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Today’s Pallet Leasing Industry
The modern pallet pooling business model was introduced in the early 1990s to provide an alternative solution for the shipping and storage of goods within national and regional supply chains. Prior to pooling, manufactures invested in “one way” wood pallets to meet the shortfall of used/free pallets circulating within distribution networks. Pallet quality suffered in this free-for-all business model, representing billions of dollars of operating losses each year; according to the Grocery Manufacturers of America (GMA). The prior costly and inefficient system laid the foundation for a new third-party wood pallet leasing industry to develop and assist manufactures in lowering supply chain costs.
Today over a trillion dollars of fast moving food, pharmaceutical and consumer goods are shipped, stored and displayed on wood pallets each year. The pooled wood pallets that deliver these products to market still cause billions of dollars of losses and result in billions of dollars in inefficiencies stemming from sub-standard wood pallets with missing boards or blocks, splintered wood and nail heads, along with liquids absorbed into the wood harboring water, chemicals, debris, bacteria, pathogens, insects and extra weight resulting in contamination, damage, health risks, increased shipping expense and costly recalls. The third-party wood pallet pooling industry has failed to deliver on its promise to cut the unnecessary costs and inefficiencies inherent in wood pallets first identified by the GMA 25 years ago.
Legislative & Technology Landscape
In 2011 the Obama Administration passed the Food Safety Modernization Act (FSMA), the first sweeping change to the laws regulating US supply chains since the 1938. The FSMA changes the rules requiring manufacturers to prevent risks in supply chains, rather than responding to them through recalls. The vast majority of FMCG products shipped on wood pallets are invisible for much of their journey from the manufacturer to the consumer. During this journey these products are subject to risks including theft, contamination, expiration, counterfeiting, spoilage and other forms of damage and loss.
Today, with better understanding we can confidently say that the 25 year old industry is due for an upgrade that integrates wireless tracking technologies into the fabric of our supply chains. Supply chain visibility brought by technology will lead to increased safety and efficiencies.