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ASHOK INDUSTRIES

We Make the Best Pallets

How to Choose the right pallet

 

The pallet is often a neglected product. Buyers and logistics professionals spend a lot of time on researching racking and warehouses, but seldom give attention to the choice of pallets.

In this article we will see how to select the right Pallet for your operations.

2012.11.11-Good-Better-Best-choices

Factors to be considered for choosing the right pallet

  • Load Carrying Capacity
    • Static
    • Dynamic
  • Material
    • Wooden
    • Steel
    • Plastic
    • Combination
  • Industry and Usage
    • Pharmaceutical
    • FMCG
    • Engineering
    • Automobile
    • Shipping & Logistics
    • Export
  • Storage
    • Floor
    • Racking System
    • Stackable
  • Commercial Implications
    • Cost
    • Rent / Buy
    • Longivity
    • Resale Value

Let us now look at all the points in more detail.

Load Carrying Capacity

The weight of the goods to be kept on the pallet is the first criterion. Typically, pallets can take a static load of 1 ton (1000 Kg) and a dynamic load of 700 Kgs.

Static Load means when the pallet is kept on the floor. It is not moved by a Hand pallet truck, stacker or forklift in that condition. If pallets are kept one above the other, the load on the lowest pallet is to be considered as the required load carrying capacity.

Static Load

Dynamic load means, the pallet is able to take the load while being moved on a Material handling equipment.

Dynamic Load

Racking Load is the load that a pallet carries when kept on a rack.

Racking Load

It is important to remember here that all load calculations are based on Uniformly distributed load structure. Any point load or impact load is an extreme factor for a pallet and will cause damage to the pallet.


Material

Wood, Steel, Plastic and PVC are the four major pallet materials. Nowadays, people also make Paper-mach honeycomb pallets. There are also other composites that are being used at certain places. We will see the benefits and demerits for each type of material.

Wooden Pallets

Wood is a natural product. It is widely used as shipment pallets as well as storage pallets. The benefits of wooden pallets are:

  1. Cheap, yet robust and strong
  2. Easily available
  3. Lot of local suppliers
  4. Accepted world wide
  5. Plank replacement can give long life
  6. Heat Treatment and chemical treatment reduces chances of termite and pest attack
  7. Frictional wood surface prevents sliding.

Good wooden Pallets

Demerits of wooden Pallet

  1. Threat to environment
  2. Unhygenic
  3. Pallet finish is an issue with local, unprofessional manufacturers
  4. Plank Breakage
  5. Low longevity
  6. Wood pallets have shown to be appropriate for microbial growth. This has made their usage fairly suspicious for food consisting of purposes. It has been explored that the these pallets are home to germs called E. coli as well as salmonella. These bacteria can cause a fantastic damage to health of lots of people that make use of that food had in these pallets. Wood pallets are prone to create fungi if maintained moist for longer duration. So they should be maintained completely dry for longer life. (Source : http://www.the greenbook.com)
  7. Difficult to clean
  8. Unsuitable for wet climates and Pharmaceutical and food industry.

Breakage wooden pallet Breakage of Planks is a problem with wooden Pallets

Fungus wooden pallet Growth of fungus in moist environments

Wood defects

Wood being a natural product, defects like Warpage, Shrinkage and Knots will be there.

Steel Pallets

Steel pallets give a lot of benefits over wooden and plastic pallets. Over the years, Steel pallets are gaining in popularity due to the following reasons:

  1. Durability: Steel Pallets last over 10 years.
  2. Resale Value: Steel has a high resale value of 50% of the original cost even after years
  3. Strength : Steel pallets are strong and do not buckle under load. They are good for sudden impact loads too.
  4. Clean and Hygienic: Powder coated Steel Structures are anti-rusting and hence are clean and hygienic.
  5. Customization: It is easy to customize steel pallets to suit a variety of needs, like stacking, Caging etc, as shown in the figures below.

cage pallet 2

Disadvantages:

  1. Cost: Steel Pallets are costlier than wooden pallets. However, they are equivalent in cost to plastic pallets.
  2. Self weight: The self weight of the pallet is higher than a plastic pallet , hence adding to shipment cost. For warehouse pallet,however this is not a disadvantage.
  3. Lack of good suppliers in local area: Being a specialized job, not many manufacturers are available to supply steel pallets.

