In healthy economies, manufacturers and distributors tend to invest in technologies and processes that enable future growth. It’s in tougher economies where the focus shifts to reducing costs and tightening margins.
With continued growth in July, the U.S. economy marked its longest expansion on record. However, sentiment is shifting and fears are growing that a recession could be around the corner. In fact, the Morgan Stanley business conditions index recently suffered the largest single-month drop in its history.
As a result, forward-thinking businesses might do themselves a favor by preparing and planning for the economy to take a step backward. Over the past few decades, the process of outsourcing has become a common method of shaving costs. The concept grew out of World War II and accelerated around the turn of the century. As niche businesses started developing ways to offer services cheaper than companies could do them in-house, outsourcing became a normal part of operations.
Typically, outsourcing is used to reduce noncore expenses. For a warehouse or distribution center, supply chain consulting experts might recommend obvious things like janitorial, landscaping, payroll or IT. But there are other engrained elements of warehouse logistics close enough to the periphery that they might make good targets for outsourcing – such as pallet management.
Pallets are essential to every DC operation. But once those pallets serve their purpose of making products easy to move and ship, they’re left over as something to deal with – a borderline nuisance.
Some facilities attempt to sell surplus pallets to local recyclers for pallet recycling. Those that utilized rental pallets in their facilities also have the issue of pallet pickup and delivery – sorting the pallets and returning them to the pooler.
It’s not uncommon for a retailer or DC to have multiple agreements in place for pallet services – and this can be a problem. They also must manage the administration required by the various pallet poolers. The reality is, pallet management simply isn’t a core competency of most distribution centers.
Many warehousing operations have learned to find value in pallets. And now, thanks to the development of total pallet management services, outsourcing the complete aspect of pallet management maximizes that value. Instead of utilizing fulltime employees to sort, store, deliver or administer pallets, that staff can focus on their central functions of receiving and moving product.
A complete pallet plan is no simple task. It can be nuanced, and at times convoluted, which is why outsourcing makes sense. The sorting and loading of pooled or rented pallets can be time- and resource-consuming. A pallet management expert can devise an operational approach that streamlines pallet handling and administration, saving time and money. It’s a more efficient use of internal resources and capital deployment.
Despite clear advantages of outsourcing pallet management, a relatively small number of companies have already done so. In the most recent Pallet Report from Modern Materials Handling, 11% said they use a pallet rental partner, and only 5% said they use another type of pallet retrieval and recovery system. However, it appears many are starting to understand the potential benefits. When asked if they would consider a third-party pallet system for pallet delivery and pallet pickup, 40% said they likely would.
Among the reasons these companies listed for taking interest in pallet management were reducing costs; keeping pallet supply constant; the return stream on plastic pallets is difficult to manage; and that, next to labor, pallets are the highest expense.
Fortunately, the right outsourcing partner can address all those – from pallet delivery and pickup, to sorting and storing – simplifying the intricate puzzle that can come from dealing with multiple pallet vendors and owners. Furthermore, with environmental, regulatory and other such concerns impacting supply chains, the proliferation of plastic shipping containers and plastic pallets are only increasing the complexity of responsibilities for facilities.
There’s no need to wait for a recession to maximize the efficiency of your warehouse or DC, and outsourcing with the right pallet management partner can accomplish that, because it’s never the wrong time to save money and improve operations.