Although real estate transactions and warehousing strategies get most of the media attention in the supply chain services business, a simple solution for cost savings and environmental impact sits in front of many executives. Pallets, the often-ignored workhorses of the warehousing and shipping industries, have become hot commodities. A new breed of third-party logistics companies hopes to save clients money by managing pallets more effectively.

How Managed Loop Supply Chain Services Work
Pallet management has been around for a few decades already, sometimes known as pallet pooling or pallet recovery. In traditional shipping and warehousing businesses, inexpensive wooden or plastic pallets start off at a manufacturer and end up at a distribution hub or a warehouse. Once unloaded, pallets often find a few additional uses as support for return shipments or for passing along freight to third parties. Most of the time, though, pallets either wind up discarded in community landfills or burned as firewood.

Managed loop services borrow a familiar strategy from the traditional neighborhood milkman. Sophisticated pallets, made from high quality materials and containing high-tech tracking devices, can be rented from a pallet management company and delivered to a manufacturer. Some pallets may remain in a closed loop, moving regularly between plant and warehouse. However, most pallets wind up in the wild, where they can be collected for reuse by other participating companies. Repairing pallets instead of replacing them saves companies money, while renting pallets can improve tax and cash flow strategies for many clients.

Integrating Pallet Management into Warehousing and Storage Operations
Upon delivery at a warehousing operation, a shipping manager can redirect a pallet to another company client at the same facility. Alternately, pallets can be collected in bulk and delivered to another client operating from a nearby plant or warehouse. Tracking equipment embedded into durable pallets can communicate location and shipment details to third party logistics companies and to freight haulers.

At first sight, a managed loop operated by a third party pallet management company may sound like a plan that would get pushed back by shipping managers and warehousing supervisors. However, when pallet management companies build strong relationships and develop reliable track records, site managers prefer not to worry about disposing of used pallets. In most cases, integrating pallet recycling into a supply chain requires little more than training and communication about which pallets to keep for pickups.

Environmental Impact and Cost Savings for Supply Chain Managers
Renting durable, high-tech pallets may incur higher up front costs for some manufacturers and shippers. However, the managed loop model has already proven successful for many large businesses. As more pallets remain in service over longer periods of time, companies can realize financial savings while enjoying the ability to claim ownership of a positive environmental initiative.

Reducing abandoned or burned pallets in industrial areas improves the quality of life for company neighbors. Finally, high tech tracking equipment that would have been cost-prohibitive for disposable pallets becomes financially feasible when costs are shared among multiple clients of a managed loop provider. This kind of innovation may not sound radical, but it offers a simple and effective way for companies to save money while reducing waste.

Sources

Warehousing Management

Modern Materials Handling

RFID Journal

Electrical Distributor