Plastic Pallets

Plastic Pallets are widely used in industry.  Some of the benefits of Plastic pallets are

  1. High loading capacity and anti-slip surface
  2. Low weight – from 5.5 kg to 15 Kg
  3. Resistant against humidity and corrosion
  4. No interruption in delivery due to timber pallet regulations and many suppliers.
  5. More than 3 years life.
  6. Resistant to chemicals such as acids and alkali
  7. Safe to handle; no screws, nails, splinters or chipping
  8. Usable in all climate conditions
  9. Can be easily cleaned (hot washed, steam cleaned or chemically sanitized) to remove any bacteria

export-cargo-pallets

Demerits:

  1. Costlier than wooden and steel pallet
  2. Lesser life than steel pallet
  3. Customization difficult for small quantity
  4. Standard Sizes available.
  5. Once broken , cannot be repaired.
  6. Resale Value negligible.
  7. Generally not suitable for Rack loading (Injection Moulded Pallets)

Renting Pallets? Burning Cash?

The humble pallet has become an inevitable link in modern supply chains. Vertical storage and unit load movement are the two biggest tangible assets that makes the pallet an indispensable innovation.

In India, post the taxation reforms, larger and efficient warehouses will be the main cost competitive edge that no company can ignore. It will not be an overstatement to say that in the next 5-7 years, everything will be palletized.

Storing and moving goods on Pallets saves over 60% of the costs involved in handling. The primary reason being that you can move about a ton of goods in one trip, rather than a maximum of 20 kgs if you move material manually.

If you are an user of pallets, you would probably own your pallets or you would have hired it from a Pallet pooling company like CHEP, Peco, Loscam, Leap, LPR and the likes. In this article we will see how buying pallets is a far superior option and how renting pallets is akin to burning cash. Let us see how.

When you hire pallets, they call it pooling and renting too, you typically pay Rs. 1.5 per day + Taxes per pallet. So we will see in what follows, that over a 5 year period, you would have incurred 4 times the cost than you would have otherwise had if you had bought the pallets!

BUY Vs RENT CALCULATION

Let us say you need 1000 pallets.

  • Cost of 1000 pallets @Rs. 800 per pallet : Rs. 8 Lacs. Life of pallet with in-house maintenance : 5 Years.
  • Cost of Renting 1000 pallets for 5 years: @ Rs. 1.5 per Pallet 1000 X 1.5 X 365 X 5 = Rs. 27.37 Lacs
  • After 5 years, in case you bought the pallets, you will be able to get at least a couple of lacks back by selling the old pallets. In case you rented, you have zero assets.
  • So the total cost of buying 1000 pallets is Rs. 6 Lacs and the total cost of renting pallets is 27 Lacs. GREATER BY OVER 4 TIMES.

If this is not enough, let us look at some other points.

  1. Rental expense hurts company's profitability, and therefore the valuations. The more your operating costs, the lower is your PBT. Lower earnings = lower return on net worth. Buying however strengthens the balance sheet.
  2. You are dependent on the pooling company for repair , maintenance and supplies.
  3. All the pooling companies have lock-in periods and minimum contract quantity, thereby not giving you the advantage of shorter duration and small quantity.
  4. You might be thinking, in that case, the pooling companies are earning in crores, at your expense. Nor really, because for them to manage a pool of a million pallets is a very big cost.
  • Transportation of damaged pallets to their warehouses and back to you involves cost of handling , storage , labor and movement. All these costs are incurred by the pooling company. Therefore, the fact is that the overall cost of the pooling model is higher, so every one is adding more cost into the system. You are paying for the additional cost, just to offset an initial upfront investment.
  • The stocks that you do not want to carry are carried by the pooling company. That cost is incurred by them, and subsequently passed to you.
  • The pooling companies are spending a lot of money in tracking their complete pool of pallets, which is unnecessary cost as far as you are concerned.

5. There may be arguments and disputes regarding the cause of damages on pallets. The cause of damage and therefore repairs are the primary costs for pooling companies and both them and you will try to save on that. This creates lot of disturbances in the work environment.

6. Often, costs can be greater than just the quoted monthly fee for a comprehensive service of rental, maintenance and tracking.

Why are so many Companies renting pallets?

Some of the reasons why big companies end up renting pallets and loosing lacks of Rupees :

  • They do not want to take the liability of selecting the right pallet.
  • They generally have a short term view of the total picture, because, they do not want to mess up with existing practices. Many multinationals have worldwide policies, that are not possible to change at local levels.
  • They have got used to the way of functioning and even top management has "rationalized" the cost into their P&L.
  • Adequate research is not warranted by people towards understating Pallets, which remains an unimportant product till it becomes a burning issue.
  • The statement that " Pooling companies don't rent pallets, they manage the supply chain" is a trap that many companies fall into, ultimately paying much more.
Summarizing the article, we can only say that if pallet is a regularly used item for you, it does not make sense to hire them.