Leisring, Justin G.

English

Research Papers in Economics

TECHNOLOGICAL / PHYSICAL CHANGES
IN THE ENVIRONMENT
Moderator Stanley Fletcher, Professor
University of Georgia
Joint Industry Container and Pallet Design Progress
by
Justin G. Leisring
Manager, Distribution Planning
The Procter & Gamble Distributing Company
Our industqy is at a crossroad! Is there an
optimum pallet design and management program
ready for implementation? Should we isolate and
sub-optimize the transport function? I think the
third-party pallet rental system is our induetw’s
best response. However, we need more field
work before such decisions are made; plus there
is more to this issue than meets the eye.
As most of you know, Procter & Gamble
continues to test a pallet design and third-party
rental system. This pallet remains under the
load until the distributor decides to order, pick or
shelve the merchandise. In the field and in the
laboratory our test pallet and management sys-
tem comes as close to a guarantee of perfection
as can be designed into the operation. For more
details and comparative costs, see Table 1. How-
ever, it is not just with system details or costs
that we should concern ourselves. We must seek
perfection! We must concern ourselves with total
system quality, and with a host of new consumer
acceptance factors just over the horizon.
We have proven that any transfer of the
unit load from one method or device to another
increases damage. We have proven that any
complication of the equipment or method com-
pounds the damage rate. Worst of all, we have
proven that such extra handling is the insidious
cause of hidden damage that does not show up
Journal of Food Distribution Research
until the store opens the case. What a terrible
waste of effort and merchandise. However, I do
not presume that P&G tests are conclusive.
More testing is encouraged during this decision
making period.
No matter who incurs the loss in the short
term, we know that unacceptable quality is
wrong and all costs eventually end up in the
selling price of our goods. Pushing back with
things like damage reclaim payments, excessive
merchandise allowances, and the like, tend to
divert our sense of responsible evaluation and
commitment to the collective right answer. Tail-
oring the way each of us does business to achieve
such objectives as reduced damage and improved
safety and efficiency is essential, but isolating an
entire problem area only delays real progress.
Can we honestly consider a system for
tomorrow that dumps over a hundred million
temporary devices into a waste problem that is
just now reaching the public crisis level? The
grocery industry is already a fiworite target.
Let’s make our project a positive rather than a
negative for the long term. I have great faith in
our collective ability to do the right thing.
This paper presenta a review of the
published joint industry container design guide-
lines. It will discuss the six basic objectives and
February W/page 85Table 1
Dqy Grocery Pallet System Costs
Current Cost-CCA Report CHEP System
per pallet trip per pallet trip
Mfg Wholesaler/Retailer Mfv Wholesaler/Retailer
Pallet purchased to
initiate system
Pallet expense to
maintain system
(carrier cost8)
Productivity loss in
order selection and
shipment preparation
Sortation
Repair
Administration
Worker Compensation
Exchange/sortation loss
Transportation to or
from depot
Issue and transfer
costs
Daily rental
Subtotal
Damage
Total
$1.28
2.05
.63
.42
.10
.25
.20
.10
.-
--
.-
$.60 $ .. $ .-
-- .- --
.95
.27
.45
.08
.06
.04
--
-.
--
$5.03
2.03
$2.45
.58
$7.06 $3.03
NOTE: Typical time for normal “turn” business is 20 days.
.- .-
-- .25
.. --
.08 .02
-- --
,50 .50
1.53 .-
1.05 .18
30 days 15 fme days -
@ $.035 5 days @ $.035
.. -.
$3.16 $.95
February 90/page 86 Journal of Food Distribution Researchgive a complete review of the pallet P&G is test-
ing and the current status of the joint industry
pallet subcommittee’s recommendations. Then I
will discuss briefly P&G’s newest mechanized dis-
tribution center located outside of London,
England. This center uses rental pallets, painted
blue, supplied by the CHEP Company for the
United Kingdom and Western Europe.
Perfect quality, a safer work place, and a
truly ejf%ient total system are the hallmarks of
our joint indust~ effort. The joint industry
associations known as the Grocery Manufacturers
of America (GMA), the Food Marketing Institute
(FMI), and the National American Wholesale
Grocers Association (NAWGA) accounted for $331
billion in total grocery sales for 1988. That
represents just under 18 percent of our dis-
posable income. Although this paper talks about
inefficiencies such as poor packaging, bad operat-
ing practices, and poor unit load fit on the groc-
ery palle$ our industry still gives consumers the
best “food deal in the world.
Our indust~ gets good marks for net cost.
We fall short on total quality and consumer satis-
faction. For example, damage costs about $2.5
billion a year. That $2.5 billion dollar loss boils
down to 20 cents per case for an industry where
the retailer’s net profit is 15 cents a case. The
greatest single cause of damage is assigned to
poor load stability and pallet fit. Most of the
problem is overhang that produces 30 percent of
the totaI. Next in line is 20 percent due to poor
pallets themselves and the next is 19 percent due
to cuts done at store level.
Realization that our industry is far from
perfect led to a focus on packaging and container
performance in 1985. The volume of damage
became such that processing centers for
accumulation and disposal of damage were jus-
