Costco’s commitment to product and operational requirements, and finally, the acceptance of plastic pallets, including CHEP commercial terms and conditions, by Costco suppliers. The latter, according to Gil, includes acceptance of premium pricing to wood and compensation charges (for loss).
If CHEP rolls out plastic pallets to Costco, at an estimated cost between $450 and $700 million, then existing wood pallets used to support Costco suppliers would be gradually reallocated to non-Costco supply chains over the course of the three-year conversion, saving the company roughly $150 to $180 million in wood pallet purchases.
But CHEP emphasizes that it will only proceed if a plastic pallet launch for Costco makes financial sense. “We are proud of our long and mutually successful partnership with Costco,” said Graham Chipchase, Brambles CEO. “But while we strive to meet our customers’ needs, it’s also important that we continue with a disciplined approach to capital allocation.
“The results from the pilot will provide key inputs to our decision, but this will be in the second half of fiscal 22.”
In the question period, Chipchase emphasized that CHEP didn’t intend to succumb to downward price pressure or a price war for accounts. “We wouldn’t intend this to be a competitive bid position on pricing,” he concluded. “We are going in with what makes sense for us. And if that doesn’t make sense for us, we won’t be participating.”
“We wouldn't intend this to be a competitive bid position on pricing. We are going in with what made sense for us. And if that doesn’t make sense for us, we won’t be participating.”
24 WESTERN PALLET
“We wouldn't intend this to be a competitive bid position on pricing. We are going in with what made sense for us. And if that doesn’t make sense for us, we won’t be participating.”