BlogSupply Chain: Lowering Your Total Cost of BusinessPallet pooling helps reduce pallet costs.

Efficiency is the key to protecting profit margins, especially in the high volume and narrow margin world of grocery and consumer packaged goods. Due to the nature of these industries, the companies working in them already pursue efficiency with an eye towards keeping their Total Cost of Business (TCOB) low and their profits as high as possible. But one component of the supply chain is often inefficient and many times goes overlooked: the shipping pallet.

Pallets are every bit as essential to a modern business as packaging and stock-keeping units (SKUs). They are the interface that allows the groceries, paper products, clothing, car parts, home furnishings, and almost everything else found in stores to be handled by forklift. If it ships, it likely ships on a pallet, and that means that huge numbers of pallets are in use at any given time in the U.S. alone. Even small companies and warehouses will go through many pallets over the course of a year. As a result, businesses that are able to reduce pallet costs, even by only a few cents per pallet, can lower their TCOB and achieve significant savings over time.

The Costs of Wood Pallets

The costs of wood pallets can add up since they damage easily.Different countries use different pallet standards and sizes. In fact, there are six internationally recognized ISO standard pallet dimensions. In North America, the most common by far is the 48×40-inch Grocery Manufacturer Associate (GMA) pallet; these may be either stringer or block pallets. The stringer pallet is relatively lightweight and inexpensive but also flimsy and unreliable. The insubstantial nature of stringer pallets led to the development of sturdier wood block pallets, which, while much longer-lasting than stringer pallets, have their own disadvantages, along with the typical drawbacks of wood as a pallet material.

The main issues associated with stringer pallets are their lack of durability and damage caused to product shipped. Stringer pallet boards, particularly the leading-edge boards, frequently crack and splinter, and the loose wood and nails can puncture packaging and ruin products. Fasteners like nails and screws sometimes get caught in machinery and cause damage and downtime. The flimsiness of stringer pallets means it is often less expensive to buy new pallets than to arrange for the recovery and repair or refurbishment of used pallets. As a result, companies that depend on stringer pallets are constantly purchasing new pallets in order to have enough usable pallets on hand to ship their products. 

Block pallets needing repair have to be transported to facilities where carpenters can replace boards and blocks to bring them back to usability.

Compared to stringer pallets, wood block pallets are much more durable overall, but because they cost significantly more than stringer pallets, they should be reused as many times as possible in order to recoup their cost–and reusing pallets can be a significant cost on its own. There is the hassle and expense of arranging for pallets to be picked up from the end of the supply chain and returned to production facilities. Once they arrive, those that can be reused will need to be sorted from those that require repair or disposal. For businesses striving to build a circular, closed-loop supply chain system that cuts down on waste and increases sustainability, disposing of pallets in a landfill works against this goal and returns the supply chain to a linear system. At the same time, block pallets needing repair have to be transported to facilities where carpenters can replace boards and blocks to bring them back to usability. This additional transportation adds yet another cost to pallet management and increases fuel consumption and greenhouse gas emissions as a result. The solution for many companies has been to turn pallet management over to specialized pallet pooling services in order to reduce pallet costs.

How to Reduce Pallet Costs Through Plastic Pallet Pooling

Plastic pallet pooling reduces transportation costs.Pallet pooling or pallet rental programs provide manufacturers, retail chains, and distributors with a supply of reusable pallets as needed. Because pooling programs maintain a national network of customers, once the pallets have moved through one supply chain, they can usually be transported just a short distance for use by another customer. This method makes pallet reuse more efficient while sparing companies the hassle of retrieving or repairing pallets. However, renting reusable wood pallets may not spare companies the costs of issues like product damage and debris in the warehouse. Even wood block pallets are prone to splinters, loose nails, boards, and other issues that cause injury to employees and damage to products, packaging, and machinery. Since pallet pooling companies have an incentive to keep wood block pallets in operation for as long as possible, pallets that should be discarded or pulled for repairs sometimes remain in the pool for far too long. However, choosing a more durable pooled pallet can reduce pallet costs through the numerous benefits they provide.

Plastic pallets are produced to a uniform standard in both weight and dimensions.

Plastic pallets dispense with the need to use wood pallets entirely, meaning there’s no opportunity for splinters to enter into the warehouse or your products. They also have a unitized construction that is free of nails or other fasteners that damage products and expensive warehouse equipment. Plastic pallets also offer other advantages that increase efficiency and reduce overall costs, such as:

  • Fuel Savings: Plastic pallets weigh less than 50 pounds, significantly less than a wood block pallet’s 75 pounds or more. That weight savings translates into a lighter total weight per truckload (and more pallets per truckload for loads that weigh out), a savings in fuel mile over mile, and reduced greenhouse gas emissions.
  • Hygiene: Plastic pallets not only reduce the amount of debris in the warehouse, but they are also non-absorbent. This makes plastic pallets easier to clean and helps prevent the growth of mold and bacteria, keeping food safer during transportation and warehouses and trucks cleaner. Cleaner trucks, cleaner pallets, and safer food all work to reduce product loss as well as rejected loads and the associated costs and fees. 
  • Automation Compatibility: Plastic pallets are produced to a uniform standard in both weight and dimensions, which makes them the perfect choice for warehouses using automated loading equipment like Automated Storage and Retrieval Systems (ASRS) and Autonomous Guided Vehicles (AGVs). Their reduced weight, precise dimensions, and absence of nails and splinters reduce wear and tear and damage to automated machinery that might cause stoppages and downtime.
  • Recyclability: Plastic pallets also offer true cradle-to-cradle recyclability, as broken or damaged plastic pallets can be reprocessed directly into new plastic pallets. This keeps pallets out of landfills and the environment, and helps companies in their efforts to reduce waste and bring circular practices into the supply chain. These efforts have many advantages, including reputational benefits, that can bring cost savings.

Pooled plastic pallets offer savings through pallet pooling, but they also allow businesses to reduce pallet costs through the cumulative benefits they provide over traditional wood pallets. The advantages of plastic pallets increase efficiency in every part of the logistics supply chain. Over time, those improvements in efficiency add up to substantial savings that can help protect profit margins or build capital to allow you to expand the business. 

iGPS is the market leader in plastic pallet pooling. The iGPS pallet pool rents durable GMA plastic pallets that can substantially reduce the costs associated with unreliable pallets. To make the switch, give our team a call at 1-800-884-0225, email a specialist at [email protected], or visit our contact page.