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Strategic design + Development Final Report 21 March 2002
Strategic design + Development
Final Report
21 March 2002

Review of domestic and international pallet standards and ongoing operational and cost implications to Australian Domestic and International Logistics

Creating new horizons for your value chain

Suite 105, 51 Rawson St, Epping, Australia P.O. Box 1075 Epping NSW 1710 Telephone +61 (0)2 9868 2590 Facsimile +61 (0)2 9868 3517 ABN 42 362 863 808

Strategic design + Development Domestic and International pallet standards Operational and cost implications

Strategic design + Development

Domestic and International pallet standards Operational and cost implications

TABLE OF CONTENTS

1. INTRODUCTION

6

1.1

Some History

7

2. CONCLUSIONS

8

3. RECOMMENDATIONS

10

4. EXECUTIVE SUMMARY

11

5. SYNOPSIS OF PREVIOUS WORK

16

5.1 GISCC - The Australian Pallet Study

16

5.2 Efficient Unit Load study by A.T. Kearney

17

5.3 Efficient Consumer Response (ECR) : a survey of the Australian grocery industry

18

5.4 ECR Pallet Implementation Project: Apaper provided ECR Asia (Singapore)

19

 

5.5 Conclusions

19

6. CONCEPTUAL FRAMEWORK

20

 

6.1 Preamble

20

6.2 Supply Chain Typology

22

6.3 Changes in market mix

24

6.4 Study components

25

 

6.5 Conclusions

26

7. SYNOPSIS OF SURVEY OUTCOMES

28

 

7.1 Respondents

28

7.2 Summary of Interviews

29

 

7.3 Conclusions

29

8. MARKET CONTEXT

30

8.1 Market Framework

31

8.2 Manufactured Goods

31

8.3 Agricultural Goods

33

 

8.4 Retail Markets

34

8.5 Export and import trade

35

8.6 Value of Market Segments

39

 

8.7 Conclusions

41

9. AUSTRALIA’S LOGISTICS TASK

42

9.1 The task in 2001

42

9.2 Domestic pallet statistics

47

Strategic design + Development Domestic and International pallet standards Operational and cost implications

Strategic design + Development

Domestic and International pallet standards Operational and cost implications

9.3 Growth forecasts

48

9.4 Transport indicators

48

9.5 The market mix of the logistics task

49

9.6 The task in 2020

50

9.7 Implication of the future task

52

9.8 Conclusions

53

10. PALLET USAGE AND INTERNATIONAL TRADE

55

10.1 Import-oriented containers

56

10.2 Export-oriented containers

56

10.3 Conclusions

57

11. OPERATIONAL IMPLICATIONS

58

11.1 Arguments to retain 1165 2 pallet

58

11.2 Argument to adopt ISO pallet

59

11.3 Storage issues

59

11.4 Pallet and order make-up

60

11.5 Vehicle interface

61

11.6 Container loading

63

11.7 Conclusions

65

12. FINANCIAL ANALYSIS

66

12.1 Framework

66

12.2 Cost Elements

66

12.3 Discounted cash flow and NPV assessments

68

12.4 Conclusions

69

13. APPENDICES

70

14. PUBLICATIONS AND RELATED ARTICLES

76

14.1 ECR Standard Pallet Implementation Project

77

14.2 Efficient Unit Loads by A.T. Kearney

85

14.3 Efficient consumer response (ECR): a survey of the Australian grocery industry

88

Strategic design + Development Domestic and International pallet standards Operational and cost implications

Strategic design + Development

Domestic and International pallet standards Operational and cost implications

SUMMARY OF FIGURES

Figure 5-1 Composition of capital cost elements identified within the GISCC report

17

Figure 6-1 Conceptual framework linking the purpose of the pallet to the prevailing market demands and product attributes

20

Figure 6-2 A Supply Chain Typology outlining influences on Australia's logistics processes

22

Figure 6-3 Transport and storage output and gross domestic product index

24

Figure 6-4 Key components of logic within the study

25

Figure 8-1 Market structure delineating key segments within supply and demand cycles

31

Figure 8-2 Subdivision (by value) of Australian manufacturing (including imports and exports) by unitisation class

32

Figure 8-3 Subdivision of Retail market within Australia

34

Figure 8-4 Value of the major Market Segments for unitised goods within the Australian market

39

Figure 9-1 Apportionment of container flows as full and empty imports and exports in 2000

44

Figure 9-2 5 Ports volume of container flows in 2000

44

Figure 9-3 Supply chain configuration incorporating road, rail and sea freight movements on unitised non-bulk products

46

Figure 9-4 Transport and Storage output and Gross Domestic Product

48

Figure 9-5 Trend analysis for container throughput for the five major ports

48

Figure 9-6 Consumer (Grocery and food) - Market value estimates based on growth forecasts

51

Figure 9-7 Consumer (Non-Grocery and household) - Market value estimates based on growth forecasts

51

Figure 9-8 Industrial/Other - Market value estimates based on growth forecasts

51

Figure 9-9 Totals (All market segments) - Market value estimates based on growth forecasts

51

Figure 9-10 Forecast trade and consumption comparisons by market sector and total

52

Figure 11-1 Various combinations for trailer length and pallet size

61

Figure 11-2 Trailer utilisation, showing under-utilised capacity

63

Figure 11-3 Demonstrates the difference in loading/unloading techniques

64

Strategic design + Development Domestic and International pallet standards Operational and cost implications

Strategic design + Development

Domestic and International pallet standards Operational and cost implications

SUMMARY OF TABLES

Table 4-1 Growth rates and value by market segment forecast for 2010 and 2020

14

Table 4-2 Container movements by pallet standard

14

Table 4-3 Matrix for operational decision criteria

15

Table 6-1 Assessment of growth scenarios based on alternative task apportionment and predicted growth forecasts

24

Table 7-1 Summary of key survey participants

28

Table 8-1 Australian Market for Manufactured Goods

31

Table 8-2 Summary of Agricultural production and export activity

34

Table 8-3 Subdivision of the Retail market within Australia

34

Table 8-4 Summary for import trade, segmented into the unitised classification

37

Table 8-5 Summary for export trade, segmented into the unitised classification

38

Table 9-1 Logistics volumes for relevant market segments (unitised/containerised)

42

Table 9-2 Inter-capital road freight matrix 1998-99 ('000 tonnes)

43

Table 9-3 Use of domestic and ISO containers within long distant freight movements

43

Table 9-4 Summary of container activity for 1998-9

44

Table 9-5 Summary of Coastal Shipping of Containerised freight

45

Table 9-6 Estimated volume for pallet issues per annum

47

Table 9-7 Summary of key market indicators

48

Table 9-8 Summary of the current and modelled growth by market sector

50

Table 9-9 Growth rates and value by market segment forecast for 2010 and 2020

53

Table 10-1 Geographic distribution of pallet standards

55

Table 10-2 Import containers by market segment and pack type

56

Table 10-3 Import containers by pack type and pallet standard at origin

56

Table 10-4 Export containers by market segment and pack type

56

Table 10-5 Export containers by pack type and pallet standard at destination

56

Table 10-6 Container movements by pallet standard

57

Table 11-1 Matrix for operational decision criteria

65

Table 12-1 Summary of cost elements within financial summary

67

Table 12-2 Project inventory and other costs and benefits

68

Table 13-1 Scenarios "A" - "C" indicating growth in indices in the intervening years

70

Table 13-2 Value of market segments and determination of task size by segment

71

Table 13-3 Forward projections of production, export, import and consumption estimates based on derived growth indices, by market sector

73

Table 13-4 Summary of Import Containers by Origin port for 1995 and 2000

74

Table 13-5 Summary of Export Containers by Destination port for 1995 and 2000

75

Strategic design + Development Domestic and International pallet standards Operational and cost implications

Strategic design + Development

Domestic and International pallet standards Operational and cost implications

1.

