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Pallet project to slash food industry costs

By Rick Pendrous , 09-Aug-2013
Last updated on 09-Aug-2013 at 12:08 GMT

Pallet specialist CHEP is to lead a campaign to bring manufacturers and retailers into agreement on a standard pallet size, which it claims offers huge potential cost savings.

The campaign will focus on the half- and quarter-sized pallets used in store. If successful, it would increase the uptake of ‘retail-ready’ formats, reducing complexity and cost in the ‘last mile’ of the supply chain, CHEP has claimed.

It would reduce manual unloading of full-sized pallets, which frequently takes place during the stacking of supermarket shelves, CHEP added.

Eventually, it could also lead to the use of a standard size of cardboard cartons across the whole fast moving consumer goods (FMCG) supply chain, thus aiding greater reuse of boxes, according to Mario Yanez, senior director for marketing with CHEP.

‘Huge potential’

“The standardisation of the size of the box and making the box reusable across the supply chain has such huge potential,” said Yanez. “We are talking about billions of boxes.”

By using smaller pallets for supermarket gondola ends and merchandising units, it would also facilitate the growth of products sold on promotion and help in convenience stores, where display space is more limited, said Yanez.

Big savings could be made in the last mile of distribution – which accounts for 65% of the total supply chain costs – by reducing the costs of replenishment, display and merchandising, he added.

Research by CHEP among 41 retailers in seven European countries has identified 24 different packaging formats and 55 different packaging platforms (merchandising formats) used for the last mile.

“There is a problem to fix and we need to standardise,” said Yanez. But he doesn't expect the UK to adopt the full Europallet size in preference to the larger conventional UK pallet any time soon.

“The appetite [amongst suppliers] for standardisation is huge and the appetite for someone to facilitate the discussion between retailers and them is also huge,” added Yanez. “We can facilitate this because we are in the middle of the supply chain.”

While the use of quarter pallets is growing in the UK, there is far more scope for both their use in a standardised format and that of the half pallets. Tesco currently uses wheeled half pallets, said Yanez.

Further opportunities

“In the UK there are further opportunities to use the half pallets, and a lot more opportunities to use the quarter pallets, both for promotions and day-to-day replenishment,” he said.

It would reduce demand for pallets used for the large number of ambient stock keeping units required in different supermarket formats, said Yanez. It would also help to balance demand for high numbers of faster moving items and lower sales of slower moving items on display, he added.

“From a manufacturing point of view [standardised smaller pallet sizes], will result in on-shelf availability going up and visibility of the product going up, which results in the revenue going up.”

CHEP is consulting with all the leading branded FMCG manufacturers (including names such as Britvic, Coca-Cola, Heinz, Nestlé, Procter & Gamble and Unilever) and retailers in an attempt to reach consensus on pallet formats. It has about 3,500 clients in total in the UK, of which 200 are very large players.

“All of them are being asked by retailers to deliver ways to reduce the complexity of the supply chain, ways to increase the on-shelf availability and reduce replenishment costs,” said Yanez.

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