L national policy for pallets
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siD HAULIERS have been the benefies of pallets ever since they were inventut the benefits—in quicker pick-ups and T deliveries—have had to be paid for. ight rates are customary for many palle. loads and hauliers carrying such loads . hope that their fine-cut margins will be eroded by delays at the unloading t. The worst snag of all—the return of empty pallets—is a problem that the :ssional road haulage industry has al; ducked.
'hereas the own-account operator can tally bring back empty pallets without ulty the professional haulier, whose hood often depends on his ability to ass for return loads, is often most tant to spoil his chances of doing so for ierisory rewards paid for empty pallet :ments.
r these reasons all general hauliers will iterested in the massive study carried )y Arthur D. Little Ltd., the prominent xi States transport consultants, for the stry of Transport. Helpfully, the stry has issued a short summary report ig out the main findings and this is able free of charge from ropm 9 /21, ;try of Transport, Southwark Bridge London, SEl.
ational Pallet Pools exist in a number of tries. There is a rental pool in Australia nterlocking exchange pools are run by us European railways. In Britain some xi forms of pallet pool operate but are generally confined to only a few S.
Intial savings
Le potential savings of a national pallet to the transport industry have always recognized by theorists. The problem always been to get a viable scheme ,. Volunteers have been singularly lackle solid report prepared by Arthur D. Ltd. commissioned by the Ministry of ;port in August 1967 and now availat 15s from the Ministry is a masterly tiation of the problem. Unfortunately :s not give a detailed blueprint which be used by the Ministry—or by some capitalist—to set up a scheme quick: calls for further detailed study to nine the likely growth in pool memberand the number of pool transactions lay; the influence of pool transaction ,es on this growth; the level of pool ances; acceptable depot and sub-depot ons and charges; and the all attitudes of senders and transport operators.
Despite this call for extended research the published report paints such a rosy picture of the benefits of a national pallet pool and it is so persuasive and practical in its approach that it will be a tragedy if its conclusions are not pressed home by the Ministry of Transport and by the road transport industry.
A pre-requisite for a viable pool is that a standard pallet should be used by all members. The 40in. x 48in.(1,000mm x 1,200mm) pallet now most commonly used in warehousing and transport operations is obviously the most suitable. The report stresses the poor loading efficiency of the 800mm x 1,200mm pallet specified by the International Railway Union (U.I.C.) for railway pallet pool working in Europe, though it concedes that it would be possible and probably necessary to consider this as an additional size for inter-working with Continental pools. (The Dutch have proved the feasibility of different plan sizes for national and international traffics.)
Alternatives to conventional palletization such as slip sheets and drum clamps and automatic warehousing systems were examined. Expendable pallets were also looked at but the survey concluded that there was no likelihood at present of an expendable pallet being developed for general use that could compete in cost with pool pallets for domestic distribution. Containers, it was believed, would increase rather than decrease the use of pallets. The question of pallet contamination admittedly presented problems in certain trades but in Europe this has been dealt with satisfactorily and it should present no insuperable problems here.
Exchange pallet pools such as those operating on the Continent require that the' transport operator exchange an equal number of empty pallets for the loaded ones he picks up from a sender. At the delivery point, similarly, the consignee must hand over an equivalent number of empty pallets.
The system has advantages in that pallet pool operations can be integrated into the normal transport operations of the company with savings in the return costs of empty pallets to senders, and in making interregional re-balancing movements of empty pallets. Documentation and control systems with exchange pallet pools are relatively simple. Most of the control takes place between the local depots and their customers and no central recording of customer stock is required. The major disadvantage of this kind of pool is that it is only viable if run by a very large transport concern. No country has more than one exchange pool operating on a nation-wide basis. Its use by senders is therefore restricted to those goods carried by the transport operator running the pool, and his associates.
Some rental pools exist which are run by organizations independent of transport operators. Pallets are rented to interested firms by the pool operator who normally delivers them on request and collects them when no longer required. Normally, when a loaded rented pallet is sent to a consignee, and the latter is willing, the pool operator transfers the rent charge for the pallet from sender to consignee.
Problems
With this system both sender and consignee need only rent those pallets needed at any one time. But if, as often happens, there are non-co-operating consignees the sender is faced with the problem of getting the pallets back, or returning them to the pool operator. Moreover, since the pool is not run by transport operators the collection and delivery of empty pallets cannot be combined with normal goods transport. Costs are higher in consequence. Most serious of all, a complex accounting system is needed to keep track of pallets to ensure that the appropriate charges are made as pallets are delivered, returned and transferred.
The survey makes clear that potential members of the proposed national pallet pool in Britain would be reluctant to join any pool that restricted their freedom of choice of transport to the extent that an exchange pool would. Strong reservations were also expressed about a rental pool largely centred on the problem of transferring rents to consignees and the fear that rental charges would make the use of pool pallets in warehouse storage uneconomic.
To meet these justifiable fears the survey comes up with a brilliant idea for a two-tier pool combining the chief advantages and minimizing the chief disadvantages of rental and exchange pools. Essentially, the two-tier pool provides a means for linking together a number of separate exchange pools run by various transport operators. This would permit as many transport operators as wished to do so to exchange standard pallets with their senders and consignees. In effect, each transport operator would run his own exchange pool (the primary tier) and a sender
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would thus have a choice of transport operator.
