Imagine there's no pallets…
“When we induct new employees into CHEP, one of the first things we try to get them to do to just understand how seriously we take our business, is to actually try and imagine a business without CHEP and how anything would move,” said Phillip Austin, CHEP’s Australian & New Zealand President.
“How Woolworths would run its warehouses? How Linfox would run its trucks? How would an importer would actually be able to take goods from China and get them to the point of consumption?”
Once you start to think about pallets, you realise they’re everywhere. But if you make anything in large quantities, you already know this.
According to its website, CHEP manages 237 million pallets, 600,000 bulk containers and 34.9 million reusable plastic containers.
The rise of the pallet, according to a US Department of Agriculture paper (cited in “Pallets: The Single Most Important Object in The Global Economy” by Tom Vanderbilt at www.slate.com) was driven by two things: World War Two and the invention of the gas-powered forklift.
CHEP itself – now with a global network in 53 countries and over 75 sites in Australia alone – goes back to the Second World War.
When the US military left Australia after its Pacific campaign, it left behind a number of cranes, forklifts and around 60,000 pallets. These resources were handed over to the Australian government, who retained them as the Commonwealth Handling Equipment Pool. It was privatised and sold to Bramble’s, who still own it, in 1958.
“As we came through the 60s and into the 70s, not only that expansion internationally, but our business was originally a single-point hire,” explained Austin on the subject of CHEP’s growth.
“So if you needed a pallet you would hire it from CHEP. And that was the simplicity of the model. When you were finished you would give them back. The growth that really happened in the 60s and early 70s as the supply chain started to emerge, the pallets started to move with the goods.”
Designed around the pallet
CHEP’s history and success mean a number of things. First of all, what the company does is so tied to logistics and materials handling in this country that warehouses and the vehicles that move goods to and from them are created with the dimensions of CHEP’s iconic blue pallet in mind.“When you come to some of the uniqueness of our business – again, we get excited about this, but – every trailer in Australia is designed to be two CHEP pallets wide,” Austin enthused.
“Every warehouse rack in Australia is built to be exactly one CHEP pallet wide. And so, the infrastructure in which the entirety of Australia’s supply chain has been built is actually built around the CHEP pallet.”
The size of the pallets isn’t the international standard, though. The 1165 by 1165 mm tray is sized differently to the other five ISO-sanctioned pallet dimensions used throughout the world.
“The CHEP Australia pallet came first,” pointed out Austin. “For whatever comfort that’s worth.”
CHEP also, of course, caters to the other and other pallet dimensions for Australian exporters and importers.
The company stresses, though, that it is more than a company that just makes pallets.
“We’re not a pallet business, we’re a pooling services provider,” said Austin.
“CHEP Australia is actually a portfolio of businesses. It has a range of products and serves a range of sectors, from manufacturing, chemical industrial, FMCG, automotive and the fresh produce sector.”
The range of containers and pallets CHEP provides includes wooden, plastic, display, import, export, aviation and automotive crates. Its history is bound up in pallets, but it is looking to expand its pooled bulk container and plastic containers and crates.
Measuring retail conditions
The humble blue pallet, however, has been around long enough and is so ubiquitous that CHEP has been able to create an index of retail economic activity based on the movements of these.
The Australian Food and Grocery Council CHEP Retail Index has been published every quarter since May last year. The leading index is based on tracked pallet movements from over 20,000 CHEP accounts, showing “significant correlation with the [Australian Bureau of Statistics] retail trade figure three months ahead” according to the AFGC.
Over 10 million data points are scrutinised by Deloitte Analytics, whose algorithm comes up with an expression of how things will look in the retail world three months in the future.
“And we’re able to get out, before the ABS, a very, very accurate overview of what the retail trade figures will be. It has predictive capacity a quarter ahead," said Austin (pictured below).
“If the packaging sector picks up, they’ll only be doing so because the manufacturing sector’s placed orders. The manufacturing sector will have placed orders because it’s taking a view or it’s got ultimate orders for retail sales.
“We’re getting very early signals of upswings or downturns in activity just through the physical movement of our assets.”
The pooling company is also proud of its sustainability efforts. Pooling, by its definition, does away with one-way container use by customer.
“And we’re committed to sustainability even within a business model that’s fundamentally sustainable, all of that plastic at the end is captured, re-ground, put back into new products,” said Austin of the plastic crate side of the business.
The Dandenong South service centre (its Victorian headquarters) that Manufacturers’ Monthly visits is one of many sites where pallets – manufactured from hardwood that is only just above a pulping standard – as well as containers and reusable plastic crates are washed, repaired and made fit to for use again.
The repair process itself, inherently a sustainable activity, is also impressive in terms of its automation levels.
“It’s an automated digital inspection where we have a booth there, and in there we’re using state of the art technology in terms of lasers and cameras,” said Darren Johnstone, the manager of the service centre, of the pallet repair ops.
“It scans the pallet – it’ll tell us what’s wrong with it. It will then define what needs to be repaired on that pallet. We’ve gone away from two people looking at a pallet, flipping it manually, looking at it saying ‘I need to this, I need to do that.’
“After the automated digital inspection, that then says ‘right, what’s wrong with this pallet?’ And we call it a recipe, it’s a repair recipe. And that recipe tracks with that pallet, so as the pallet moves through the plant, that recipe jumps around with it from sensor to sensor, and when it gets to the repair table, we’re just looking on what we call Smart Repair now, we’re a screen says ‘do this, do this, do this.’”
The Dandenong South centre alone handles and conditions around 4.7 million pallets each year, according to Johnstone.
A vast network
As another example of the company’s scale, as well as its coordination, CHEP’s Supply Chain Australia director David Hansen gives the example of the Brisbane floods of 2011.
“We actually lost 75 per cent of our capacity in the state of Queensland, and nationally we lost over 15 per cent of our capacity, with two service centres out of action,” remembered Hansen.
“Through having great people and a lot of focus and drive, we actually came out of this without a single known customer service failure in Brisbane… While the places were getting cleaned up, while we were re-installing machinery, making good premises etc, the broader network kicked in.”
Austin also lauded the network’s efforts. “Part of that was actually getting back to production of bottled water and back to production of foodstuffs to feed north Queensland, which had just had a cyclone as well as Brisbane itself,” he said.
To return to the first point, if the CHEP doesn’t move, neither do a lot of other things. “If a major beverage company can’t get pallets today its production line stops tomorrow,” offered Austin.
“And if its production line stops tomorrow, then a major retailer doesn’t have one of its biggest-selling items two days later.
“That’s how I try to explain to it my daughter who’s in third grade. When we go to the supermarket and everything’s there, that’s because CHEP works.”