An interview with CHEP UK & Ireland director of retail & asset management Helen Lane

HSS: Can you tell us about new CHEP initiatives?

Helen Lane: Load containment is a fundamental part of the dispatch process. The stretch film secures the product to the pallet and ensures that the load is protected in transit and arrives at its destination in the same condition as when it was dispatched. However, inadequate or poorly applied wrap can result in product damage and unsafe loads in transit which can cause rejected loads on arrival at the retailers.

To tackle this issue here in the UK, we’ve just launched CHEP Stretch – a new, innovative way to supply, maintain and manage pallet wrap solution. CHEP Stretch has been specifically designed to save customers from the inefficiencies and hidden costs of hand wrapping, and the large capital expenditure required to purchase a semi-automated machine. Instead, CHEP Stretch provides:

• a market leading semi-automatic machine;

• high quality film;

• ongoing support and maintenance for the equipment.

And the whole solution is bundled together in a per pallet wrapped, cost effective price – essentially a pay-as-you-wrap service. So customers only pay for what they use, and don’t need to hold large stocks of the film wrap. CHEP Stretch allows them to simply flex the service in line with demand, freeing them from the risk, cost and hassle associated with other stretch wrap solutions.

Our calculations show that for some customers we can halve their total load containment cost.

Clearly, this is a diversification for CHEP, while we are still utilising our supply chain expertise coupled with our core competence of pooling. This is another clear example of where we have listened to what our customers are telling us, and delivered a solution that can help them reduce their total packaging-driven supply chain costs.

To deliver CHEP Stretch we’ve partnered with Lantech, the pioneer of stretch wrapping and the world’s largest manufacturer of stretch wrapping equipment with over 65,000 machines sold worldwide. CHEP already has a proven track record with Lantech machines being part of the CHEP Stretch solution already on offer in Australia and New Zealand. Together, CHEP and Lantech bring over 40 years collective supply chain experience, providing customers with access to unrivalled expertise in load containment and supply chain protection solutions.

In summary, here’s how it works:

• We install a market leading Lantech semi-automatic stretch wrap machine at the customer’s premises;

• We provide the customer with stocks of the required stretch wrap film in the appropriate thickness for the goods being wrapped;

• We arrange ongoing servicing and maintenance of the machine;

• We monitor the wrap volumes against the pre-requisite targets set at the outset;

• The customer just adds their product and fulfils their customer’s orders.

We’ve specifically designed CHEP Stretch to remove the risk, cost and hassle associated with other stretch wrapping solutions. The benefits are compelling:

No large capital investment is required in the machinery. In addition, the machine is fully maintained and managed on behalf of the customer by CHEP ensuring the machine is kept in optimal condition, reducing the possibility of any potential downtime;

Customers have access to a highly reliable semi-automatic machine from the world’s leading manufacturer of stretch wrap equipment, Lantech;

A semi-automatic machine means minimised manual intervention is required which significantly reduces potential for lost time safety incidents. This also leads to minimised unproductive hours for staff who can be redeployed on more value-added activities elsewhere within an operation.

Compared with hand wrapping, semi-automated stretch wrapping gives improved product presentation which improves customer satisfaction and enhances a customer’s reputation. There is also much less product damage and fewer rejected loads. This also leads to a huge reduction in re-work associated with rejected loads needing to be re-wrapped.

Semi-automated stretch wrap application ensures safer, more stable loads which improves product protection in transit and reduces the risk of product damage which could lead to contamination of whole loads, and the potential associated costs.

Customers only pay per pallet wrapped, so costs are predictable and flexibility is greatly improved allowing them to manage the peaks and troughs of demand which is particularly useful if a business is affected by the seasons. 

Unpredictability is eliminated which means gives a much more efficient film stock-holding. This model also removes the risk of film price fluctuations which can be directly affected by oil prices.

Elimination of inefficient hand wrapping which can be costly, resource intensive and prone to poor quality wrapping which can lead to product damage and load rejection.

In addition to launching CHEP Stretch, we’re also seeking to move in the area of container devanning, as we believe that the current dramatic expansion of UK ports that is taking place represents significant opportunities throughout the supply chain. 

A visit to any major UK port demonstrates clearly the huge growth in container traffic coming into the UK. It is estimated that more than four million TEU (Twenty Foot Equivalent) containers of goods are imported to the UK every year of which about 1.5 million contain goods such as food, beverage, durables and clothing. Of this total some 4% of containers are devanned at the port side. 

