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RFID Makes Pallet Tracking More Palatable

Japan Pallet Rental is deploying an RFID system to locate its rental pallets in the supply chain and create value-added services for its customers.
By Bob Violino
Aug 31, 2009—Pallets, the flat structures that support containers of goods, have become fixtures of many transport processes worldwide. They make it easier for manufacturers and shippers to load and unload heavy stacks of goods, and can decrease damage to products and containers, as well as increase storage efficiency. Some businesses employ disposable pallets, but on a large scale, they can be cost-prohibitive and adversely affect the environment. Other businesses use reusable pallets, but collecting empty ones is an added expense.

Japan Pallet Rental (JPR) addresses cost and environmental concerns through its pallet-loaning business. The company, founded in 1971 and headquartered in Tokyo, operates six branch offices in Japan, an office in Singapore and 116 pallet pool depots throughout Japan, including 16 with repair facilities. Its customers, from a wide range of industries, include Matsushita Electric Industrial, Nestle Japan Group, Nippon Oil, Procter & Gamble Far East, Sony Supply Chain Solutions and Sumitomo Chemical.

As the supply chain has become increasingly complex, the movement of pallets has also become more complicated—and the risk of pallets being lost or returned late has become greater.

In 2008, JPR rented 20 million pallets, generating $159 million in sales. The company's reusable pallets circulate in the Asia Pallet Pool system, an alliance of pallet rental companies whose pallets move between Japan, China, Korea, the Philippines, Singapore, Taiwan, Thailand, Vietnam and the United States. The use of standardized pallets that re-circulate among businesses in the region can increase efficiency by eliminating the issue of collection.

But pallet rental companies such as JPR often struggle to locate their assets. Some firms lose as much as 30 percent of their pallet stock every year, which can be a significant drain on profitability. What's more, not knowing the pallets' locations can make it difficult to procure accurate payment from customers.

In a typical transaction, JPR rents pallets to a client, after which each pallet, loaded with that customer's products, moves to a warehouse for temporary storage. When an order for products is received, the appropriate pallet is moved to a distribution center (DC) operated by a wholesaler. (It's rare that pallets are used for goods transportation between a wholesaler and retailer, JPR reports, due to the limited space at individual retail store sites.) When the products are unloaded, the pallets are stored at the DC until JPR dispatches trucks to retrieve them.

As the supply chain has become increasingly complex, the movement of pallets has also become more complicated—and the risk of pallets being lost or returned to JPR late has become greater. A JPR customer, for example, might ship a pallet to a third party that is not a rental pallet user. If one party puts the wrong number in a pallet movement form, or if someone moves a pallet to a location without that move being reported, it is then difficult for JPR to track that pallet's location. If pallets are not being used, that translates into higher operating costs for JPR, and the company is forced to keep more pallets available in inventory in order to meet customer demand.

To address these issues, JPR sought a low-cost, efficient, pallet-tracking method, and determined that radio frequency identification technology would provide the best solution. While the company was not experiencing significant pallet losses, officials realized that finding an inexpensive way to track the pallets made sense for a number of reasons.
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