and the benefits that leading companies are beginning to enjoy, by participating in the CHEP pallet pooling service, will set the scene for other companies to consider. By far the greatest benefit is derived if the pallet journey begins at the production plant, and with so many products imported from abroad there is real value in GCC based companies participating in a global pooling service.