INTRODUCTION

This study into the operational and cost implications of the Australian Pallet in Domestic and International Logistics has been commissioned by the

Integrated Logistics Network (ILN) Australian Marine Group (AMG)

Debate regarding the suitability and implications arising from the Australian pallet standard has been ongoing since the mid 1990’s. Despite several recent studies and the dual recognition of both the Australian and ISO pallet criteria the Australian Standards regime (AS4762-2000 “General-purpose flat pallets), the issue remained unresolved in a number of forums.

Globally, there are four (4) dominant pallet sizes utilised. These are:

1200 x 1000mm pallet, cited as the ISO standard and most

common across Asia, Americas, Europe and New Zealand 1200 x 800mm pallet, known as the Euro-pallet

1100 x 1100mm pallet used in Japan and Korea

1165 x 1165mm pallet used exclusively in Australia

Contemporary argument seeking to retain the 1165 2 pallet have been based on the cost to alter the pallet pool (around 15 million pallets), adjust racking and associated equipment, and increased warehousing costs.

Conversely, previous studies have failed to identify and assess the implications of an increasingly global logistics network, where

variations in standards and systems generate direct and indirect non conformance costs.

Taking a 20 year view, and understa nding that import and export trade have substantially

Taking a 20 year view, and understanding that import and export trade have substantially higher growth rates than domestic production and consumption, the “markets” served by Australia’s domestic and international fields, will fundamentally change.

International trade as a percentage of domestic consumption will increase Multi-national firms are consolidating their manufacturing platforms and economising on product range The Asia region is emerging as a substantial market with countervailing power to set standards

on product range The Asia region is emerging as a substantial market with countervailing power to

This study incorporates a market perspective and models forecasts the changing market mix. Over 40 organisations were interviewed to determine their direction in manufacturing and marketing strategy and to relate these issues to pallet standards.

The pallet remains one of the most pervasive items of logistics equipment, yet this issue is largely dismissed as trivial by many logistics practitioners within Australia.

However there is a strong correlation between the views of the multi- national organisations for the need to align Australia’s pallet and container standards with those of its dominant trading partners.

Multi-nationals will make decisions as to where they base their production platforms and/or source materials and products based on the overall cost of supply.

Strategic design + Development Domestic and International pallet standards Operational and cost implications

Strategic design + Development

Domestic and International pallet standards Operational and cost implications

Australia’s inability to adopt standards which are aligned with its trading partners will substantially disadvantage its

Soon after, the Australian Government took over the responsibility for the pool of pallets under the Commonwealth Handling Equipment Pool, more commonly known as CHEP.

Effectiveness to attract investment Ability to supply export products to current and new markets Ability to import value added products in a cost effective manner

Recently a FMCG multinational manufacturer made a decision to relocate a major production facility to SE Asia and to consolidate production. In this instance, Australia will become a net importer of the finished product rather than being a net exporter. Those products will be distributed from SE Asia in cartons that conform to ISO standards and configured to fit ISO pallets.

In 1958, CHEP was sold to Brambles and the pool had grown to around 90,000 pallets, yet usage was still limited to the waterfront.

By the late 1960’s the pool of pallets had grown to around 600,000 pallets based on the original standards. Today the number of pallets is around 15 million with Brambles, TNT and Loscam offering products based on the 1165*1165 mm footprint.

Considering the supply chain cost implications of this and other examples, Australia will be best served by commencing a process to align its pallet and carton standards towards the ISO standards used by its trading partners.

Given the relative isolated nature of Australia’s land transport system, the 1165 2 pallet has provided an effective means of moving goods. Freight forwarders and transport operators have invested in equipment based on the 1165 2 pallet. Similarly racking and conveyor systems have been developed that accommodate the pallet standard.

To not undertake this process is like the decision by the USA to maintain the imperial standard of measurement, as the rest of the globe embraced metric measurements.

One interviewee surveyed the issue akin to dental surgery, saying “it will hurt to get the tooth out, but it will only get worse if we don’t”.

1.1

Some History

At the end of the Second World War, the US forces abandoned around 60,000 pallets which had been used for materials handling purposes. These measured 46 inches by 46 inches and fitted the vehicle tray standards at the time.

Strategic design + Development Domestic and International pallet standards Operational and cost implications

Strategic design + Development

Domestic and International pallet standards Operational and cost implications

2.

CONCLUSIONS

1. Australia is part of a global economic and logistics system. If ignored the corollary is that Australia will be relegated as player within the development of supply strategies and processes servicing the burgeoning Asian market.

2. Global manufacturing and brand managers are seeking scales of economy and standardisation of inventory, supported by least cost supply channels, necessitating an alignment of pallet standards and efficient unit load strategies between Australia and its trading partners.

3. Decisions regarding investment and establishment of manufacturing platforms within Asia 1 will depend on the potential and capacity for host countries to provide and integrate the requisite and supporting capabilities and standards. Australia must address its lack of readiness in this regard.

4. Efficient Consumer Response (ECR) strategies have emerged as a critical enabler of supply chain efficiency within grocery supply

and demand channels at a global level. Such strategies explicitly reinforce the need for efficient unit load (EUL) concepts and harmonisation of standards at a global and regional level, rather than historic and expedient activities at the domestic level.

(i) 65% of Australia’s trading partners (by volume) utilise the ISO pallet footprint as a key driver for dimensioning logistics standards.

1 Asia incorporates ASEAN, Middle East, North Asia, South Asia

(ii)

Previous assessments to migrate to the ISO standard have been influenced by short-term assessments and a disproportionate level of control by a few firms within the supply chains.

(iii)

Recognising the differential growth rates, it is highly feasible that the sum of international export and import trade movements will reach 70% of domestic trade (and consumption) by 2020.

5. Whilst transitional processes may require more than 5 years, a strong economic case exists for Australia migrate towards the ISO standard for pallets, linked to a similar adoption of cartons sizing standards. The issue must be seen in the context of value foregone in the medium to long term, rather than the cost of transition in the near future.

