How the humble pallet became indispensable to the global supply chain
The humble pallet is not something you normally notice. It’s just there, doing its simple job of moving all kinds of things from A to B, quietly efficient, no complaints, almost invisible. No big deal, right! Wrong!
The humble pallet has evolved, it has quietly become indispensable to distribution networks around the world and in the hands of CHEP, has become the invisible backbone of the global supply chain.
Pallets are perfectly designed to store and move a wide range of goods, and wood is the perfect material for making pallets as it is light, strong, recyclable, biodegradable and derived from a renewable resource.
To support its timber pallet pooling business model, CHEP SA has invested in standing pine plantations in KZN. These farms, with a total of 3 400 ha planted mainly to pine, contribute a significant portion of CHEP SA’s annual timber requirements.
CHEP SA, a member of the international Brambles group, has developed a unique pooling system based on the circular economy, whereby CHEP pallets are shared and reused (not sold) by leading players within the FMCG and agricultural supply chains who use them to distribute their goods to retail and wholesale outlets around the country.
Once these products have been delivered, the pallets are returned to the nearest CHEP service centre where they are inspected, repaired and pooled, ready to be rented out to the next customer.
This ‘circular’ business model has multiple benefits – for CHEP and for its customers.
1. Pallets are re-used again and again, reducing waste from the supply chain.
2. Clients can concentrate on their core business, and don’t have to buy, track, recover and repair their own pallets, which can be costly and time consuming. They only pay rental for pallets that they are currently using. As soon as the pallet is delivered to the retailer, the retailer takes over responsibility for renting and then returning the pallet to CHEP.
3. Pallet ‘pooling’ solves the problem of ensuring there are sufficient pallets to meet the needs of big FMCG companies. Demand for their products fluctuates through the year, and getting sufficient pallets in the right locations at the right time can become a logistical nightmare. CHEP SA’s pooling system coupled with its network of service centres around the country (more than 64, at last count) allows customers to simply order pallets when and where they need them.
4. Pallet quality: ownership of the pallets remains with CHEP throughout its life, so there is a massive incentive to build strong, long lasting pallets that can be repaired again and again. The customer’s distribution chain runs smoother with good quality pallets, and so does CHEP’s business – a classic win-win situation.
Shortage of timber
The motivation for CHEP South Africa to acquire their own timber farms has its origin in the shortage of supply of suitable FSC pine timber, both current and future. This is due to a number of factors including government policies which have resulted in a reduction in plantable areas, the impact of wildfires, pests and diseases, and the conversion of pine to short rotation Eucalyptus species utilised in the pulp, paper and cellulose markets.
This forced CHEP in the early 2000s to import suitable timber components from Brazil to supplement local supplies and meet the growing demand for pallet wood in South Africa. But the long lead times and cost were becoming prohibitive. Thus the decision was made to purchase their own timber farms which would go some way to securing its supply of raw material.
Between 2006 and 2014, CHEP SA acquired six timber farms in KZN with 1 900 ha planted to pine. Then in 2015 they purchased another four timber farms from PG Bison, as well as the Weatherboard sawmill near Creighton, taking the planted area to 3 400 ha. All of the farms are located within 100 kms of the sawmill, which has been upgraded and modified to meet CHEP’s needs.
The sawmill manufactures 1 800 pallets a day, utilising 110 cubic metres of sawn boards, which are supplied to CHEP service centres throughout southern Africa.
CHEP’s forestry operations have been tailored to meet their specific needs under the guidance of Forestry and Milling Director, Jed Krige, and Forestry Manager Gordon McKenzie. The farms are all FSC certified, as customers want assurance that the timber used to make the pallets they rent is derived from responsibly managed plantations.
Some of the farms had some existing Eucalyptus compartments, which will be converted to pine after felling and existing supply contracts have been fulfilled. The species planted on CHEP farms are P. patula, and P. eliottii, at 3 x 3 metre espacement, giving a total of 1 111 stems per ha.
Pruning is done at four years (up to 1.5 metres), eight years (3 metres) and 12 years (5 metres), to improve the quality of timber at harvesting at 22 years.
Highly selective thinning of weak trees with poor form is done during the growing period to achieve an estimated stem count of around 850 SPH at the end of the rotation. This regime yields a mix of B and C class logs most suitable for pallet manufacture.
Land prep, planting, maintenance and harvesting operations are outsourced to contractors, providing jobs for 100 – 150 people sourced mainly from neighbouring communities. Planting is by hand, while the harvesting is increasingly mechanised.
An average 22-year-old pine tree yields sufficient roundwood to build 6-7 CHEP pallets, which are carefully designed and manufactured to maximise durability and recyclability over the life of the pallet.
The most dense part of the log (sapwood) is used to manufacture the leading edge boards that the forklift impacts during loading/offloading. The nails are hammered into place in a deliberate zig-zag pattern to maximise strength.
In addition to pallets, CHEP supplies a range of additional distribution platforms to the FMCG, Agriculture and Automotive sectors including re-usable plastic crates, bins and other specialised containers.
• One 22-year-old pine tree yields sufficient wood to manufacture 6-7 CHEP pallets.
• Pallets were developed in the 1920s, initially as flat platforms. The spacers and second platform were added to facilitate handling with forklifts.
• CHEP is an acronym for Commonwealth Handling Equipment Pool, an Australian government initiative to make handling and packaging platforms utilising the wooden packing crates used to transport arms and ammunition that were left over from the 2nd world war. This concept was later turned into a global business by Australian entrepreneur, Walter Bramble.
• Brambles is a supply-chain and logistics solution provider, operating in more than 60 countries, primarily through the CHEP brand.
• CHEP SA is the first CHEP operation anywhere in the world to purchase its own timber farms.
*First published in SA Forestry magazine, September 2019
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