tified. Although the centers serve to make collec-
tion and reclaim more efficienL the objective by
all industry leaders is to eliminate the problem in
the first place. There are about 200 reclamation
centers now in operation around the United
States. This efficient processing and almost auto-
matic payment at the retail price by almost all
manufacturers makes uniform commitment to
damage reduction a difficult task indeed, but it is
happening.
By January of 1988, the joint industry
team produced a document called “Voluntary
Industry Guidelines for Dry Grocery Shipping
Containers.” The booklet was introduced to 800
industry executives at the FMI midwinter meet-
ing in Boca Raton.
This is a list of grocery manufacturers and
distributors who were members of the joint
industry committee during the writing of guide-
lines to date:
Associated Groc. (WA) Nabisco
H. E. Butt Philip Morris
Byerlys Pillsbury
C&H Sugar Procter & Gamble
Campbell Soup Publii
Cert. of California Ralston Purina
Fleming Safeway
General Foods Scott
General Mills Springfield Sugar
Giant Foods (Land.) Stop & Shop
Kraft Super Foods
Kroger Wegmans
The booklets that this team of experts produced
are available from FMI headquarters in
Washh@on, D.C.
1.
2.
3.
4.
5.
6.
Our booklet covers these basic guidelines:
Establish uniform 48x 40 pallet design and
dimensions.
Establish uniform 48 x 40 pallet load foot-
print with no overhang. (P&G is plus or
minus 1 inch).
Develop suggested pallet patterns and stabi-
lizing techniques for unit loads. (Stretch-
wrap is primary thrust.)
Establish a maximum case weight of 50
pounds for now and 45 pounds for longer
range.
Improve the visibility and clarity of case
markings. A separate booklet gives details.
Define maximum and minimum container
dimensions. (Maximum 30 x 24 x M“ for
paper and minimum of 4 for all cuqes.)
When introduced in Januaqy 1988 the indus@
team set a goal of a three- to five-year implemen-
tation for these guidelines.
Exactly one year after introducing the vol-
untary design guidelines, Tom Laco and Dean
Werries, the co-chairmen of the Industry Sisering
Committee reported back to the midwinter execu-
tive group. The bottom line seems to be that the
U.S. Grocery Pallet Exchange Program is in a
shambles, with 70 out of every 100 pallets in the
system being unacceptable. Procter & Gamble is
currently testing one pallet with three groce~
Journal of Food Distribution Research February 90/page 87distributors and we are asking other manufac-
turers to get involved.
A preliminary report by a pallet subcom-
mittee was delivered to the Container Committee
on September 28. Although its report talked
more about a low-cost “platform” yet to be
designed, the Container Committee will seek
more input before concluding anything. Will the
final pallet design include a solid area top and
minimum bottom openings? I really do not
know, but I think so. The top and bottom will
be connected with nine blocks that facilitate true
four-way entry. The pallet weighs only 65
pounds. P&G will continue to test this design.
We are convinced that the CHEP-3rd Party Man-
agement System offers a quick entry for U.S.
shippers and receivers wishing to go to this qual-
ity of pallet. At present the distributors in the
test are Super Valu, Fleming and Kroger with
Super Foods having completed a six-month agree-
ment with excellent results.
CHEP’S expected income as well as all
manufacturer, carrier and distributor costs for
sorting, handling, and shipping the pallet.a totals
$4.11 against a current (Cleveland Consulting
Assoc.) total system cost of $7.06.
The manufacturer would carry the full
burden of initial CHEP pallet rental and cover
fifteen days of free rental for the distributor.
That expense would be about $3.16 per use cycle.
The distributor, holdlng the pallet for an
average extra five days and paying a transporta-
tion fee of approximately 50 cents to return i$
would incur a total expense of about $.95 per use
cycle.
If we use an average of, say, 40 cases per
pallet cycle, the total expense of $4.11 boils down
to about $.10 per case. The Cleveland Consulting
Company told us that our real coats, including
damage and inefficiencies within today’s opera-
tions, are over $.16 per case. We obviously could
tiord the change on pure cost comparison alone.
Our joint industry study is far from com-
plete. Call ten grocery manufacturers or dis-
tributors and you will get at least seven variances
on what the pallet design should be and a few
more variances on what the exchange program,
if any, should be. Unlike Pete Rose, I am not
placing any beta on the short term.
In Procter & Gamble’s plant and distribu-
tion center in England, we are using the CHEP
pallet. The cases on these pallets are wrapped--
not contained in corrugated packaging.
The work done by the Container Commit-
tee regarding basic dry groceqy containers gives
direction for pallet fit within tolerances of plus or
minus one inch with no overhang preferred. The
expected stacking strength of any case is the
equivalent of at least two unit loads as received.
That means that if you shipped me a pallet load
96 inches high in the truck or rail case, it had
better be strong enough to store 192 inches high
for 30 days at 90 degrees F. and 80 percent hum-
idily. We started with old rules like Rule #41
and converted to realistic performance expecta-
tions as defined in our booklet. It is working and
the directions continues to be useful to our
industry.
February 90/page 88 Journal of Food Distribution Research

JOINT INDUSTRY CONTAINER AND PALLET DESIGN PROGRESS

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