Pallet Lessons from the USPS
Retrieval problems pushed the U.S. Post Office to reconsider wood pallets. Learn the keys to setting up an effective retrieval and recovery system.
By Rick LeBlanc
Date Posted: 8/4/2008
The U.S. Postal Service (USPS) has long been the single largest purchaser of plastic pallets in the country, possibly even the world. Over the past year, leakage and budget concerns have led the USPS to re-evaluate its purchasing practices. The USPS has begun purchasing wood pallets, INCA presswood pallets and some low-priced plastic pallets.
Peter Grau, a contractor to the USPS, said, “The action to purchase wood pallets over plastic pallets is due to budget constraints and asset management issues with plastic pallets. From an operational and engineering perspective, the twin sheet thermoformed plastic pallet is still the pallet of preference.”
The bottom line is that the USPS has leaked out plastic pallets about as fast as they had been buying them. Peter Grau said, “While we prefer plastic pallets for their performance, they are leaking out of our system almost one for one.” With the higher cost of petroleum and plastic products, cash flow was being squeezed as the USPS faces budget shortfalls due to lower mail volume.
The USPS shifted to plastic pallets in the mid-90s, and the full conversion began in earnest in the following years. The change was supported by an exhaustive study that compared the performance and endurance of the INCA presswood pallet, the previous platform of choice, with wood pallets and a variety of plastic models. A twin sheet thermoform plastic pallet proved to be the winner, and the conversion swung heavy to plastic.
The study found the twin sheet pallets were light, durable and superior in other aspects of distribution. The study was widely used by twin sheet marketers working downstream markets, including grocery decision makers. According to Jeremy Albright of WitPostal, a postal logistics service provider, a generation of mail processing automation has developed around the use of the plastic pallet.
There has been one recurring problem. The distinctive orange and black postal pallets were popping up everywhere, even as props on the Jurassic Park ride at Universal Studios in California. The USPS sent a memo to trading partners in 2006 urging that postal pallets only be used for intended purposes. This memo threatened legal action against anyone involved in stealing USPS pallets.
The National Wooden Pallet & Container Association became involved, and wood pallets were offered as a possible solution. Several sources suggested that the USPS develop a pallet tracking system. It never developed and pallet losses continued.
A postal communication from October 2007 announced that USPS had ordered 250,000 INCA pallets, as a cheaper alternative. Plastic pallets had been leaking out of the USPS system to the tune of two million pallets per year. Pallet leakage cost the USPS more than $100 million over the previous five years. Major plastic pallet suppliers have been working to design lighter plastic pallets for USPS that would be more competitively priced, according to one industry source.
WitPostal confirmed that printing companies were being shipped wood pallets amounting to almost 50% of postal pallets ordered in some cases. Jeremy indicated that his clients are reporting “damaged pallets all over their facilities.” He noted that many facilities have automated sorting equipment and other machinery that is sensitive to wood debris.
Jim Hardie, manager of mail transport equipment for USPS, said that buying wood and presswood pallets is a short term solution necessitated by plastic pallet shortfalls. He offered no long term prediction about what the USPS would do other than attempt to improve its pallet management practices.
Hartson Poland of PDQ Plastics, which has supplied pallets to the printing industry, sees pros and cons with the USPS and its pallet program. He applauded the USPS for launching the making of this platform change in the slower part of the year, before the busy fall mailing season begins. However, he was less flattering about its approach to pallet management.
Hartson said, “The USPS picked the right pallet. They did a good job of deciding who gets the pallets and who did not. What they have not done well is create the basic structure to get their pallets back. They have never created a closed loop.”
It seems the USPS got into its present dilemma by failing to create an adequate pallet control system. Now it seems the USPS may be embarking to another equally precipitous course of action. It is moving to a wood pallet program without specifications and other quality control measures in place to ensure a consistently good quality pallet every trip.
Just a little background on the USPS program, bulk mailers are issued pallets by USPS. The approved mailer, such as a printing company, calls to order pallets, and the USPS delivers them for free. The pallets are only supposed to be used for shipments to USPS.
Jeremy of WitPostal indicated that in addition to the issues with automated equipment, there are concerns about weight and storage requirements. Wood pallets take up more space and weigh more than nestable plastic pallets. Space is a major concern for many printers. Extra pallet weight results in increased overall shipping costs.
Jeremy noted that printers often use wood pallets from other sources. In some cases, wood pallets are shipped back to USPS in addition to postal pallets. This could mean that the USPS may actually start accumulating rather than losing pallets in the near future.
The success of the USPS pallet program depends on how it is administered and the level of compliance by mailers. There are a few things that any pallet user can do to ensure that its transport packaging assets are secure. The sidebar on page 49 discusses the top few steps that must be taken to establish a closed loop. It is easy to talk about but hard to do in practice because success depends largely on people who view protecting pallet assets as an afterthought.
Top Steps for Developing a Managed Pallet Program
1.) Hire an asset recovery team that oversees the pallet program and works with all parties involved to safeguard pallet assets. This includes marketing, policing and management functions.
2.) Develop clear communication with all participants in the supply chain. This involves properly marking the pallet, sending letters to supply chain partners and providing educational materials for people handling pallets at warehouses and other facilities.
3.) Establish a patchwork of legal authority and custody agreements. Pallet rental companies do this with their customers. Users agree to terms specified by the pallet owners. This includes returning assets and reimbursing for stray pallets.
4.) Electronically track pallet movements to monitor pallet flows. Use regular reports to inform problem areas of leakage issues. This should be brought to the attention of upper management on a facility by facility basis. You could use batch or individual pallet tracking, depending on your level of sophistication.
5.) Charge a fee for excessive use or capturing of a pooled pallet.
6.) Dialogue with pallet recyclers through a letter campaign that informs them of the proprietary nature of postal pallets. Set up a 1-800 phone number for pallet recyclers to call if they have stray pallets. Develop procedures to adequately compensate recyclers for their costs while protecting the ownership interest of your asset and identifying sources of major pallet leakage.
7.) Quickly return phone calls and work to reclaim stray assets. The last thing you want is a reputation for poor response to legitimate reports of stray pallets. Remember that it will take a local focus to curtail leakage. Communicate with anyone who might come in contact with stray assets, and let them know what they should do.
8.) Conduct quarterly analysis to gauge the effectiveness of new pallet management initiatives.