Chaos in the Food Supply Chain Network

Several weeks ago, I had the privilege of touring the food supply chain center for a multi-billion dollar
food retailer. The facility is over 1.2 million square feet shipping over 1 million cases of food products
weekly. The management team is effective as the operation runs smoothly and efficiently 24/7, 364
days a year. They also have a very good work force that is well-trained and highly motivated. The
building is in very good shape and the working conditions were excellent with an extremely clean
operation.
Despite the overall positive condition and appearance of distribution center, there was a major problem
that totally blew me away. Although I had read about the issue many times and had listened to various
executives complain about the extra work, seeing the operation first hand smacked me in the face and
forced to conclude the following: The Food Industry is can do better than this!!
The glaring problem is pallets! White ones, Red ones, Blue ones, Cheap ones, Big ones, Small ones,
Plastic ones for inbound, plastic ones for outbound. It took the food industry 25 years to standardize on
a 48 X 40 hardwood pallet, as a common platform which significantly improved industry productivity
and performance. Now we have messed up the situation big time and it costs every company in the food
supply chain a lot of money at a time when all food companies are searching for ways to squeeze out
costs from the operation.
The Process
Most manufacturers prefer the wooden pallet pool concept because it provides a better pallet with no
pallet exchange. (Pallet exchange used to work except when the food distributors decided to hold onto
pallets because they did not want to buy any or when they ‘stuck’ the manufacturers by returning
‘broken’ wood.)
Most food distributors prefer plastic pallets because they are significantly lighter (25lbs vs. 75lbs)
1. which reduces workers compensation claims due to back injuries
2. they enable the dispatcher to schedule more product on the truck
3. they last longer making significantly more trips per life cycle.
As result, the food industry currently has two closed looped systems which are very expensive. Inbound
product is received on RED, BLUE, or WHITE wood or the iGPS plastic pallet. The pallets are placed
into the racks for storage. When the pallets are emptied, they are collected, sorted and returned to the
pallet pool facility. This means that every food distribution center in the US has multiple stacks of
pallets to be returned somewhere on the property or stashed into multiple trailers which take up dock
space. In the facility I visited, 5 dock doors and at least 5 trailers were being utilized for the pallet return
project. It cost significant manpower and equipment to complete this process.
The second closed looped system is the outbound process where the food distributors buy hundreds of
different plastic pallets which are utilized for picking/shipping products to their customers. Most of the
time, the plastic pallets are returned from the stores to the distribution center. These pallets are then
stacked in multiple locations and they require cleaning on a periodic basis. The bottom line is: Stacks
of pallets are everywhere taking up space, equipment and manpower. None of the work is productive.
Where is the Return on Investment?
Food distributors refuse to pay for inbound pallets. (Cost $10/pallet) They feel very strongly that it is
the manufacturer’s responsibility to pick up the cost of the shipping platform even though they get the
opportunity to store thousands of pallets in the distribution center for free. Distribution centers are cost
centered so everything they do should focus on reducing costs.
On the other hand, food distributors buy plastic pallets every year (Cost $25-50/pallet) to ship product to
the retail customers with no effective recordkeeping system. Thousands of plastic pallets are loaded
onto trailers every day with no accountability with the hope of being returned from the “black hole”.
(Black hole is the warehousemen’s term of endearment for the retail customer)
Who Speaks the Truth?
Upon my return from the retailer’s distribution center, I decided to learn more about pallets. The results
are confusing and complex with many questions to be answered:
1. Is plastic better than wood?: it depends on who you talk to and which group did the study
2. Is wood ‘dirtier’ than plastic?: again it depends on who you talk to and which group did the
study’
3. Is wood or plastic a fire hazard? again it depends……
4. Is plastic more sustainable than wood? again it depends…..
5. Can plastic work in racks? again it depends……
Are u confused? I am! Here’s what I do know.
The food industry needs an effective platform to ship product from source to the final point for sale
(retailer). We need a complete supply chain solution because the piece meal solutions add costs.
Representatives from every segment of food supply chain need to step up and work towards this
common goal.
The key characteristics for the solution are as follows:

 The platform needs RFID for tracking and accountability.

 The platform needs to work in all temperature zones from -20 to 100+.
 The platform needs to be rackable
 The platform needs to be lightweight, yet durable
 The platform needs to work for years with minimal maintenance
BIG Opportunity
In an era where costs and efficiencies are paramount, true collaboration of all interested parties is
required. We need to do the right thing as an industry and not what is right for an individual company.
We also need to do things right and take a visionary approach seeking to find solutions that enable all
players to share in the efficiencies to be gained. This is a multi-million $$ issue that needs attention
now. We need to stop the chaos that currently plagues the entire food supply chain network!