6. Australia operates two container pools each servicing discrete segments of the market (namely international trade and domestic trade) arising as a consequence of the Australian pallet size.

(i)

Substantial inefficiency exists at the container loading and unloading interface, requiring the need to universally develop and implement unitised loading based on the optimal pallet footprint, however without the need to use a pallet in the process. This represents an integral element of the EUL concept applied to the international freight task.

(ii)

Freight imbalances cause the movement of empty ISO containers in parallel with loaded domestic containers, and the return of the empty domestic container, yielding a cost of $20 million marginal cost and $40 million opportunity cost. These costs would be expected to triple over time concurrent with the growth in international and domestic trade.

Strategic design + Development Domestic and International pallet standards Operational and cost implications

Strategic design + Development

Domestic and International pallet standards Operational and cost implications

7. Implementing the ISO standard requires conformance costs of

$600 million over ten years however the NPV benefits are over $2.5 billion exist for the period to 2020 (assuming 30% pre tax discount rate).

(i)

The primary benefits are the ECR and EUL strategies and the secondary benefits are efficient container loading utilising unitised handling processes.

(ii)

The NPV benefits increase to $5.1 billion if the pre-tax discount rate is decreased to 20%.

8. Many industry representatives understand the strategic benefit of

standardising on pallet size, however express the need to address the transitional arrangements

(i)

Past assessment and treatments of the transitional costs have inhibited commencement and/or progress towards the new ISO standards

(ii)

A review of depreciation and write-off arrangements is necessary

(iii)

Strategies such as double depreciation on investment in compliant equipment should be considered.

9. A clear need exists for government to facilitate the process. Comparisons can be made with the adoption of metric standards, taxation reform, the introduction of new currency, trade reform and assistance, and the like.

Strategic design + Development Domestic and International pallet standards Operational and cost implications

Strategic design + Development

Domestic and International pallet standards Operational and cost implications

3.

RECOMMENDATIONS

1. This study recommends the progressive adoption of the ISO pallet standard for Australia with full implementation by 2010.

2. It is recommended that government provides leadership in the implementation of the ISO standard and recognises that

(i)

there is a predisposition towards the status quo by industry based on short-term planning horizons, and

(ii)

the misalignment of standards should be seen in the context of a “market failure” that government has a legitimate right to address.

3. It is recommended that the outcomes of the study be presented to Australian Transport Council (ATC) via the Integrated Logistics Network, with the view of achieving support towards the ISO standard by ATC.

4. It is recommended that the ILN design and promote an implementation strategy through the Transport and Logistics Working Group for industry awareness, consultation and delivery of the new ISO standard.

5. It is recommended that a review be undertaken of the process and adequacy of implementing Efficient Consumer Response and Efficient Unit load strategies by Australia

(i) as part of Australia’s contribution towards the implementation of efficiency within international supply chains

(ii)

as a demonstration of Australia’s long term commitment toward the Asia markets

(iii)

in support of market development programs such as Supermarkets to Asia

6. It is recommended that depreciation and write-off costs relating to compliant transitional and/or capital expenditures be structured within a range of taxation incentives designed to foster timely implementation of the standard. This recognises that

(i)

(ii)

strategic and operational factors identified within the study yield a positive economic and financial outcome concurrent with the adoption of the ISO standard, particularly within an ECR/EUL context

supply chain standards have long term implications for trade, and government must

remove short-term impediments for industry recognise the transitional cost burdens acknowledge the extent of sunk cost treatments for distribution infrastructure

Strategic design + Development Domestic and International pallet standards Operational and cost implications

Strategic design + Development

Domestic and International pallet standards Operational and cost implications

4. EXECUTIVE SUMMARY

The following points are drawn from the summary of each chapter of this report and can be read in context with the Conclusions in section

From Section 5 (Previous work) The pallet standards issue has been an integral part of the global debate of the benefits of ECR (Efficient Consumer Response) and EUL (Efficient Unit Loads) strategy.

Global consulting firm AT Kearney undertook a seminal study in 1997 and identified that substantial benefits can be realised by harmonising the carton size to the pallet standards, and by developing processes that maintain load (and unit) integrity as far along the supply chain as possible. Such benefits are between 1.2- 1.6% of sales values. A summary of the AT Kearney findings is provided in the appendix in 14.2 titled “Efficient Unit Loads by A.T. Kearney”.

ECR Asia has undertaken extensive research and development on this issue, identifying substantial financial benefits and recommending implementation of the 1200 * 1000 mm pallet. This outcome will have significant implications for Australia’s future import and export trade and supporting logistics systems. A summary of the ECR findings is provided in the appendix in section 14.1 titled “ECR Standard Pallet Implementation Project”.

The Symonds Henderson report (commissioned by the Grocery industry) recommended the retention of the Australian pallet standard however based 80% of the financial justification on

increased warehouse expansion costs, a finding which is not generally accepted from the survey conducted within this study.

An ECR study conducted in 1999 outlined the strategic relevance of ECR within the Australian Grocery industry, and questioned the motives being pursued and the inherent imbalance of power therein. It found that evident deficiencies may cause the strategic benefits to be lost. A copy of the paper is provided in section 14.3 and is titled “Efficient consumer response (ECR): a survey of the Australian grocery industry”.

From Section 6 (Framework) The logic and rationale for a prevailing pallet standard is derived from the conceptual notion of a supply chain and its composite elements, which exist within the notion of “why do goods move?”

A study into pallets standards requires a number of considerations such as

 

o

A long range view of the served market

o

A holistic view of the supply chain

o

The relevance of unitisation and efficiency

o

The relationship between products (SKU’s), pallets, containers and/or trucks

Differential growth rates exist for domestic production, export trade, import trade and domestic consumption, which will lead to a change in the market mix served by Australia’s logistics systems (and standards)

Strategic design + Development Domestic and International pallet standards Operational and cost implications

Strategic design + Development

Domestic and International pallet standards Operational and cost implications

It is very conceivable that within the next 20 years Australia’s international trade and logistics task will reach 70% of its domestic consumption 2 . That is

The need for single organisations to tolerate multiple pallet standards within a regional (sub-global) manufacturing or supply strategy. Changes in the market mix serviced by supply chain processes.

% international trade =

$import + $export ---------------------------- $ domestic consumption

From Section 7 (Survey) A number of consistent messages emerged from the interview process conducted within the scope of the study Supply chain philosophy in 2001 has progressed significantly since the GISCC report of 1997. Supply chain management has emerged as a critical differentiation for firms in 2001 to 2010 Manufacturing is consolidating to pursue scales of economy Supply chain processes are fundamentally changing with concepts of “shelf ready packaging” and “reverse crate flows”, emerging. This is being facilitated by strategies such as Efficient Consumer Responses and Efficient Unit Load, and supported by great collaboration than has existed in the past.

where domestic consumption is a “proxy” for domestic land transport

Logistics processes and standards are increasingly global in context and application, with marketing and manufacturing strategies being executed at a global/regional level by large multinationals with substantial countervailing power

 

It does not automatically follow that harmonisation between Australia and its customers/suppliers on pallet standards leads to such efficiency if considered in isolation. Nor do such alignments justify an increase of pallet usage within containers to facilitate efficient loading and unloading.

