Aug 06, 2008
Lost in Translation
Posted by : ueb555
Lost in Translation By Rick LeBlanc Date Posted: 8/4/2008 Whether it is in the pre-dawn squalor of a wet and crowded produceterminal loading dock or the polished black walnut of theboardroom, the wondrous importance of the pallet rarely benefitsfrom an adequate translation. Just like the late RodneyDangerfield, the pallet never seems to command much respect. I wasreminded of this in a couple of ways over the last few weeks. First off, there was a new Italian pallet study on 3rd PartyLogistics providers released in mid-June. It is written inItalian, but with the power of Google Translate, it was revealed tome in that charming, semi-coherent manner that free translationsoftware offers. Case in point is the description of EPAL palletexchange:In Italy the most common management pallet is the exchange at parpallets EPAL: interchange provides for the refund instant a numberof pallets equivalent quantity and quality to pallets received. In other words, the most common pallet management approach in Italyis a one-for-one exchange of like quality EPAL pallets at the timeof delivery. The study itself is the second Pallet study in as many years by theCentre for Research Carlo Cattaneo, sponsored by Assologistica, anational logistics association in Italy. The subject is the impactof the EPAL pallet exchange system for mainstream 3PL providers,including the likes of DHL, Kuenne and Nagel, and others. The results are predictable to a North American audience. The 3PLproviders dont like exchange very much. At many locations, theyhave trouble getting pallets back. This is true for a number ofreasons, including black market activity as well as the lack ofstorage capacity at many smaller outlets (and Italian groceryretailing is still quite fragmented and predominates to smallerformats in comparison to the U.S. market.) In some circumstances, exchange works quite well, particularlywhere exchange is deferred until full load quantities of sortedpallets are picked up at a distribution center to return to theproduct manufacturer. But non-recovered pallet rates are quite high as much as 10% forone of the seven cases presented. The study determined a cost pertrip for 3PL providers ranging from $1.19US to $1.86US per trip. (This is in addition to pallet costs felt by other supply chainparticipants such as product manufacturer, carrier, anddistributor.) Keeping in mind that typically a 3PL provider isgoing to receive a pallet under load and then ship it out, thepallet cost comes predominantly from fulfilling pallet returnobligations to its client, the product manufacturer. The study says that the 3PL providers do not have a very privilegedposition in the supply chain, which makes them vulnerable to theinefficiencies of the pallet exchange system. It caught my eye thatof the data presented from seven 3PL operations, the one with thelowest cost per trip was the one that spent the most money onpallet administration. Over half of $1.19 spent per trip ($0.64)was attributable to administrative efforts. This operator more thanmade up for the expenditure by accumulating extra pallets to sellinstead of having to purchase pallets to cover shortfalls inretrieval. Here is my point - why is it still so counter-intuitiveto pallet users that investment in pallet management will pay foritself? The second story I want to tell quickly has to do with a C-storedelivery program in the United States. The distributor noted thatit didnt seem to be getting its pallets and assorted reusablecontainers back from the various outside trucking firms it wasusing to make the deliveries. This negative trend prompted thedistributor to launch a tracking program to ensure it would get theassets back. The new system provided notice to the drivers on the dock. Thesales group that ran the program was assigned to forward theinformation to the C-store customers and the management at thetrucking companies to make sure everybody knew about the assetmovements. Pallet tracking software was introduced. At the end of the firstmonth, reports were run, and the result was downright scary. Veryfew of the pallets were coming back. It was projected that thepallet and container loss for the modest program would reach wellinto six figures per year. The ledgers were faxed or emailed to the carriers by the DC palletcontroller. Carriers were encouraged to make the returns so as toavoid deductions from their checks. The controllers phone startedringing as every carrier account manager phoned to say that no onehad told them, but now they were aware of the problem. Carrierscommitted to try to comply as best they could, as long as theC-stores could safeguard the assets for return. Apparently none ofthe C-stores knew about the problem either. The sales group, predictably seemed distracted by all this talk,and began to calculate if they could tweak up the margin enough tonot bother with this tracking nonsense at all. No respect, like Isay. Or as my friend Mr. Google translates in Italian, &nonrispetto.
Continuing the discussion
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