One of the recurrent themes in any supply chain operation is the desire to increase profitability by driving down costs and yet retaining service levels.
The wider any network extends and the higher the volume of traffic, the more challenging it becomes to manage costs efficiently. Manufacturers produce and ship massive volumes of goods every day to all corners of the world. In such a situation, even the smallest inefficiency becomes magnified and can lead to a significant dent in the profits of all involved in the supply chain process.
The European market for fast-moving consumer goods (FMCG) is a perfect example of this, with millions of palletloads of goods every day being transported across the continent from manufacturers’ processing plants. However, the cornerstone of this model – the pallets on which the goods are transported – and the implications of their misuse represent an element of supply chain costs that is often overlooked.
There is a strong link between achieving optimal value from assets and the cost implications for the wider supply chain. If such assets are misused or misappropriated, the burden of replacing them falls on pallet pool operators who are left with a choice between investing in further stock or attempting to sweat their assets ever harder to meet existing orders with reduced capacity.
Pallet pooling is based on being able to forecast a cycle time and if you estimate cost against a pallet being able to do six cycles within a given 12-month period but the reality is it only does three, budgetary estimates will be 50 per cent out, affecting bottom line capability and onward costs significantly.
Retailers have a duty to help in improving supply chain efficiency by reducing downtime. By tackling the problems created as a result of pallets and other inventory spending too much time at retailers’ sites or sitting in the corner of a regional distribution centre, the supply chain can be streamlined thoroughly.
Retailers who fail to ensure that pallet pool operators are able to obtain maximum value from their assets could be doing themselves – and their customers – a disservice in the long run.
Jane Gorick is managing director of LPR UK