Pallet wars

The Guidelines released by the Australian Logistics Council, about pooled equipment management, have been called into question by the Victorian Transport Association. Both organisations have long been involved with the issue of pallets and the systems used to hire and dehire them, as they move between different parts of the supply chain.

For the ALC, it is all about efficiency. The organisation represents members throughout the logistics supply chain. In fact, the VTA is one of its members. The guidelines are designed to take a holistic approach to the pallet issue, working towards a single industry approach.

“It is everyone’s interests that the system works efficiently and effectively because the cost of damaged and unaccounted for pooling equipment is inevitably borne within the supply chain,” said Michael Kilgarrif, ALC Managing Director, in announcing the Guideline. “The key is to be aware, understand, and build an accurate process that follows the goods as they move through the supply chain. This gives rise to a set of responsibilities and expectations on the part of all parties handling pooling equipment, which are set out in the ALC Guideline.

“With the logistics industry accounting for more than 8 percent of GDP, any practice which undermines industry efficiency is not only bad for the sector, it undermines the efficiency of the Australian economy.

“With, literally, millions of pallets in circulation, there simply must be a nationally consistent and industry wide approach to their use. The ALC Guideline is based on six pallet management fundamentals and aims to achieve greater standardisation along the entire supply chain based on a common set of understandings.”

From the point of view of the trucking operator dealing with the big retailers and other major transport buyers, the Guideline fails to deliver some basic principles, as the rules laid down can be overridden by contractual processes already in place.

“It is clear from the ALC Guideline that contractual terms between supply chain parties will over-ride the Guideline,” said Neil Chambers, VTA CEO. “But, it can be argued that some existing contractual arrangements are ‘unconscionable’ and impose significant burdens on certainly parties in the supply chain, particularly road transport operators and small businesses.

“It is these contractual arrangements, imposed and controlled by the large retailers, in collaboration with the pallet hire companies, which need to be reformed. Unfortunately, the ALC Guideline has ended up being a ‘toothless-tiger’ in that regard.”

According to the VTA, when receivers of goods on pallets, typically the larger retailers, have ‘Receiver Declare’ accounts, they take responsibility for notifying the pallet hire companies of transfers onto their accounts. However, if they fail to do so, they stand to benefit at the expense of others.

Many of these receivers also have ‘delay days’ policies, asserts the VTA, meaning the pallets remain on the accounts of the suppliers or their transport companies for several weeks, in practice. This results in the receiver getting the benefits of using the pallet without initially paying for having it.

These contractual arrangements lead to disputes about pallets not being transferred accurately or not at all. Subsequently, if the supplier of the transport company can’t produce the transfer paperwork, or do have the pallet dockets, but they are more than six months old, then the receiver and the pallet hire company don’t accept the transfer.

The most important thing to come out of this debate is the fact we are debating it. The issue of pallets and who has control of who has to pay for each hire is an ongoing one. Smart operators can control their exposure to high pallet costs to a degree, but the big players hold the whip hand and will always come out of the situation in pocket.

You can read the full Guideline here, at the ALC website.