by Mike Baker, Executive Relationship Manager
Finding hidden costs in your operation
A pallet is much more than simply a device for moving goods. It’s the backbone of shipping and logistics, providing a base for transporting goods efficiently and safely. It’s been called the unsung hero of the supply chain. However, in the demanding world of warehouses, distribution centers and retail and commercial operations, pallets often go unnoticed. That’s until one fails!
The sight of a broken pallet usually sparks an immediate reaction: Set it aside! No, replace it! The fact is that the true cost of a broken pallet goes far beyond the cost of repairing or replacing it. Hidden beneath the surface lies an intricate web of risks, expenses and distractions that can eat away at efficiency and even profitability.
This blog will attempt to peel away the layers of a broken pallet, exposing hidden risks that lie in wait within your operation and then investigate strategies to diminish these threats.
Pallets 101: A pallet’s anatomy
Before moving forward, let’s first agree on what a pallet is.
At its core, a pallet is constructed to carry weight, guarantee safe storage and simplify the efficient movement of goods. Most pallets are constructed from wood, in addition to plastic or other materials and are designed to withstand sizable loads.
However, its repetitive use, plus environmental factors and manufacturing inconsistencies, can all play a part in pallet failure.
So, what exactly causes pallet failure?
There are several factors that play a part in pallet failure. Here are the usual suspects:
- Overloading: Each wooden pallet is constructed to support a precise weight and surpassing this limit can cause the pallet to crack, splinter or even break down. Moreover, when a pallet is overloaded, the extra weight puts excessive strain on it, leading to structural weak spots.
- Unbalanced weight limits: Similarly, items placed in the wrong order of heaviness, or when too many hefty items are on one side, it could not only damage the pallet and its content, but it might also lead to further harm to the inventory or surroundings.
- Environmental impact: Wooden pallets are especially prone to environmental issues. Moisture can result in warping and rotting, while significant fluctuations in temperature can result in expansion and contraction that weaken the wood’s assembly.
- Manufacturing defects: Design flaws or material shortcomings can predispose pallets to premature failure.
- Inappropriate handling and forklift damage: Inappropriate handling, especially with forklifts, is another well-known culprit behind pallet damage. When workers use forklifts negligently, they can pierce the wood, dislocate nails or cause the pallets to breakdown.
- Age: Truth is, no matter how careful you are with pallets, you can’t stop the effects of Father Time. Even the most dependable pallets are exposed to rough handling, hefty loads and the elements over time and it will begin to impact the integrity of those pallets.
What are the direct costs of a broken pallet?
- The obvious cost is replacing the pallet itself. While the price per unit may look inconsequential, these charges can grow rapidly in large-scale operations.
- Pallets ensure the safe and efficient movement of the items they support. When broken, however, they are unable to perform their job by keeping everything secure during transit. This not only increases the likelihood that the goods might be damaged but also leads to would-be safety concerns for employees handling the pallets.
- Damaged pallets can also result in damaged goods. Clearly, the items on the pallet are in danger of being unusable if the pallet breaks or falls to pieces. This means added waste that must be handled and discarded properly. Plus, there are financial losses because of any wasted items.
- If a pallet breaks during loading, unloading or transport, operations must be interrupted to tackle the issue, leading to more downtime.
The hidden costs of a damaged pallet
There you have it. We’ve looked at the upfront costs of a damaged pallet. However, there are hidden costs linked to the damaged pallet that companies frequently fail to notice. Understanding such hidden costs can help companies make more enlightened decisions and possibly save a significant amount of money over time.
- Perhaps the most sinister risk is to worker safety. Damaged or badly maintained wooden pallets can present safety risks to workers. Splinters, razor-sharp edges, exposed nails and rickety pallets can produce workplace injuries, leading to medical expenses, lost workdays, workers’ compensation claims, a drop in productivity and regulatory scrutiny.
- Speaking of damaged pallets and productivity, dealing with damaged products and their subsequent return can be a genuine hit to a firm’s productivity. Employees must spend hours filling out claims, chasing return orders, repackaging and shipping substitutions, etc. In most instances, dealing with product damage and returns isn’t the principal job of the employees given these duties.
