Making Pallets a Supply Chain Asset Instead of an Unrecoverable Cost

June 20, 2011
Lesley Kristeff, iGPS LLC

Pharmaceutical Commerce, Pharmaceutical Commerce - May/June 2011,

Recent product contamination incidents are highlighting the importance of having reliably clean pallets for warehousing and shipping

The typical supply chain process in pharmaceuticals goes something like this:

• Ingredients/materials/packaging from suppliers are shipped into a production facility on wood pallets

• The goods are removed from the pallets to enter the manufacturing process, then often wind up on plastic or metal pallets as they become packaged products

• The packaged products are then loaded back onto wood pallets

• The wood pallets are shipped out, typically never to be seen again.

Changing from wood to plastic or metal back to wood obviously adds time, labor and expense to the supply chain. Not only is it more labor-intensive, the manufacturer has to invest in two separate assets: wood pallets and plastic or metal pallets. One asset—the one-way wood pallets the finished products ship on—is an unrecoverable expense. However, Current Good Manufacturing Practice (cGMP) dictates that the presence of wood—especially chemically treated wood—should be minimized inside a pharmaceutical manufacturing facility. Therefore, using wood pallets upstream is problematic. Most major pharmaceutical companies, when they use wood pallets, specify new or once-through pallets to avoid risks of contamination from pallets that were used elsewhere.

If a facility is audited, the auditing party (FDA, USDA, 3rd party) utilizes a process called HACCP, Hazard Analysis & Critical Control Points. During the audit process, one of the many factors HACCP looks for is that manufacturing equipment is certified by NSF International. The iGPS pallet is the only pallet (plastic or wood) that has NSF Food Equipment certification. This stamp of approval on any manufacturing equipment assists the auditing party in making a decision on cGMP compliance.

Plastic pallet pooling

Within the past few years, an alternative model has become available to take steps out of the process and enable predictive cost-control of pallets within the supply chain. By using rented pallets via a plastic pallet pooling network, the expenses of purchasing, maintaining and replacing pallets is reduced. The pallet pooling model allows pharmaceutical companies to utilize a plastic pallet throughout their supply chain, not only eliminating the costs and inefficiencies detailed above, but eliminating the many risks of potentially contaminated wood. (The wood pallet contamination experienced by Johnson & Johnson during 2010 is a case in point.) Here’s how it works:

• Clean plastic pallets (truckload quantities) are dropped off at the pharmaceutical manufacturing facility

• The pallets migrate downstream through the company’s internal network

• The same pallets carry the finished product to the final customer

• Once the pallets have been emptied, they are picked up by the pooling company.

The pharmaceutical manufacturer relinquishes all responsibility for the pallet upon shipment to its customer. The company only pays for the time the pallet is within its possession. The pooling company works with the pharmaceutical company’s end customers to recover the pallets and put them back into service in their network.

This type of program allows the pharmaceutical customer to utilize a plastic pallet and all its benefits for a price competitive with, if not lower than, its current pallet spend. The rental program alleviates the headaches of pallet management: managing an internal pool of cGMP compliant pallets and constantly purchasing one-way wood pallets.

The typical price of a heat-treated, white wood pallet used in one-way shipping is $10-$15. The cost of a high-quality plastic pallet utilized in the manufacturing process is approximately $75-$100. The rental cost of a pooled plastic pallet moving all the way through the system from manufacturing to final destination is on average about $10 per trip—the same as, or even less than, the one-way wooden pallet. This means a savings of at least $75 per pallet through the elimination of company-owned plastic pallets in the manufacturing process. More operational savings of over $1.00 per pallet load are realized through the superior characteristics of the plastic pallet, such as lighter weight leading to less fuel consumption.

Health and safety

Perhaps the most important benefit of plastic pooled pallets in a pharmaceutical setting is removing potential product contamination. Wood is often treated with toxic chemicals to repel pests and fungus that will nest in untreated wood. Wood containing these chemicals has found its way into wood pallets. In addition, wood is inherently absorptive, and liquids can easily seep into wood, leading to the growth of pathogens such as salmonella, E. coli and Listeria.

Plastic pallets require no treatment for pests or fungus, and there are no cross-border shipping issues with plastic pallets as there are with wood. Some wood pallet suppliers have raised the concern of the use of flame retardants in plastic pallets. However, these retardants are integrated into the molecular matrix of the plastic pallet and are not susceptible to migration from that matrix.

Track and trace

My company, Intelligent Global Pooling Systems (iGPS), has developed a proprietary electronic tracking technology that is embedded into our plastic pallets. Each pallet carries a unique serial number that can be read in various ways. To maximize the efficiency of the rental program, these electronically tagged pallets are integrated into the customer’s warehouse management system.

The product “license plate” can then be tied with the pallet’s unique identification number, creating a unitized load. This establishes a framework for tracking and tracing loads throughout the supply chain. The tracking technology enables companies to reduce lost loads, theft and enables swift and accurate recalls when necessary. There can be complete accountability throughout the chain.

There are a few instances where one-way pallet shipping may still make sense, such as shipping to countries that do not participate in our pooling program, although more countries are being including as time goes on. However, particularly for pharmaceuticals and other consumer goods where health and safety are key concerns, a plastic pallet rental service is a safer, more economical and more efficient option. PC

ABOUT THE AUTHOR

Lesley Kristeff is National Sales Manager, Pharmaceuticals and Life Sciences for Intelligent Global Pooling Systems (iGPS Company, LLC; www.igps.net), operator of the world’s first pallet rental service to provide lightweight, 100% recyclable plastic pallets with embedded track-and-trace technology. For more information, contact Ms. Kristeff at lkristeff@igps.net.