Why should you be careful of blue pallets and what are the alternatives?

CHEP is the trade name for the Commonwealth Handling Equipment Pool, the leading force in the North American pallet pooling market.

Curiously for a North American organisation, CHEP evolved from an initiative developed by the Australian government during the Second World War. When American troops returned home after 1945, they left behind millions of U.S. Navy issue blue pallets at their former military bases. The Australian government established CHEP, selling it in 1958 to Brambles, an Australian company with a worldwide presence, though it's predominantly in the North American market.

Market Leader

Also known as Big Blue for its distinctive 40 by 48 inch blue plastic or wooden pallet product, CHEP has a 90 per cent share of the pallet pooling market in North America and probably accounts for about 20 per cent of all pallet usage in the region. In addition to its pallet services, CHEP also rents containers and reusable plastic crates.

Pallet pooling systems rent reusable pallets under the condition that the customers return the pallets rather than selling them on or destroying them. CHEP loads goods on to its own pallets, and these move down the supply chain to the final distributor, who has to return the pallet to the nearest CHEP retrieval centre.

Once the pallet has been inspected for any damage and quality standards, it is fit for re-use.

Pooling Advantages

The advantage of a pooling system to the manufacturers and distributors is that they use quality pallet and container products without the initial outlay of buying them. CHEP or any other pool is able to meet any seasonal increases in pallet demand. The businesses will benefit from up-to-date materials handling and control systems without have to find the capital for any systems upgrade.

Ownership Issues

However, sometimes business may find they have a trickle of blue pallets coming into their premises and have no clue what to do with them. These are pallets that are either stolen or leak out of the pooling system, ending up in the back yard of a business that is not a CHEP client.

Some businesses sell on the pallets to CHEP customers, while others find a way of returning them to CHEP for a pre-arranged fee. Some others keep them. From CHEP's point of view, the mere possession of blue plastic or used wooden pallets by a non-customer has indicated theft. This has led to a series of court cases in the U.S. that have affected CHEP's corporate and stock market standing.

Alternatives

Now CHEP has a number of serious rivals in the pallet pooling market.

• iGPS is the U.S. market's second-largest pallet pooling enterprise. Like CHEP it offers 40 by 48 inch pallets. It rents plastic pallets at prices similar to those for wooden ones. The pallets may come with a GPS tracking system attached if the customer requests.

• The Canadian Pallet Council is a cooperative pallet pool that was established in 1977. CPC does not own the pallets but organises their exchange, repair and inspection. A CPC pallet is hardwood and also measures 40 by 48 inches.

• Euro Pool. This is continental Europe's largest returnable packaging supplier to the fruit and vegetable market. It operates in 15 countries with 45 service centres across Europe.

• PECO is a leading North American pallet rental company with a distinctive red pallet. It supplies about 40 per cent of the pallet market in groceries.