SEPTEMBER 2021
trendsetter in transitioning from pallet exchange to rental, and then from stringer pallets to block style units.
Moving away from pallet exchange addressed safety, not to mention product and equipment damage, while the move to block pallets drove efficiency, allowing warehouse material handlers to move more unit loads at a time. Now it is looking to plastic to further improve supply chain efficiencies and member value. Naturally, investors are interested in what a shift to plastic would look like for a pooler that is so highly invested in wood pallets and the infrastructure to support them.
Costco full pallet supply chain is different than others
Nador emphasized that Costco has a “unique, unique supply chain.” Rather than being a conventional FMCG supply chain that involves a case pick at the distribution center from the manufacturer pallet to another pallet, Costco employs a full pallet cross-dock model. Full pallets from the manufacturer are cross-docked at a Costco depot for delivery to a retail store so that goods stay on the same
pallet from manufacturer to retail location.
The cross-dock depot is empty at the start of the day, and after all of the loads are cross-docked, the depot finishes the day empty as well. “There is no long-term storage or racking,” she said. Costco has also invested in outbound RFID readers. The speed and control of the Costco supply chain “give us enough confidence to have engaged in this possess…so far, and to advance into this pilot validation phase,” she said.
The plastic pallet pooling model
The proposed model would see a majority of plastic pallets repositioned directly from Costco to product manufacturers, thus avoiding the freight and labor involved in sending all empty pallets back to the CHEP depot for processing. The company estimates that only 25% of pallets would be returned to the depot, mainly to support pallet network rebalancing. The expected damage rate is in the “single digits.” This model is enabled by Costco’s agreement to inspect and sort the CHEP pallets at their depots.
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