Pallet Lessons from the USPS
By Rick LeBlanc
Date Posted: 8/4/2008
The U.S. Postal Service (USPS) has long been the single largestpurchaser of plastic pallets in the country, possibly even theworld. Over the past year, leakage and budget concerns have led theUSPS to re-evaluate its purchasing practices. The USPS has begunpurchasing wood pallets, INCA presswood pallets and some low-pricedplastic pallets.
Peter Grau, a contractor to the USPS, said, The action to purchasewood pallets over plastic pallets is due to budget constraints andasset management issues with plastic pallets. From an operationaland engineering perspective, the twin sheet thermoformed plasticpallet is still the pallet of preference.
The bottom line is that the USPS has leaked out plastic palletsabout as fast as they had been buying them. Peter Grau said, Whilewe prefer plastic pallets for their performance, they are leakingout of our system almost one for one. With the higher cost ofpetroleum and plastic products, cash flow was being squeezed as theUSPS faces budget shortfalls due to lower mail volume.
The USPS shifted to plastic pallets in the mid-90s, and the fullconversion began in earnest in the following years. The change wassupported by an exhaustive study that compared the performance andendurance of the INCA presswood pallet, the previous platform ofchoice, with wood pallets and a variety of plastic models. A twinsheet thermoform plastic pallet proved to be the winner, and theconversion swung heavy to plastic.
The study found the twin sheet pallets were light, durable andsuperior in other aspects of distribution. The study was widelyused by twin sheet marketers working downstream markets, includinggrocery decision makers. According to Jeremy Albright of WitPostal,a postal logistics service provider, a generation of mailprocessing automation has developed around the use of the plasticpallet.
There has been one recurring problem. The distinctive orange andblack postal pallets were popping up everywhere, even as props onthe Jurassic Park ride at Universal Studios in California. The USPSsent a memo to trading partners in 2006 urging that postal palletsonly be used for intended purposes. This memo threatened legalaction against anyone involved in stealing USPS pallets.
The National Wooden Pallet & Container Association becameinvolved, and wood pallets were offered as a possible solution.Several sources suggested that the USPS develop a pallet trackingsystem. It never developed and pallet losses continued.
A postal communication from October 2007 announced that USPS hadordered 250,000 INCA pallets, as a cheaper alternative. Plasticpallets had been leaking out of the USPS system to the tune of twomillion pallets per year. Pallet leakage cost the USPS more than$100 million over the previous five years. Major plastic palletsuppliers have been working to design lighter plastic pallets forUSPS that would be more competitively priced, according to oneindustry source.
WitPostal confirmed that printing companies were being shipped woodpallets amounting to almost 50% of postal pallets ordered in somecases. Jeremy indicated that his clients are reporting damagedpallets all over their facilities. He noted that many facilitieshave automated sorting equipment and other machinery that issensitive to wood debris.
Jim Hardie, manager of mail transport equipment for USPS, said thatbuying wood and presswood pallets is a short term solutionnecessitated by plastic pallet shortfalls. He offered no long termprediction about what the USPS would do other than attempt toimprove its pallet management practices.
Hartson Poland of PDQ Plastics, which has supplied pallets to theprinting industry, sees pros and cons with the USPS and its palletprogram. He applauded the USPS for launching the making of thisplatform change in the slower part of the year, before the busyfall mailing season begins. However, he was less flattering aboutits approach to pallet management.
Hartson said, The USPS picked the right pallet. They did a goodjob of deciding who gets the pallets and who did not. What theyhave not done well is create the basic structure to get theirpallets back. They have never created a closed loop.
It seems the USPS got into its present dilemma by failing to createan adequate pallet control system. Now it seems the USPS may beembarking to another equally precipitous course of action. It ismoving to a wood pallet program without specifications and otherquality control measures in place to ensure a consistently goodquality pallet every trip.
Just a little background on the USPS program, bulk mailers areissued pallets by USPS. The approved mailer, such as a printingcompany, calls to order pallets, and the USPS delivers them forfree. The pallets are only supposed to be used for shipments toUSPS.
Jeremy of WitPostal indicated that in addition to the issues withautomated equipment, there are concerns about weight and storagerequirements. Wood pallets take up more space and weigh more thannestable plastic pallets. Space is a major concern for manyprinters. Extra pallet weight results in increased overall shippingcosts.
Jeremy noted that printers often use wood pallets from othersources. In some cases, wood pallets are shipped back to USPS inaddition to postal pallets. This could mean that the USPS mayactually start accumulating rather than losing pallets in the nearfuture.
The success of the USPS pallet program depends on how it isadministered and the level of compliance by mailers. There are afew things that any pallet user can do to ensure that its transportpackaging assets are secure. The sidebar on page 49 discusses thetop few steps that must be taken to establish a closed loop. It iseasy to talk about but hard to do in practice because successdepends largely on people who view protecting pallet assets as anafterthought.
Top Steps for Developing a Managed Pallet Program
1.) Hire an asset recovery team that oversees the pallet programand 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 supplychain. This involves properly marking the pallet, sending lettersto supply chain partners and providing educational materials forpeople handling pallets at warehouses and other facilities.
3.) Establish a patchwork of legal authority and custodyagreements. Pallet rental companies do this with their customers.Users agree to terms specified by the pallet owners. This includesreturning 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. Thisshould be brought to the attention of upper management on afacility by facility basis. You could use batch or individualpallet tracking, depending on your level of sophistication.
5.) Charge a fee for excessive use or capturing of a pooledpallet.
6.) Dialogue with pallet recyclers through a letter campaign thatinforms them of the proprietary nature of postal pallets. Set up a1-800 phone number for pallet recyclers to call if they have straypallets. Develop procedures to adequately compensate recyclers fortheir costs while protecting the ownership interest of your assetand 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 tolegitimate reports of stray pallets. Remember that it will take alocal focus to curtail leakage. Communicate with anyone who mightcome in contact with stray assets, and let them know what theyshould do.
8.) Conduct quarterly analysis to gauge the effectiveness of newpallet management initiatives.