Stockholders are seeing more sophisticated products (crates, trolleys, slip sheeting) and alternate materials such as plastic The future of the wooden pallet is limited; the study and review process was seen to be more about the standardisation process of how individual cartons aggregate into “blocks” or “units” that comply with a universal footprint standard for international distribution. There is a clear awareness by multi-nationals that the carton and pallet size is standardizing on the ISO footprint of 1200 x 1000mm

The issue is the degree to which retention or dissolution of the current standard impact higher order issues such as

Carton sizing, consistent with the global ECR (Efficient Consumer Response) strategy Customer expectation relating to product presentation in overseas markets

2 The GISCC report by Symonds Henderson identified that there is financial justification to introduce the ISO pallet where international trade reached 70% of domestic grocery consumption

 
Strategic design + Development Domestic and International pallet standards Operational and cost implications

Strategic design + Development

Domestic and International pallet standards Operational and cost implications

From Section 8 (Markets) Pallets are not used in all supply chains. Generically, three types of supply chains exist for the purpose of categorisation herein, which are:

integrated with international supply and demand markets and delivery channels Products manufactured in Australia for export markets will need to meet customer expectations for packaging storage and transportability. Secondly these products must not also conform to customer systems, without transferring non-conformance costs along the chain. To fail to appreciate this dynamic will cause

o

Bulk shipments

o

Semi bulk shipments, typically in containers or as “break bulk” consignments

o

Containerised movements of unitised freight (pallets, cartons, bags, etc.)

o

Customers to source products from alternate sources

o

Manufacturers to nominate alternate economies for their

o

It is the third group relevant to the study

 

Markets considered by this study are manufactured and primary products, retail markets, and export/import international trade Australia’s international trade is around $210 billion, however trade in unitised product represents around 35%, with the majority of the balance relating to shipment of bulk commodities (coal, grain, minerals, natural gas, etc.) The market value of Australia’s*/packaged products is around $150 billion, comprising domestic production retained and imported product, for domestic consumption. This can be subdivided into consumer grocery ($54 billion), consumer non grocery/household ($47 billion) and industrial ($53 billion). Each sub-element has differential growth rates and trade imbalances, further influencing the composition of the market mix. The growth rate for international trade is between 8-10% (compound), whereas domestic production and consumption is around 3-4%.

 

production platforms Global manufacturing and brand managers are consolidating with a focus on Asia. Where Australia’s standards and systems do not comply with the systems developed by these firms, the total landed and distributed cost of goods will increase for Australia’s consumers Trade in products which are unitised / containerised will substantial increase as a percentage of domestic consumption.

 

From Section 9 (Logistics) Whilst substantial reform has focussed on domestic transport within Australia across road, rail and coastal shipping segments, it will become more critical that Australia’s transport systems are

Strategic design + Development Domestic and International pallet standards Operational and cost implications

Strategic design + Development

Domestic and International pallet standards Operational and cost implications

Table 4-1 Growth rates and value by market segment forecast for 2010 and 2020

Product, consumption and trade values for containerised products

 

Current

       

Growth

(a)

Modelled

Growth (b)

2001

$B

2010

$B

2020

$B

Comsumer (Food/grocery)

Dom. Production

4.2%

61

85

134

Export

11.6%

10.0%

10

24

63

Import

9.2%

9.0%

3

7

16

Dom. Consumption

2.6%

2.6%

54

68

88

Consumer (Household)

Dom. Production

4.3%

39

56

86

Export

13.5%

9.0%

4

8

19

Import

14.2%

7.0%

12

22

43

Dom. Consumption

4.6%

4.6%

47

70

110

Industrial/Other

Dom. Production

0.9%

29

33

34

Export

5.5%

4.0%

8

11

17

Import

8.4%

5.0%

32

50

81

Dom. Consumption

3.3%

3.3%

53

71

98

Total

Dom. Production

3.7%

129

175

255

Export

8.2%

22

44

99

Import

5.9%

47

79

141

Dom. Consumption

3.5%

154

209

297

Ratio international trade to consumption Comsumer (Food/grocery) Consumer (Household) Industrial/Other Total

25% 46% 90% 33% 43% 57% 75% 86% 99% 45% 58% 81%
25%
46%
90%
33%
43%
57%
75%
86%
99%
45%
58%
81%

(a) Based on ABS Economic indicators against market values (b) Composite forecasts derived from ABS Economic indictaors and adjusted to reflect volume growth in contaier 1995-2000

Container movements and volumes relevant to the pallet standards issue are

 

o

Imports – 375,000 TEU’s

o

Exports – 400,000 TEU’s

o

Coastal shipping

 

Tasmania - 190,000 TEU’s

Other - 35,000 TEU’s

The movement of empty ISO containers to WA and empty domestic containers from WA yields a marginal cost around $20

million per annum and also represents an opportunity cost of $40 million recognising that parallel freight movements by rail and road are undertaken. It is considered that harmonisation between ISO

containers and the product footprint (pallet) would address this cost,

whether considered in a marginal or opportunity cost treatment.

Australia’s pallet pool system is valued at $200 million per annum,

and generates around 40 million pallet issues. There are around 15

million pallets in circulation

From Section 10 (Pallet usage)

Trade to/from containers that use ISO pallets account for 60-70% by volume, with imports growing at 5% and exports at 10%

The following table summarises the key results.

Table 4-2 Container movements by pallet standard

Pallet size

 

Imports

Exports

1100

x 1100

‘000 TEU’s

35

62

 

% total

10

16

 

% growth

9

3

1200

x 1000

‘000 TEU’s

230

275

 

% total

62

69

 

% growth

5

10

1200

x 800

‘000 TEU’s

90

40

 

% total

24

10

 

% growth

10

18

Non Standard

‘000 TEU’s

15

23

 

% total

4

5

 

% growth

6

10

TOTAL

‘000 TEU’s

370

400

Strategic design + Development Domestic and International pallet standards Operational and cost implications

Strategic design + Development

Domestic and International pallet standards Operational and cost implications

From Section 11 (Operations Implications)

The decision and supporting logic can be summarised in the following matrix.