- A broken pallet can have a ripple effect. A damaged load might be behind schedule or turned away by downstream participants. Where just-in-time is applied, even a small interruption can cascade into missed deadlines, a sudden halt in production and dissatisfied customers further down the supply chain.
- Downtime can deal a shocking blow to your company’s bottom line, affecting production, sales, delivery and more. Think about the time spent separating usable from unusable pallets, dealing with product damage due to defective pallets or handling interruptions in delivery schedules thanks to pallet shortages.
- Taking delivery of damaged products, and the delay and annoyances it brings with it, may eventually shape your customers’ buying decisions. This is particularly true in business-to-business dealings where your products are items that another business requires for its own production. Receiving a damaged shipment could temporarily shut down their production lines and can destroy your relationship with them.
- How repeatedly can you deliver damaged goods to your customers before they begin to harm your brand? No one wants to purchase from someone that doesn’t sufficiently protect their products, and it doesn’t take long for word to get out and injure your reputation.
- Many industries are governed by precise safety and quality protocols. Frequent pallet failures and related accidents can give rise to fines, legal action and a boost in insurance premiums.
Companies that track only the direct costs of pallet damage may fail to notice the effect of those hidden costs, which can run into thousands or even millions of dollars, dependent upon the size of operations.
Mitigating hidden costs
To help mitigate these hidden costs, companies take the following strategies into consideration.
- Invest in quality pallets: Yes, high-quality pallets may have a greater upfront cost but can reduce maintenance, repair, and replacement costs over time. Says one pallet company executive, “Purchasing low-quality tires for your car can increase your gas costs, put greater strain on your brakes, and make an accident more likely. Both tires and pallets determine how efficiently and safely you, or your shipments, arrive at your destination.
- Work with a reputable pallet supplier: Working with the right supplier all but guarantees you’re receiving high-quality, durable pallets that meet or exceed every industry standard. They do so by offering constant quality control and material sourcing and providing repair and recycling programs to cut costs.
- Initiate a pallet recycling program: In place of transporting used or broken pallets to the local landfill, companies can decide to recycle them. By recycling, you cut down on waste and recapture a bit of the value from those materials. If managed properly, these pallets could be an asset rather than a liability.
- Educate employees on proper handling and storage: Pallet mishandling is a leading cause of premature pallet disposal. Training employees to deal with pallets appropriately can help avoid needless damage. In addition, educating your employees on how to correctly store, stack and handle pallets can lessen the number of pallets that have to be tossed out prematurely, saving you money in the long run.
- Routine inspections: Before shipping, always inspect your palletized pallets to confirm that everything is packed and secured appropriately. Correct palletization makes sure of both load and worker safety, since broken pallets can lead to further damage and injury. It’s also a great idea to take photos of each pallet on the scale. This helps protect shippers from possible overweight charges as well as providing visual proof for damage inspections.
- Pallet flow optimization: Consider pallets as an integral part of your inventory management system. Do so by assigning explicit areas for incoming, outgoing and repair-needed pallets; designing clear lanes for pallet movement; and scheduling routine removal of broken pallets.
- Use the right pallet for the right product: Employing the right pallet for the job may seem like a “no-brainer.” But you’d be astonished at how many companies get this one wrong. When you use pallets, it’s essential to be sure the product isn’t too big for the pallet, or the pallet isn’t too big for the product. Also, make sure the pallet is meant to deal with the weight of the product.
- Source from sustainable suppliers: Sourcing pallets from sustainable suppliers provides several key benefits, including a reduction in your company’s carbon footprint, cutting back on the needless waste in landfills and lowering the requirement for newly cut timber.
Case in Point
Think about a distribution center that experienced several product recalls because of contamination that stemmed from poor quality wooden pallets. The recalls, plus reimbursement claims and reputational harm, far outweighed the cost of just upgrading to higher-grade pallets.
Final thoughts
Okay, we’ve seen that what seems like a minor issue, a broken pallet, can be a sign of deep-seated operational flaws. We’ve discovered that the true cost is not simply financial, but includes safety, reputation and long-term sustainability. By recognizing the hidden risks and committing to proactive prevention, companies can convert pallets from a liability into a positive feature of operational excellence.
Questions? Contact the pallet professionals at Ongweoweh.