Buy Pallets – Read Why
According to a study by Pennsylvania State University released in August 2004, leased or rented pallet systems are, on average, more costly to the customer through the supply chain than purchased pallet systems, by at least $1.00 per trip. The study’s other conclusions:
- The average system cost, to all pallet users in a typical grocery supply chain, of a rental pallet is from $1.01 to $2.11 higher than the average system cost of a purchased pallet.
- Pallet system costs roughly equalize once the pallets enter the distribution system. However, daily rental fees, transfer fees, and non-participating distributor (NPD) surcharges begin to offset the higher acquisition costs of purchased pallets. Higher initial costs and product damage costs in the purchased pallet system are offset by the higher administrative costs of rental pallet systems.
- Final disposition of the pallets determines the ultimate cost of the two systems. The return credit of sell price of purchased pallets yields this cost advantage of the purchased pallet system and it is increased by the rental pallet return costs. Since the system price differential is not realized until this final disposition, only distribution chains or vertically integrated corporations realize the impact of this differential.
- The 15-year old pallet system cost calculations of the Cleveland Consulting Group assume major cost estimates for purchased pallets that seem far out of line for today’s industry. The total system costs for rental pallet systems are remarkably accurate, however. But, due to the overestimated high purchased pallet system costs, the Cleveland study erroneously concludes purchased pallet systems are higher to pallet users than rental pallet systems.