Chep highlights pallet savings worth millions

01-Mar-2012 - Last updated on 06-Mar-2012 at 11:35 GMT

Pallet consolidation could lead to savings worth millions of pounds each year

Millions of pounds of savings are on offer across the grocery supply chain through pallet consolidation as global specialist Chep’s project targeting the topic builds momentum among manufacturers and retailers.

The number of pallet sizes used to distribute products is multiplying, complicating the ‘last mile’ before items reach stores. This makes it harder for suppliers to meet their scheduled delivery slots as they have to switch production batches for each packaging platform, increasing costs and threatening on-shelf availability and sales.

The situation is caused by retailers adopting too many bespoke solutions concerning distribution and in-store merchandising, perversely to increase efficiency, according to John Kenna, leader of Chep’s Last Mile Solutions project.

Labour costs

“They [retailers] have looked at improving speed of replenishment, driving down labour costs,”he told FoodManufacture.co.uk.“That’s why we have so many solutions in [store] aisles.”

At a basic level, 1,200mm x 1,000mm is the optimum UK pallet size, but many retailers demand other shelf replenishment and display sizes, such as 600mm x 800mm or 600mm x 400mm. In addition, pallets for the rest of Europe often adopt 1,200mm x 800mm specifications.

Retailers also call for specific stock-keeping units (SKUs) to be delivered on different units. Sometimes that forces manufacturers to hire a co-packer, which can handle these orders while they focus on their standard lines. And that drives up costs, as well as increasing the volume of deliveries as suppliers convey products to co-packers.

“You are getting 10, 15, 20 different platforms, sometimes as many as 55,” said Kenna.“Optimisation of the supply chain has led to increased complexity for manufacturers. You may have a number of different SKUsfor each individual retailer, which means stopping the production line to change the base platforms. These changes are beginning to show in terms of longer lead times and availability and some manufacturers are struggling.”

Millions of pounds

He said Chep was working with several customers to determine the financial impact of all these differences. “We can then start to talk with manufacturers and retailers about taking cost out of the supply chain.” Estimated savings could total millions of pounds, he added.

Chep is also working with grocery think tank IGD’s supply chain group Efficient Consumer Response (ECR) UK to bring retailers, suppliers, warehouse operators and logistics providers together to consolidate pallet types. This is a massive project, with forums involving an international network of representatives at all stages of supply, including Coca-Cola Enterprises; Heinz; Arla Foods; Morrisons and Sainsbury, said Kenna.

Four or five different merchandising and replenishment solutions are being discussed, but Kenna added:“I’m not saying the right answer is one pallet. It’s clearly not, but we should be able to get down to 15–20 at least.”

The major stumbling block in this collaboration was industry’s reluctance to share commercially sensitive data. But non-disclosure agreements were facilitating talks, he said.