Devanning is the process whereby a container is unsealed and its contents repackaged, often palletised, for onward distribution within the supply chain. Of the remainder, 75% are transported out by road and 21% by rail to undergo a similar operation inland, before the goods end up at their final destination for retail consumption. 

This operation of devanning uses an estimated 21 million 1200x1000mm pallets every year, with about eight million being used by 3PL operators at port-centric or inland locations. 

With such large volume, it obviously represents an attractive opportunity for pallet operators like CHEP.  As such, we’re actively seeking opportunities within this sector. 

HSS: How is CHEP progressing towards its stated objective of becoming a more listening company?

HL: CHEP’s objective is to build better supply chains together with our customers by helping them to store, protect and move their products in a cost effective, safe and environmentally sound way. 

Through our quality equipment, information systems, network scale, insights and people, we believe we can help every business to systematically reduce their total packaging-driven supply chain costs.

We offer concrete ways to help our customers make their supply chain operations leaner, greener and safer. This means that our customers can extract a greater return from their supply chain investments, increase their performance to an ever more competitive level and focus scarce resources on their core business.

We are constantly working with our customers to seek ways in which we can help them to identify and then reduce their total packaging-driven supply chain costs. To achieve this we are developing our service offers to be customer-lead in a drive to help them remove cost out of their supply chains.

The costs I’m referring to occur throughout the supply chain, with some being directly visible, such as the direct purchasing costs of the materials, and many being invisible, such as:

• the administration needed to order and store the equipment/platforms;

• costs associated with handling multiple platforms if different receivers specify different approaches;

• poor platform selection causing damage to goods in transit meaning they need to be returned and/or replaced;

• trucks that cannot be filled to optimum capacity or routed properly;

• platform collapses in transit resulting in spillages which need to be cleaned up;

• items needing to be decanted or re-palletised before they can be used/displayed. 

And in the case of retailing for example, this can ultimately affect on-shelf availability and in-store dynamics.  

These visible and invisible costs can also reside at all stages in the supply chain, not just within the four walls of a single business. And the selection of the platform in one part of the supply chain can cause some or all these issues in another part of the supply chain, sometimes without the implications and pain being known or considered.

At CHEP, we believe that these issues are increasingly relevant as, for example in consumer goods, the trends towards more online and convenience retailing and the increased use of promotions are increasing the complexity of supply chain fulfilment operations, and this extra complexity drives cost for both manufacturers and retailers alike. 

Some companies have also sought to address the issue themselves and own/operate their own ‘closed’ pools of pallets and containers or buy one-way packaging/shipping platforms, but this can be expensive and inefficient. In addition to removing cash and capital that can be used for core business investment, it drives extra complications around administration to procure and manage the equipment, the equipment takes up space and can often get lost or damaged and drives the need for still further capital and/or operating expense.  

Fundamentally, this means that packaging-driven total supply chain costs are much higher than they need to be. What I mean by that is that the selection of the platform/packaging used to store, protect and move goods through the supply chain, and the ownership model employed, can have a significant impact on the cost, in the case of automotive on the cost per part for example, and in consumer goods on the cost per case or cost per pallet. 

To address these issues, we are continually working with our customers to build and develop the right scenarios that lower their total packaging-driven supply chain costs. And for us to do this effectively, we obviously have to listen intently to their requirements.

One of our relatively new Service Offers is Managed Exchange that was launched last April. This was developed fully in response to customer feedback to give them increased flexibility and to make overall pallet management simpler.

Managed Exchange now provides an efficient pooling solution designed to support today’s modern supply chain. It allows suppliers to collect loads of trade quality pallets either from the same retail location following a delivery, or from any Managed Exchange retail location around the country at a later time. Managed Exchange collections are no longer limited to the same delivery point providing customers with increased flexibility whilst also allowing them to improve load capacity optimisation.

Under Managed Exchange, pallet control vouchers (PCVs) are no longer required as Managed Exchange is a fully declared, electronic evolution of the previous pallet exchange service offer. This allows customers to gain full visibility of supply chain movements, and greatly simplifies pallet management.

Last Mile Solutions is another excellent example of where we are listening closely to what our customers are telling us, with a view to us developing products and solutions that will ultimately drive cost out of the overall supply chain, benefitting manufacturers and retailers alike.

HSS: In addition to pallets, CHEP is becoming better known for a range of returnable storage units. What’s the latest news?

HL: CHEP is part of the Brambles group which is a pooling solutions company specialising in the provision of reusable pallets, crates and containers and associated logistics services.

