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LOST IN THE SUPPLY CHAIN
Although theft clearly factors into the
equation, Welcome and others believe that
the majority of pallet losses stem from
less nefarious causes. They happen simply
because companies lack visibility of their
assets’ whereabouts in the supply chain,
according to Norm Kukuk, vice president
of marketing for Orbis Corp., a manufacturer of plastic pallets and other reusable
packaging. “We really find that for most
of our customers, 80 percent of what they
thought was lost is actually somewhere
in their own warehouse or their partners’
warehouses,” he says.
The main reason for loss is the sheer
complexity of most supply chains. It might
seem fairly simple—product is shipped on a
reusable pallet (or container or other shipping platform) from company A to company B, and then empty pallets are shipped
back from company B to company A. But
the reality can be a lot more complicated.
The product on the pallet could get damaged and the whole pallet could be diverted
elsewhere with the damaged goods. The
pallets could be sent to an offsite warehouse
because of lack of storage space or end up
being stored in a third-party logistics service provider’s (3PL) warehouse.
Furthermore, in most cases, the pallets
get returned at a slower pace than they are
shipped out. Suppliers, customers, or 3PLs
might be collecting the items until they
have enough for a full truckload. While
this reduces transportation costs, it also
slows the return process. Or if a driver is
supposed to pick up pallets or containers from a previous trip, he or she might
not be given enough time on the route to
track down and return the items. A “lost”
asset may just be sitting idle, waiting to be
returned.
Indeed, a certain amount of asset loss
is inevitable, and it’s unrealistic to expect
100 percent of your assets to be returned
to you, says Welcome. But if your rate of
loss creeps up above 10 percent, he adds, it
might be time to take a closer look at your
system.
KEEP YOUR EYE ON THE PALLET
Regardless of whether your pallets are dis-
appearing due to loss or theft, improving
the visibility of units within your supply
(such as being made into furniture
or fencing), says Gormley.
Most of the pallet theft is perpe-
trated by an individual thief pick-
ing up unattended pallets behind a
store, according to Welcome. But
there have been cases of organized
crime rings stealing pallets and con-
tainers. These groups tend to tar-
get plastic pallets, milk crates, and
bread trays, which they grind down
into plastic pellets that are then sold
to plastic manufacturers, typically
overseas. Although the extent of the
practice is unknown, the following
statistics might shed some light on
the situation: From 2011 until it
ran out of funding in 2013, a Plastic
Industrial Theft Taskforce run by
the Los Angeles County Sheriff’s
Department recovered $7.4 million
in stolen plastic pallets and contain-
ers, made 74 arrests, and shut down
30 illegal grinding operations.
While the rising cost of resin
makes plastic pallets particularly
vulnerable to theft, pallets made
from wood and other materials
are not immune. For example, in
2013, Upper Arlington, Ohio, near
Columbus, experienced a rash of
wooden pallet thefts from behind
grocery stores.
Indeed, the problem of wooden
pallet theft is serious enough in
CHEP’s eyes that the company has
set up a couple of task forces. It has
an asset recovery team in the field
that focuses on recovering lost and
stolen pallets, and a separate asset
protection team that educates pallet
users and recyclers on CHEP’s ownership rights for its products.