Table 4-3 Matrix for operational decision criteria

 

1165 * 1165 mm pallet

1200 * 1000 pallet

Current carton

Current situation identified as yielding 10% inefficiency in utilisation. EUL analysis identifies 1.2-1.6% cost to sales of such inefficiencies

Given certain % of case sizes are based on the ISO standard, this option may absorb under-utilised capacity (and “slack”)

sizes

Cartons based on

Recommended in

 

580

* 387 module

GISCC report to be of significant benefit, if harmonised however ignores global trend towards ISO carton standards

Not considered as a viable option

Cartons based on

Increasing trend in this

Potential to off set near term adjustment costs for infrastructure 60-70% global activity based on ISO standard for cartons and pallets

600

* 400 module

direction will proliferate current inefficiencies further

From Section 12 (Financial) The financial analysis allows for A capital expenditure of $600 million for adjustments to the pallet pool, racking and ancillary equipment over the 10 years The incremental increase in operating costs by $100 million is assumed over the same period The benefits of ECR/EUL are applied to 75% of the market segment for consumer grocery and non grocery products and 50% for industrial products Unitised loading of containers is a substantial benefit

The analysis yields a positive NPV of $2.5 billion, assuming an inflation rate of 3% and a discount rate of 30% (pre-tax).

This NPV increases to over $5.1 billion of the discount rate is decreased to 20%.

Prime-facie, there appears to be a substantial cost impact if the current standard is maintained, leading to non conformance costs arising from the “disconnect” between standards.

Strategic design + Development Domestic and International pallet standards Operational and cost implications

Strategic design + Development

Domestic and International pallet standards Operational and cost implications

5. SYNOPSIS OF PREVIOUS WORK

A review of the previous work in this area has identified the following references relevant to this study. These are referred to within this report.

The Grocery Industry Supply Chain Committee (The Australian Pallet Study) undertaken by Symonds Henderson for the Grocery Manufacturers Association and the Australian Supermarkets Institute (1997) Efficient Unit Loads study by A.T. Kearney (1997) Efficient Consumer Response: a survey of the Australian grocery industry – Harris, Swatman and Kurnia (1999) Recommended Pallet Standard for Asia, a brochure issued by ECR Asia recommending the adoption of the 1200 mm * 1000 mm ISO pallet

5.1 GISCC - The Australian Pallet Study

This report provides a comprehensive overview of the critical elements impacted by a change in the pallet standard within Australia from the perspective of the grocery industry, and presents a number of case studies for manufacturers and distributors. The following conclusions are summarised from the study.

“The cost of pallet size conversion would be borne by the domestic grocery manufacturers, retailers and service providers with virtually the only saving benefits being derived from international trade” “The estimated capital cost of a pallet change to the grocery industry is $A1195 million, with perpetual additional operating

costs of $A62.8 million per annum”. This is based on avoiding any overhang on the pallet. If an overhang is tolerated, the capital cost is reduced to $A980

million. Saving would be limited to $25.3 million for container loading and

unloading efficiencies NPV was calculated to be negative $376 million

“Only when palletised international trade grows to over 70 percent of

the total Australian domestic and foreign grocery and produce sales or there is a significant change to pallet technology, unavailable on the 1165 square, would the NPV become positive” The research identified the potential for significant savings applicable

under Efficient Unit Loads (EUL) initiative proposed by ECR Europe and A.T. Kearney GISCC recommended not changing the Australian pallet standard,

but did recommend the further development for “optimising the pallet fit” and investigating the EUL methods. Whilst the NPV was negative, it was acknowledged that the EUL

benefits would offset the capital and recurring costs, however implied that these benefits should be internalised for the grocery industry Recognition of the ISO pallet subject to the development of future

pallet technology or a potential change in the task mix within a higher proportion of international trade evident. Asserted that “in no circumstances should the industry use both sizes

in one open system” The composition of the requisite capital costs is shown on the following graph.

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Figure 5-1 Composition of capital cost elements identified within the GISCC report

1,400 1,200 1,000 800 600 400 200 - Estimated Modification Additional Modification capital cost to
1,400
1,200
1,000
800
600
400
200
-
Estimated
Modification
Additional
Modification
capital cost
to existing
pallet
to pallet
pool
requirement
machinery
Modification
to existing
rack / MHE
Storage
Modification
facility for
to transport
additional
fleet

pallets

The Symonds Henderson report ( commissioned by the Grocery industry) recommended the retention of the Australian pallet standard, however based as much as 80% of the financial justification on increased warehouse expansion costs, a finding which is not generally accepted from the survey conducted within this study.

5.1.1 Key issues addressed

The report is comprehensive in its analysis of equipment interface and operating costs, dealing with pallet and ancillary equipment modification costs.

The major thrust of the report is based on the 12.5% reduction in the footprint area for the pallet from 1165 mm square to 1200 mm * 1000 mm . As a result, it is inferred that handling costs increase by 12.5%, trailer efficiency is reduced, labour costs increase, warehouse-racking utilisation reduces and there is a need to increase warehousing area and provision of racking locations by the same proportion.

Over 80% of the overall capital cost is captured by two key elements relating to racking adjustments and increased warehousing requirements. 5 million racking locations to be adjusted at $45 per location, assuming no overhang is tolerated, leading to a one off cost of $225 million Whilst a four percent reduction in storage floor area is available with compression of racking, it is essential that an additional 1.3 million rack locations required at $600 each, totalling $777.6 million

The analysis assumes that the migration to the new pallet standard will not absorb the under-utilisation inherent within the chain, evident due to the proliferation of carton sizes, particularly ISO carton standards.

5.2 Efficient Unit Load study by A.T. Kearney

In 1997, global consulting firm AT Kearney undertook a seminal study regarding supply chain efficiency and the relevance of harmonisation of standards. The context of the study is generally limited to grocery manufacturers and distributors.

The study assessed the implication of co-ordination within supply chains in a concept labelled “Efficient Consumer Response”. Within the study,

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analysis was given to the importance of Efficient Unit Loads (EUL), and this study importantly draws on the findings of AT Kearney.

For a more detailed explanation on EUL in the Appendix under Section 14.2

A summary of the key findings is available at http://www.ecrnet.org and key findings include Efficient unit loads impact 12-15% of retail sales price. Savings opportunities represent 1.2% of retail sales price in the European context. Unit load harmonisation is key to supply chain integration and break through results Projected savings are not evenly spread among manufacturers and retailers, with the latter group expected to gain three quarters of the benefit

The GISCC report which is summarised in the previous section identified the importance and value of the EUL principle and identified that a saving of 1.64% of retail sales is possible.

Based on the estimate of $54 Billion for Consumer–grocery/food products, the implications of ECR/EUL equate to $850 million reduction in chain costs. If non grocery and household products are added to this group, totalling $101 Billion, benefits arising from EUL would yield $1.6 Billion in chain savings.

5.3

Efficient Consumer Response (ECR) : a survey of the Australian grocery industry

This study and report was co-authored by John Harris, Paula M.C. Swatman and Sherah Kurnia and was published in the journal “Supply Chain Management: An International Journal” (1999), Volume 4, Number 1, pp35-42.

The paper presents the results of an Australian study which was designed

to assess the applicability of ECR within the Australian grocery industry.

A copy of the full text is provided in the Appendix 14.3 on page 83.

Whilst ECR represents a broader, contextual issue surrounding pallet and carton standards, the report made a number of substantive statements worth incorporating herein.

