SEPTEMBER 2021
Plastic pallet pilot
“Our teams collaborated, tested, and learned together…,” Nador said. “That real-life Costco testing and our own pilot test drive data gives us the confidence that we are taking a durable and sustainable product to the market.”
The test has included customers from a wide range of product categories, involving customers who account for roughly 30% of total volume in the Costco supply chain, and including some of Costco’s largest vendors.
“The value of the plastic pallet is being recognized early on through our achievement of pricing premiums in the pilot and the positive customer feedback on the pallet’s performance,” Nador said. She noted that control will remain a key focus throughout the duration of the trial. “As we know controls to prevent loss and protect our assets are the most important variable for long-term success.
Pallet control is strengthened by “strong language clauses” in contracts, a digital operating model and proactive engagement across an entire customer base, supported by customer audits. Based on feedback and data, CHEP intends to make a decision on whether to commercialize a plastic pallet for Costco in the second half of fiscal 2022.
Joaquin Gil, Brambles Senior Vice President of Financial Planning & Analysis, noted that, given its experience, CHEP has a very clear understanding of the key variables that drive the economics of plastic pallets. “It is important to note the loss rate in anything but low loss rate lanes would require a price premium that would make plastic pallets commercially unviable.
“This is why we believe there are currently limited use cases where high-cost plastic pallets are commercially feasible for other North American retailer supply chains,” he said, noting the importance of RFID in the Costco pilot, and the rapid product cycle time, which can again offset some of the price premium required.
How the decision will be made
Gill stated that the decision on whether to proceed with the investment in Costco plastic pallet will be based on three decision criteria: expected financial returns at full implementation,
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“...the loss rate in anything but low loss rate lanes would require a price premium that would make plastic pallets commercially unviable."