But this scheme, alone, would not be viable owing to the need for operators to maintain large supplies of pallets and for the expensive re-balancing journeys. But if these separate "exchange pools" were linked by a rental pool operators would be able to hire and return pallets at pool depots when and where needed. This second tier rental pool would have no direct contact with senders and consignees unless they were themselves transport operators: its customers would be the transport operators.
So senders and consignees would simply exchange with the transport operator concerned loaded pallets for empty pallets, or vice versa, thereby maintaining their pallet stocks. Rental transactions would be a simple matter taking place directly between the pool operator and the transport operator as pallets changed hands.
The simplicity of this system can be illustrated. A Newcastle sender wishing to send a palletized load to London would contact a transport operator who would hire the necessary pallets from the local pool depot before calling on the sender. When the load was collected he would receive empty pallets in exchange. At the delivery point the transport operator would be given empty pallets in exchange for the loaded ones and these could be dropped offal the most convenient pool depot and the hire terminated. The sender and the consignee would each have exchanged pallets with the transport operator as if the latter were the actual pool operator. The transport operator whose pallet needs are variable and often short term could rent pallets from the pool when needed. Senders and consignees could purchase or lease their own pallet stock and keep this stock level through exchange.
Alternatively—and this would make for time-saving--transport operators could maintain a small stock of pallets either owned outright, or rented from the pool. The requisite number would be taken to the sender's premises and exchanged for loaded pallets and, at the consignee's delivery bay, the operator could obtain a balancing supply of pallets for return to his own depot, or to the local pool depot nearest to the delivery point. The study suggests that the pool issues and receipts generated by a number of transport operators in a region would to some extent cancel out. So the total number of inter-regional rebalancing movements undertaken by the pool would be less than the total number of movements necessary if each transport operator undertook his own inter-depot rebalancing. Even more significant, pool rebalancing journeys would tend to coincide with overall transport imbalances and therefore would be in the direction of empty vehicle movements, thereby reducing rebalancing costs.
The scheme outlined offers three main advantages. By contrast with the exchange pool any transport operator can participate; hence senders have a choice of operators. Far fewer transactions involving far fewer renters would need to be recorded and processed. Transactions would take place directly between an agent of the renter and an agent of the pool operator at a pool depot, so there would be no need for postal transactions. And since the pool's customers are all transport operators, it need not run a pallet collection and delivery fleet of its own.
At present the average cost of returning empty pallets is around 4s 6d per pallet journey. The study suggests that a national pallet pool could reduce these costs by 3s per pallet journey. But allowing for the costs of pallet damage and losses and for the capital locked up in the value of the pallets gross savings of as much as 4s 3d per pallet journey are envisaged, but this, it must be stressed, is before allowing for the pool operating costs.
To calculate the net savings of a national pallet pool is not a simple matter. The survey insists that only good pallets would be exchangeable; those responsible for pallet damage would have to pay for it. A very large number of sub-depots would be necessary for the scheme to be attractive to transport operators and inquiries suggest that many transport operators would be prepared to operate pool sub-depots at their own premises in return for an appropriate handling fee.
• As a rough estimate the report envisaged some 22 main depots at major centres each with a similar number of sub-depots. The total activity of the system, as may be imagined, has a great bearing on the net savings of the scheme. If the fixed costs of operating and administering the pool's main depots and headquarters can be spread over a very large number of journeys substantial savings are possible.
The study indicated that well within the first year of operation the number of loaded pallet journeys within the pool should exceed 10,000 per day. Before this level of activity was reached a net saving per journey would be achieved (i.e. pool incurred costs become less than the gross savings of 4s 3d per journey).
Net savings After a full year's operation a pool activity of 45,000 loaded pallet journeys per day was envisaged. This may sound a lot of journeys but in a sample taken by the research team it was noted that 31 firms using pallets generated about 67,000 loaded pallet journeys per day at present. At this level the net savings would be 2s 6d per journey, amounting to £1.6m a year.
If 100,000 loaded pallet journeys per day were achieved in five or six years—and this seems an extremely modest target—savings would amount to approximately 3s 4d per journey, or £4m a year. At maturity, after about 15 years, it was thought that there might be some 400,000 loaded pallet journeys daily at which level of activity net savings would be around 3s 6d per journey with a total saving to the transport and distribution industry of no less than £18m a year. In any language this is a lot of money.
The study goes into much more detail than is possible to summarize briefly. A fee per pallet issue of Is 6d or 2s, with no charge for return is envisaged. A fully operational pool was estimated to have annual fixed costs, allowing for interest and depreci
ation, of about £360,000. But the savings to transport and to the British economy are really striking. With 45,000 pallet journeys per day at the end of one year the pool would lose about £150,000 but the netsystem benefits would be no less than £1.5m per year. The pool could break even with 100,000 pallet journeys per day at which point net system benefits would exceed £4m. At the maximum likely use an annual pool profit of £750,000 could be anticipated plus net system benefits of some £18m.
This is an exciting prospect for the road haulage industry. The research team hope that in the further study contemplated some persons who would subsequently participate in the administration or operation of the pool would join the planning study. This is a clear invitation to the RHA, the FTA and—I wonder what their reaction will be--the NFC. "The pool would most appropriately be operated by some form of national organization. .. ." Sir Reginald Wilson and his expert advisers will no doubt wish to check the arithmetic of Arthur D. Little Ltd. We must all hope that this enlightened and imaginative study is brought to fruition. If it is, the consultants' substantial fee will be worth every penny.