“The goal of ECR is to take out of the supply chain costs which do not add

consumer value (Robins, 1994). ECR is about producing efficiencies in the grocery supply chain within the four core business process areas of efficient store assortment, efficient replenishment, efficient promotions and efficient product introductions (Kurt Salmon Associates, 1993).” “There is considerable interest in ECR in Australia, with 61 per cent of

respondents being aware of ECR and 40 per cent of respondents actively pursuing an ECR strategy). Despite this interest in ECR, we believe that there is no real commitment to its implementation.” “One of the main reasons given for adopting ECR is pressure from trading partners. These results, which differ significantly from the (comparatively limited) evidence available from the USA, suggest that the Australian motive for engaging in ECR may well be quite different. Indeed, the likelihood is that Australian grocery industry members appear to be "encouraged" to engage in ECR by large and powerful customers (supermarkets) - a situation which is reminiscent of the Australian experience with EDI. There is thus a real danger that, as with EDI, organisations may become involved only to the extent required by their larger and more powerful trading partners, so that the full benefits of a strategic approach may be lost.”

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5.4

ECR Pallet Implementation Project: Apaper provided ECR Asia (Singapore)

A full copy of the report is provided in Appendix 14.1 on page 72

The results of the study identified substantial benefits and savings by adopting the ISO standard through South East Asia.

The outcome of the study provides a stark contrast to the results of the GISCC report referred in section 5.1 on page 16. However it must be recognised that whilst the principles are consistent, the relative immaturity of the Asian situation would yield significant benefit, which may not follow with a more mature environment such as Australia, having already established substantial infrastructure costs.

5.5 Conclusions

The pallets standards issue has been an integral part of the global debate of the benefits of ECR (Efficient Consumer Response) and EUL (Efficient Unit Loads) strategy.

Global consulting firm AT Kearney undertook a seminal study in 1997 and identified that substantial benefits can be realised by harmonising the carton size to the pallet standards, and by developing processes that maintain load (and unit) integrity as far along the supply chain as possible. Such benefits are between 1.2- 1.6% of sales values.

The Symonds Henderson report ( commissioned by the Grocery industry) recommended the retention of the Australian pallet standard, however based as much as 80% of the financial

justification on increased warehouse expansion costs, a finding which is not generally accepted from the survey conducted within this study.

An ECR study conducted in 1999 outlined the strategic relevance of ECR within the Australian Grocery industry, and questioned the motives being pursued and the inherent balance of power therein. It found that deficiencies may cause the strategic benefits to be lost.

ECR Asia has undertaken extensive research and development on this issue, recommending implementation of the 1200 * 1000 mm pallet, which will have significant implications for Australia’s future import and export trade and supporting logistics systems.

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6. CONCEPTUAL FRAMEWORK

6.1

Preamble

The conceptual notion of a supply chain and its composite elements exists within the notion, “why do goods move?”

Whilst the obvious subject of the study is the pallet and its prevailing standard, the underlying argument extends to the purpose and fit of the pallet within the supply chain. It therefore begs the question as to the need and existence of the pallet in the first instance, and if its purpose and use has been found to be “wanting”, then what item and/or process will replace the pallet.

Most supply chain practitioners will share anecdotes and experiences

of pallets as an item of logistics equipment. Some of those same

practitioners are searching for alternatives such as slip-sheets, intermediate bulk containers/crates, and alternate materials such a plastics and compressed paper.

A study into pallet standards requires a number of considerations such

as:

A long range view of the served market

A holistic view of the supply chain

The relevance of unitisation and efficiency

The relationship between product (SKU), pallet and container or truck

A

conceptual model of the inter-relationship between markets and

pallets is provided in the following diagram.

Figure 6-1 Conceptual framework linking the purpose of the pallet to the prevailing market demands and product attributes

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Production Production Product attributes
Production Production
Product attributes

• Bulk, pack type

• Presentation

• Value-added

(a) Flow Flow of of goods goods (a) Supply processes
(a)
Flow Flow of of goods goods
(a)
Supply processes

• Sources

Market Market
Market Market

Demand characteristics (b)

• Location of markets

– regionalisation of

–existing

manufacture

–future, emerging

– centralisation of supply and inventory

• Frequency and expectation

• Growth

• Channels

• Methods

The relationship The relationship between products, pallets products, pallets between and and
The
relationship
The
relationship
between
products,
pallets
products,
pallets between and
and
containers/vehicles
containers/vehicles

– integration

– connectivity

– unitisation

(a) Goods may be raw materials, intermediate and finished products (b) Where demand characteristics change, then supply processes will equally need to change

Within the conceptual framework outlined in Figure 6-1 above, there is a direct relationship between the pallet (role and standard) and the served market.

The issue has been treated tactically to date as pallet costs are the domain of the “firm”, and in the context of a firm’s individual potential to influence the pallet standard, the outcome for practitioners has been to move onto “the next big issue”.

Yet collectively (at a national level) the pallet issue is an important element that influences the overall efficiency of the “system” servicing our market requirements.

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LocalOverseas

LocalOverseas

LocalOverseas

PRODUCTION (Origin)

PRODUCTION (Origin)

PRODUCTION (Origin)

It does not automatically follow that harmonisation between Australia and its customers/suppliers on pallet standards leads to such efficiency if considered in isolation. Nor does such alignments justify an increase of pallet usage within containers to facilitate efficient loading and unloading.

The issue is the degree to which retention or dissolution of the current standard impact higher order issues such as

The issue is the degree to which rete ntion or dissolution of the current standard impact

Carton sizing, consistent with the global ECR (Efficient Consumer Response) strategy Customer expectation relating to product presentation in overseas markets The need for single organisations to tolerate multiple pallet standards within a regional (sub-global) manufacturing or supply strategy. Changes in the market mix serviced by supply chain processes.

a regional (sub-global) manufacturing or supply strategy. Changes in the market mix serviced by supply chain
a regional (sub-global) manufacturing or supply strategy. Changes in the market mix serviced by supply chain

6.2 Supply Chain Typology

There are three direct and one indirect supply chains relevant to Australia. These can be represented within the following diagram.

