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Go-ahead for pallet pool?

14th March 1969, Page 26
14th March 1969
Page 26
Page 26, 14th March 1969 — Go-ahead for pallet pool?
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Which of the following most accurately describes the problem?

• A national pallet pool is practicable and would be of major benefit to users and to the country as a whole, states a report to the Ministry of Transport published on Monday. The report is by Arthur D. Little Ltd., the management consultancy and research firm which was commissioned by the Ministry to study the feasibility and potential value of a national pallet pool for the United Kingdom.

The main objectives of the study were to examine: (i) the economics of establishing and operating a pool; (ii) the technical problems involved, taking account of the development of other handling techniques, notably the rapid growth in the use of containers; and (iii) the traffic which might benefit from pooling.

The study involved an examination in some detail of the different operating practices and trade patterns of the various potential users of a pool, which inevitably impose some constraints on the form of pool which is practicable. The consultants then had to develop a type of pool which would match the particular operating requirements. Transport firms and large users of pallets were interviewed in order to obtain preliminary reactions to the idea of a national pool and to investigate the kinds of traffic that could make use of a pool and the most suitable pallet specifications.

As a result the consultants conclude that, while none of the existing types of pool would be satisfactory for a national pool under UK conditions, a new kind of "twotier rental/exchange pool" would be feasible, attractive, and of major benefit to senders of goods, transport operators and consignees, producing in time very substantial overall net system savings for a comparatively modest initial investment.

Discussing the economics of the two-tier pool proposal the report says that purely qualitative arguments were backed by a detailed economic analysis. Mathematical models of pool operations were developed and the actual costs that a pool would meet were investigated. The economics of a twotier pool were then examined in detail, and other kinds of pool were studied in sufficient depth to determine that they were not as attractive. A pool's major benefit would come in the form of reduced costs of various kinds which might accrue at any stage in the distributive process; but the pool would have costs of its own to set against these savings. The analysis concentrated on examining how a pool could reduce the cost of using pallets and how pool costs would behave under the influence of different operational factors.

The most significant savings in costs which a pool could achieve are, according to the report:

01 Return of empty pallets to their owner The cost of getting pallets back can vary greatly. The trip from the consignee to the local haulage depot may involve a negligible extra cost if a lorry with space is calling at the consignee's premises anyway. But special trips can put the cost up to well over 4s per pallet journey. A representative average for the cost of returning a pallet to the transport operator's depot in the consignee's locality is put at 3s per journey, which a pool should halve.

The rest of the journey, the return trunk haul, may at present be dealt with by building up a full load and delivering direct to the pallet owner, or by ferrying pallets back in small numbers to the depot in the owner's area, using available free space, and making bulk return to the owner from time to time. The two methods, used as appropriate, yielded the same costs, on average 1s 6d per journey, which a pool should eliminate. The present average cost of returning empties, of 4s 6d per pallet journey, would therefore, on these assumptions, be reduced by 3s per pallet journey.

(ii) Pallet costs When using pallets in distribution, senders incur added pallet costs due to the loss of use of the pallet until returned, and because some pallets are lost and never returned. It is estimated that large sending firms at present do well if the loss rate per pallet despatch can be kept to 3 per cent and if loss of use of those pallets which are eventually returned is kept to only five weeks. With the exchange sys tern of pool, losses should be virtually eliminated: and loss of use should be reduced to the amount which a reserve pallet stock at the sender's premises makes necessary. Even if losses (plus damage beyond repair) still amounted to a rate of 1 per cent per pallet journey, and if the sender maintained a one-week supply as a reserve against late exchange and fluctuating requirements, the saving in pallet costs should still amount to Ts 3d per pallet journey.

Hence, the introduction of a pallet pool should offer a gross savings (before allowing for the cost of operating the pool itself) to transport operators and senders together of 4s 3d per pallet journey. This, of course, takes no account of the elimination of the nuisance to the consignee of sorting out a particular sender's pallets from a pile of miscellaneous empties, or to the transport operator in arranging the return operation.

The Ministry of Transport is ready to receive comments from interested persons or organizations on the concept of the two-tier rental/exchange pool, and on the proposal for further study. A summary of the report prepared by the Ministry is available free of charge from the Ministry of Transport, Room 9/21, St. Christopher House, Southwark Street, London, SEl. Copies of the full report can also be obtained from the same address, price 15s. Comments should be addressed to the Secretary. Ministry of Transport, at the above address and marked "For the attention of Freight Co-ordination Division."


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