The complexities of the modern supply chain and its interconnectivity of supplier, service providers, logistics, distribution, and customers is a popular topic. New technology, from blockchains to artificial intelligence to RFID chips, creates new opportunities to transform the process of moving products from point A to point B.
These modern supply chain solutions can improve efficiency and help companies achieve their goals amid disruptions and demand fluctuations that have never been seen before. But where can a company realize the near-term benefits in their supply chain operations and begin optimizing immediately?
There is a critical component of the supply chain at the ground level that is often overlooked - the wooden pallet. Today, we will look at how the wood pallet is an essential part of any company's initiatives in supply chain operations.
Companies have realized that they must do their part in having a positive environmental impact through sustainability goals. In the supply chain, sustainable practices are implemented through reducing waste by re-use and recycling of assets. The wood pallet is a perfect example of a reusable, recyclable, and bio-degradable asset that can help achieve essential sustainability goals. In fact, a pallet is made of 98.5% renewable resources.
Recently, the Pallet Foundation and the NWPCA (National Wooden Pallet & Container Association) released an Environmental Product Declaration (EPD) that speaks directly to those sustainability goals by confirming that wood pallets are an eco-friendly choice in the supply chain. The EPD includes a Life Cycle Assessment (LCA) performed by the US Forest Service-Forest Products Lab that provides a "cradle to grave" appraisal of a wood pallet's environmental impact. The recycling of pallets through repair and re-use is a key factor in their value as an environmentally friendly product.
Very often, companies will create a green scorecard as part of their sustainability program. One of the tools a company can use when it comes to tracking how well wood pallets can fit into a program is by using a calculator designed to reduce carbon emissions through pallet recycling. A system-wide assessment of wood pallet recycling can yield millions of metric tons in carbon emissions saved. Calculate your CO2 reductions with this tool.
One of the interesting things about supply chain operations is that you notice pallets are EVERYWHERE: behind the big box store, outside by the loading dock, taking up space in the corner of the warehouse. As pallets begin to accumulate, it becomes prudent to figure out what to do with them, so they don't overtake valuable space for storing and shipping products.
Companies can sell their reusable pallets to recyclers in many cases, generating significant cost savings for pallet procurement. However, it can depend on the pallet's size, with a 48" x40" pallet having the most value in re-use. With a high volume of returned pallets, pallet recycling companies will generally be willing to provide services to collect, process, and repair pallets for resale.
A pallet recycling program is an excellent way for a company to develop positive environmental practices and provide an effective means of offsetting the costs of buying pallets. In some cases, this offset can total anywhere from 25% to 50% of the total cost of pallet purchases. Multiply this same scenario over several facilities, and the value of a pallet recycling program can be considerable for a company's supply chain operations. A good partner will demonstrate how the pallet management program works and how the costs can be re-captured.
Data Insights and Transparency
A comprehensive pallet recycling program can provide cost savings, but it does not need to end there. A pallet management program can work from both the supply and recycling sides to generate essential data that provides information into a company's warehouse and supply chain operations.
If a company buys recycled pallets to ship products at a macro-level, they can identify seasonal trends in pallet spending and make forecasted adjustments to budgets for production or logistical needs. Over time, the data captured will provide an overall picture of pallet-related spend that can be used to secure pallet supply where and when needed most.
Pallet-spend can be broken out by grade in situations where companies are buying 48x40 pallets. When tracking the price trends in the data, companies can use that insight to develop RFQ's that are more closely adjusted to the market and align appropriately with budget expectations.
At a smaller scale (facility-level), manufacturing plant managers can look at the reject rate of recycled pallets in the production process to gain insight into the overall quality of the pallets they are receiving. This allows them to work closely with a good pallet management partner to understand the local market's availability for the type and grade of pallet they want to utilize. Manufacturers should also be mindful of their customer's pallet requirements. An ideal pallet management partner will be able to educate the shipper of these specifications.
Plant managers also will want to know what usable pallets they have available in reserve at their facilities. Many like to have access to a certain number of reserve pallets in case production increases unexpectedly. Over time, as these fluctuations in demand are tracked, and the supply is adjusted accordingly, a reliable pallet partner will have the resources ready to go in times of critical need.
On the other hand, a warehouse manager wants storage space and minimal disruption to the flow of goods moving through the warehouse. Pallets are a necessary part of those processes, and warehouses will typically receive hundreds, if not thousands of pallets of goods each day. The empty pallets leftover are moved to trailers for removal and processing by the pallet services provider.
The data provided here is in the form of pallet return counts and will often be broken out by type, size, and grade, where appropriate. Tracking returns over time will yield an average expected monetary value for the returns per load. Based on this data, warehouse managers can make monthly or quarterly forecasts of the cost savings provided by a pallet recycling program.
The Next Level
Supply chains are continually evolving, and that means the tools used will evolve as well. As more and more companies begin to realize the value of collecting more comprehensive data in their operations, supply chains are ripe for an information upgrade.
There are numerous tools available that provide a dashboard view of supply chain data and can be used to build analytical insights. These tools offer a birds-eye view of data. They can be adjusted and customized to capture new and novel connections in processes that are otherwise hidden in the sheer volume of data as it is generated. A good pallet management partner will capture all relevant data, analyze it for their customer, and share opportunities to improve the program's value and the wooden pallet being utilized in their supply chain.
The next evolution in supply chain data is coming from the pallet and package itself in the form of IoT (Internet of Things). The sensor technology available is small enough and scalable to be included on every pallet. It will furnish a wealth of information like temperature, tilt, humidity, shock, and location in real-time. This type of technology will fundamentally change everything from supplier management to last-mile logistics. This technology, of course, comes at a cost not just of the sensor but of readers available to scan the pallets/boxes. Any user of this technology should be aware of the value of the commodity shipped and determine the overall value proposition of using this type of technology/infrastructure.
Wood pallets are an integral part of most supply chain operations. The value realized begins with the pallet itself as a recyclable asset and extends to the data that is gathered through supply chain operations. A good pallet services partner will work with you to understand the changes happening in the market and be a valuable part of a successful pallet management program both now and in the future.