In pursuit of its geographical expansion and platform diversification strategy, Brambles recently purchased the Pallecon container business (Revenues to December 2011 of Euro 53 million, primarily in Western Europe, Australia & New Zealand, EBITDA of Euro 17 million). 

The Pallecon acquisition will complement Brambles’ plans to grow its IBC operations worldwide, in line with its strategy of expanding its pooling solutions operations into a broader range of service lines and customer segments.

This is in recognition of the fact that Brambles is a pooling specialist, so regardless of whether they are pooling pallets, crates, or containers, their core competence is around equipment pooling – the shared use of high quality standard equipment by multiple customers, which spreads the cost across the pool.

This recent acquisition also recognises the changing face of the supply chain and the need to offer products and solutions that our customers need and want to help improve their supply chain efficiency.

The CHEP brand still represents Brambles’ Pallets business though, and in the UK this is very much still regarded as the platform of choice within the supply chain.

HSS: Can you please tell us about recent developments in standardising last mile solutions?

HL: The nature of CHEP’s business and its position in the supply chain means we are in a good position to collaborate with both retailers and manufacturers to help improve supply chain efficiencies and to tackle the larger issues affecting the supply chain, like Last Mile Solutions.

As retailers seek efficiencies in the "last mile” of their supply chain and adopt unique handling solutions for their own supply chain, manufacturers have to deal with an increasing range of non-industry standard handling solutions. Many manufacturers are facing a steady increase in the number of ways they have to prepare their products for distribution. 

Research conducted by CHEP between January and April 2011 from across the supply chains of 41 retailers in seven European countries identified that 24 different packaging formats and 55 different packaging product platforms are currently in use in this crucial "last mile” of the supply chain. These packaging types are seeking to address the merchandising, replenishment and display requirements of the retailers.

In the UK CHEP is actively working with retailers and manufacturers alike to explore potential solutions to help manage the platform complexity associated with the challenging "last mile” of the supply chain. 

Collaboration is the key: in a recent research study by IGD 85% of retailers and 80% of manufacturers think collaboration has improved on a number of fronts.1

CHEP is actively working to bring manufacturers and retailers together to discuss standardised approaches that reduce the complexity and inefficiency being created for manufacturers by retailers adopting their own unique handling solutions. CHEP is working with the manufacturers and the retailers to provide packaging solutions that can assist with the efficient delivery of goods in a retail-ready format.

We are looking to find the common ground that is realistic and will satisfy as many players as possible, while at the same time reducing the level of complexity that is currently driving significant supply chain costs for all.

CHEP is well positioned to facilitate the necessary collaboration to make this happen and has the people, knowledge and products to deliver a solution that will help manufacturers and retailers alike. CHEP has a range of display platforms and merchandising units already in use in the supply chain across Europe.

Implementing the right merchandising unit is seen as one of the key strategies being implemented to reduce cost and complexity.

Other strategies are being implemented to increase revenue and margin, including Brand Management, Category Management and Shopper Marketing.

Shopper Marketing is the use of insights-driven marketing and merchandising initiatives to satisfy the needs of targeted shoppers, enhance the shopping experience, and improve business results and brand equity for retailers and manufacturers alike.

HSS: Is the growth of e-commerce, with the focus on deliveries to the home, leading a reduction in the demand for pallets from retailers?

HL: E-commerce is certainly changing the dynamic of the supply chain in terms of how consumers interact with the retailers, and also how retailers fulfil customer’s orders and manage demand.

Retailers are adopting different supply chain models to allow them to fulfil this demand – whether that is a distribution centre model, or a hub-and-spoke approach. And this is having an impact on how supply chains operate.

However, this is having no impact on demand for pallets as the fundamental aspect of the manufacturer needing to ship their products to the retailer is still very much intact.

And in fact, if anything, the rise of e-commerce is leading to increasing demand as consumers are given more choice and flexibility in terms of how they are able to buy their goods and interact with the retailers. They are no longer restricted to visiting shops during specific opening times.

However, a number of other factors also have significant roles to play in influencing the level of consumer demand – the wider economic landscape, along with the weather are two very significant factors that no one has any real control over, yet both can have a dramatic impact on the performance of a business.

The nature of CHEP’s business and the predominance of FMCG customers means that its performance can be easily influenced by both of these factors. This summer is a classic case in point where we have experienced a prolonged period of fine weather which has driven demand for the likes of beverages, ice creams and BBQ related items which is obviously very good for our business performance.