Imagine…. You’ve invested many millions of pounds in the latest warehouse automation, saved a fortune renegotiating your transport contract and you’ve just won a listing with a major retailer. Revenue is up and supply chain costs are down – you’re on top of the world!
Fast forward a few months…
Your new automation seems to be spending more time down than up, your haulier costs are through the roof, and the profit margin with your new customer is being eroded by penalty charges. Life is not so rosy. So, what went wrong? It could be something as simple as not having factored in the role that pallet quality plays in your new automation – and your supply chain…
What it means to you…
LogisticsIQ’s latest market research report forecasts that the global warehouse automation market will grow at a CAGR of c. 14% to reach $30bn by 2026. The appetite for investment in warehouse automation and robotics has undoubtably been accelerated by the implications of the Covid-19 pandemic, and – in the UK – the impact that Brexit will have on the UK labour market.
Your decision to make this investment is huge, both operationally and financially. The internet is awash with articles urging you to consider topics such as data, training and cultural readiness. It’s not quite so vocal when it comes to the humble pallet, yet pallet-related downtime can have the biggest impact on your investment.
Let’s say 20,000 pallet loads are moved each week, with a success rate of 99.8%. That success rate sounds good, but it still equates to 40 incidents of downtime each week. Gone are the days of jumping onto the line to free your jammed pallet, not only from a H&S perspective, your fix is likely to be system driven too. If each incident takes 20 minutes to resolve, we’re talking about almost 700 hours of downtime each year! I bet you didn’t build that into your ROI calculation when you invested?
What it means to your unhappy new customer…
Just over half of all rejections at a UK retailer’s Distribution Centre were recently found to be caused by poor pallet quality. The biggest culprit by far being failed composite blocks. Put simply, the sensor is looking for a complete block, and when it finds a degraded block, it rejects the load. Other causes for rejection include damaged or broken base-boards, excessive top-board chips and contamination.
Your customer will do one of two things: reject the load (at which point you’ll find yourself with a transport bill and a re-work cost) or, increasingly commonly, issue you with a charge for repalletisation (perhaps with a penalty element built in too!) Either way, the result is additional cost for you, and appearance on your customer’s naughty-list – not a great start to your new relationship.
Let’s talk sortation. Most pallet poolers offer a choice of services: pre-sorted/repaired pallets fresh from their Service Centres, or a trade quality option where you receive a “mixed bag” direct from a retailer. Of course, the trade quality pallet is cheaper, and is often chosen where cost per pallet is the main driver – but it’s not the whole cost, so should be considered in its entirety.
Have you factored in the cost of sortation? As well as the cost to return the pallets you reject? Even with a rejection rate of 10% and some speedy operatives sorting 90 pallets per hour, your handling cost is likely to be twice as high as it would be with quality assured pallets. Suddenly, the higher pallet fee starts to look much more affordable.
Strengthen your supply chain backbone by using a high quality pallet which enhances your automation investment and creates business efficiencies. LPR’s pallets lead the way in automation. To talk to us about how we can help call 01527 523311 or email us at email@example.com