Figure 6-2 A Supply Chain Typology outlining influences on Australia's logistics processes

MARKET (Destination)

MARKET (Destination)

MARKET (Destination)

Local

Local

Local

Overseas

Overseas

Overseas

Domestic logistics

Domestic logistics

Domestic logistics

operating essentially

operating essentially

operating essentially

as a closed loop and

as a closed loop and

as a closed loop and

not linked to global

not linked to global

not linked to global

markets or chains

markets or chains

markets or chains

Export logistics

Export logistics

Export logistics

servicing the demands

servicing the demands

servicing the demands

of overseas customers,

of overseas customers,

of overseas customers,

with substantial

with substantial

with substantial

growth expected in

growth expected in

growth expected in

next 10 years

next 10 years

next 10 years

Import logistics

Import logistics

Import logistics

influenced by the

influenced by the

influenced by the

countervailing power of

countervailing power of

countervailing power of

increasingly large

increasingly large

increasingly large

suppliers and Australia’s

suppliers and Australia’s

suppliers and Australia’s

“appetite” for value

“appetite” for value

“appetite” for value

added products

added products

added products

Global logistics with

Global logistics with

Global logistics with

increasing dominance to

increasing dominance to

increasing dominance to

set trends in logistics

set trends in logistics

set trends in logistics

techniques, which

techniques, which

techniques, which

influence supply chain

influence supply chain

influence supply chain

and market decisions

and market decisions

and market decisions

“follow the leader”

“follow the leader”

“follow the leader”

Direct

Direct

Indirect

Indirect

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6.2.1 Domestic Logistics

Australia’s domestic logistics have been benchmarked to be efficient, particularly road transport processes. It has seen the emergence of dominant transport operators seeking opportunities to vertically integrate from “wharf to door”. Industry consolidation of the players is the current trend.

Most transport initiatives have been founded on the east-west corridor, where cubic utilisation within the “structure gauge” for road and rail has been a strong focus.

Australia’s domestic market is small and lacks density and scale economy.

6.2.2 Export Logistics

The development of export markets has been seen as critical by government and industry alike, with initiative such as Supermarkets to Asia and the Habitat Alliance identifying the need to substantially increase the export of value added products or unique and quality primary products. 3

Food quality attributes have continued to provide Australia with ongoing global opportunities.

3 Exports of Food products to Asia have increased from $4.8B in 1991-92 to around $13B in 2000-01 – source Supermarkets to Asia database

6.2.3 Import Logistics

For non-bulk freight, Australia remains a net importer of goods, sourcing over $67B trade annually from USA, Asia and Europe. With the planned consolidation of manufacturing within the Asia region, the trend to move manufacturing off-shore from Australia will see the strong import freight continue, tempered periodically by currency exchange rates and policy intervention to address trade imbalances.

6.2.4 Global Logistics

Recognising that “no country is an island”, Australia’s domestic, import and export logistics processes will increasingly align with global trends influencing inventory policy, technology applications, customer service expectations, product performance and presentation and transport methodologies and economics.

Supply and demand choices will occur at a global level, which will influence the degree of integration of Australia’s supply chains within regional and global chains.

The degree to which global inventory processes continue to align within the ISO standard, will provide a countervailing influence of the same choices that Australia’s supply chain practitioner’s may make.

Alternately, Australia may not have a choice, where economics of production and inventory pre-determine such outcomes.

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6.3 Changes in market mix

There is a temporal dimension to the issue, which will impact supply chains, techniques and equipment.

The land transport task linking the domestic production and consumption clusters will progressively migrate from being domestic to becoming more focused on international supply chains. Whilst this aspect is dealt with empirically in Section 9 the following paragraphs illustrate the point.

The Transport and Storage Index has approximated GDP since the early 1990’s. Given that conceptual notion that transport provides a link between markets (consumption) and production, this is accepted intuitively.

Figure 6-3 Transport and storage output and gross domestic product index

and storage output and gross domestic product index Table 6-1 provides a theoretical example of three

Table 6-1 provides a theoretical example of three scenarios experiencing different growth rates for international and domestic trade. Further explanation is provided overpage.

Table 6-1 Assessment of growth scenarios based on alternative task apportionment and predicted growth forecasts

Error! Not a valid link.

Refer also to the Appendix Table 13-1 Scenarios "A" - "C" indicating growth in indices in the intervening years on page 65

From Table 6-1 the task mix in Scenario “A” is consistent with the relativity between domestic and international flows identified in the GISCC report of 1998. 4

Scenarios “B” and “C” provide for alternate mixes in the task split as 80:20 and 70:30 respectively.

For all scenarios, the total growth is limited to 3.5% (compound) over the twenty years to 2020. The growth in the international task is assumed to be 8% consistent with various forecasts and references.

Under these criteria, the growth in the domestic task will vary to meet the overall consumption index.

Scenario “A” yields a growth in the domestic task of 2.7% and yields a % task mix of 78%, against an international task of 22%.

4 The Grocery Industry Supply Chain Committee report titled “The Australian Pallet Study” for the Grocery Manufacturers’ Association ad the Australian Supermarkets Institute undertaken by Symonds Henderson

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Multi-national firms are implementing regional and global strategies seeking production scales of economy and proximity to substantial markets Growth rates in market segments are expected to yield outcomes consistent with the threshold of 70% identified within the GISCC study referred in section 5.1 on page 5.

For scenario “B”, the domestic growth required reduces to 1.5%, with an outcome of 55% in the overall mix. For scenario “C”, a negative growth in the task is necessary with an initial task split of 70:30, yielding an a domestic outcome of 33% in the total task.

6.4

Study components

 

Whilst pallet standards are the subject of the study, using pallets in supply chains is only relevant to the extent that

The following diagram summarises the key components of logic within the study.

Pallets provide a fundamental and efficient means for transporting cartons Technology relating to crates, returnable boxes, and “shelf ready” packaging is being assessed as part of EUL and ECR strategies, particularly within the grocery industry. This will change the nature of the pallet, however issues relating to the “foot print standard remain critical and in need of resolution Containers move products and cartons as international trade. It does not automatically follow that pallet use within containers is any more or less efficient. The pallet is a component of transport and storage that interfaces with the container for the land transport component. Emerging opportunities for using pallets within ISO containers for coastal shipping is a secondary issue and needs to be treated as a marginal benefit.

Figure 6-4 Key components of logic within the study

Moreover, exogenous factors such as markets and growth are relevant to the extent that

Key market segments need to be assessed separately, as each has different growth rates and vary with respect to the mix of domestic and international trade

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Towards ISO packaging standards

Towards ISO packaging standards

Towards ISO packaging standards
Towards ISO pallet standards

Towards ISO pallet standards

Towards ISO pallet standards
ISO packaging standards Towards ISO pallet standards Mutually exclusive decision points Compliance with ISO

Mutually exclusive

decision points

Compliance

with ISO

standards

ISO

packaging

standards

and domestic

pallet

standards

Domestic

standards

Note 1 Alignment and efficiency of pallet standards with packaging and container standards Current situation
Note 1
Alignment and efficiency
of pallet standards with
packaging and container
standards
Current
situation within
Australia, due
to increasing
imports by
multi-national
firms
Closed systems
and domestic
standards; may
be efficient in
a steady state
The “status
quo” will lead to
substantial
inefficiency
currently
estimated to
be 10-15% sub-
optimal
utilisation
Marketing and manufacturing strategy
Note 2
Prevailing standards
Domestic focus Hybrid/transitional Globalisation and phase increasing connectivity 25% 50% 75% 0%
Domestic focus
Hybrid/transitional
Globalisation and
phase
increasing connectivity
25%
50%
75%
0%

Export and import trade as a percentage of domestic consumption

Note 1 – denotes a strategy that seeks to maintain the status quo Note 2 – proposes that decisions regarding cartons ad pallets are mutually inclusive

6.5

Conclusions

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The logic and rationale for a prevailing pallet standard is derived from the conceptual notion of a supply chain and its composite elements, which exist within the notion of “why do goods move?”

