If your industry moves goods between facilities, such as distribution centers and stores, you may be a great candidate for a closed distribution system. Closing your shipping loop means re-using and recycling your pallets. You send product on pallets from the distribution center to a store where the product is offloaded and the pallet is sent back to the distribution center. When a pallet is in need of repair, the distribution center sends it to a recycler, a pallet manufacturer that also repairs pallets. The pallet recycler then sends repaired pallets back to the distribution center.
This system can end up saving your company on pallet cost as well as time spent ordering and tracking your pallet inventory.
Closed Loop Considerations
Not every industry is a good candidate for a closed distribution system, but it is worth taking a look at your pallet use to see if it might be an option. One of the biggest users of pallets, the grocery industry, illustrates the details of using the closed loop system.
The flow of product between warehouses and grocery stores is fairly straight forward, made even more so by the standardization of pallet size within the industry. Pallets are loaded at the distribution center and then shipped to the retail stores. The pallets are unloaded and then returned to the distribution center. Because all the pallets used are the same size, it eases the logistics of this transition. They do not have to worry about sorting through which pallets are used for which shipments. Using a standard size pallet is not a requirement for using a closed loop system, and it is not practical for all industries, but it does make the process easier.
Pallets that are used in closed shipping loops are generally of higher quality since they must be more durable to withstand the multiple uses. This means a larger initial investment in your stock of pallets. Because you do not have to buy new pallets for every shipment, however, it can still be the most economical choice. Even when you have to get pallets repaired, it costs a fraction of the price of a new pallet.
Not all industries can re-use pallets. When there are problems with contamination from products, or if there are complicated regulatory issues that arise when shipping pallets across borders, then single-use pallets are the best option. In these cases, closed loop shipping is not a viable alternative.
If your shipping loop can be closed, it can help you save time and money on pallets. Purchasing higher quality pallets up front, re-using them, and repairing them when needed can be a wise investment for companies.