A study into pallets standards requires a number of considerations such as

o

A long range view of the served market

o

A holistic view of the supply chain

o

The relevance of unitisation and efficiency

o

The relationship between products (SKU’s), pallets, containers and/or trucks

It does not automatically follow that harmonisation between Australia and its customers/suppliers on pallet standards leads to such efficiency if considered in isolation. Nor do such alignments justify an increase of pallet usage within containers to facilitate efficient loading and unloading.

The issue is the degree to which retention or dissolution of the current standard impact higher order issues such as

Carton sizing, consistent with the global ECR (Efficient Consumer Response) strategy Customer expectation relating to product presentation in overseas

markets The need for single organisations to tolerate multiple pallet

standards within a regional (sub-global) manufacturing or supply strategy. Changes in the market mix serviced by supply chain processes.

Differential growth rates exist for domestic production, export trade, import trade and domestic consumption, which will lead to a

change in the market mix served by Australia’s logistics systems (and standards)

It is very conceivable that within the next 20 years Australia’s international trade and logistics task will reach 70% of its domestic consumption 5 . That is

% international trade =

$import + $export ---------------------------- $ domestic consumption

where domestic consumption is a “proxy” for domestic land transport

Logistics processes and standards are increasingly global in context and application, with marketing and manufacturing strategies being executed at a global/regional level by large multinationals with substantial countervailing power

5 The GISCC report by Symonds Henderson identified that there is financial justification to introduce the ISO pallet where international trade reached 70% of domestic grocery consumption

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Revenue Domestic

Domestic logistics

Geographic focus

Revenue Global

Organisation or

Export logistics

Import logistics

Slip sheeting

individual

Type

7. SYNOPSIS OF SURVEY OUTCOMES

More than 50 individuals representing 40 organisations were interviewed to provide views and input into the study. These include:

Manufacturers/Importers/Exporters Equipment providers Retailers Policy Advisers

7.1

Respondents

The table adjacent provides a summary of the key participants assessed in terms of financial size, geographic focus, logistics scope and perceived positive or neutral support or the issue of pallet standardisation.

A comprehensive contact list is provided under separate cover.

Table 7-1 Summary of key survey participants

 

Bachell

Equipment

n/a

Asia

Baxter

Manufacturer

$8000m

$285m

Global

BBC

Retailer

Not stated Asia

Chep

Equipment

~$140m

Global

Coles

Retailer

Not stated

Domestic

CRT

Services

$50m

Domestic

CUB/Fosters

Manufacturer

$4200m

-

Global

DFAT

Policy

-

n/a

Asia

Dexion

Equipment

-

-

Domestic

FCL

Services

-

$100m

Domestic

Heinz

Manufacturer

$500m

Asia

Holden

Manufacturer

Not stated

Global

IKEA

Retailer

$7000m

$110m

Global

JJP

Manufacturer

$230m

Global

K&S

Services

$130m

Domestic

Kelloggs

Manufacturer

Not stated

Domestic

Loscam

Equipment

Not stated

Asia

Murray Goulburn

Manufacturer

$1500m

Asia

Nestle

Manufacturer

$2200m

Global

P&G

Manufacturer

>$1000m

Global

SCT

Services

-

$100m

Domestic

Simplot

Manufacturer

$3500m

$500m

Global

Sonneveld

Policy

-

n/a

Global

TDG

Services

-

Not stated

Domestic

TNT Materials

Equipment

-

Not stated

Domestic

Toll Logistics

Services

-

Not stated

Asia

Toll SPD

Services

-

$265m

Domestic

UBA

Manufacturer

-

$1000m

Asia

Uncle Toby's

Manufacturer

$350m

Asia

Unilever

Manufacturer

$1300m

Global

Woolworths

Retailer

-

$15000m

Domestic

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7.2 Summary of Interviews

A summary of interviews is provided in the part two of the report

under separate cover. The interview process provided an exhaustive

range of perspectives with the “multinationals” providing the most strategic outlook.

Service providers expressed concern regarding the impact and cost of change, whereas equipment providers expressed a degree of “neutrality”, indicating a preparedness to follow customer directions.

Early within the survey process, discussion tended to pursue operational and technical perspectives, however later discussions identified the links between manufacturing, marketing, marketing policy, carton standards and pallets. This line of research led to the development of the Conceptual framework shown in Figure 6-1 on Page 20.

7.3 Conclusions

A number of consistent messages emerged from the interview process

conducted within the scope of the study Supply chain philosophy in 2001 has progressed significantly since the GISCC report of 1997. Supply chain management has emerged as a critical differentiation for firms in 2001 to 2010 Manufacturing is consolidating to pursue scales of economy Supply chain processes are fundamentally changing with concepts of “shelf ready packaging” and “reverse crate flows”, emerging. This is being facilitated by strategies such as

Efficient Consumer Responses and Efficient Unit Load, and supported by great collaboration than has existed in the past.

Stockholders are seeing more sophisticated products (crates, trolleys, slip sheeting) and alternate materials such as plastic The future of the wooden pallet is limited; the study and review process was seen to be more about the standardisation process of how individual cartons aggregate into “blocks” or “units” that comply with a universal footprint standard for international distribution. There is a clear awareness by multi-nationals that the carton and pallet size is standardizing on the ISO footprint of 1200 x

1000mm

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8. MARKET CONTEXT

The application of a particular item of handling or transport equipment such as pallets and containers must be seen within the context of its market, and an assessment of the “served market” is considered worthwhile.

Not all supply chains are serviced by pallets and/or containers, rather are limited to supply chains servicing specific manufactured and/or value added products.

Conclusive data regarding the physical movements of these goods within supply chains is not available, however judgements can be made from an assessment of the value of the goods within specific markets.

The following analysis based on the degree of unitisation 6 employed will determine the relative market sizes for three (arbitrary) classifications, which are

Goods that are never unitised, palletised, or containerised, and are generally bulk commodities and refined products, or automotive vehicles. Goods that are not typically palletised, and but may be containerised, and may generally be handled and break-bulk

6 For the purpose of efficient definition, “unitisation” will refer to the generic practice of value adding through packaging and/or used of pallets and containers for the transport and storage of the goods

cargoes. Such products include steel and lumber, however may be unitised dependent on destination, consignment size and so on. Goods that are almost always unitised and containerised, such and grocery and other consumer items. Products are always transported domestically on pallets, however import/export movements may employ pallets, slip-sheeting (or similar) or are hand-stacked within the container.

The classification used herein will also show this in graphical form as follows.

Classification

Unitised

 

Palletised

Containerised

     

(international)

 

A (never)

(never)

(never)

 

B (never)

?

(not usually)