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Pallet Tracking Goes High Tech

Can RFID transform the way CHEP, a global supplier of wooden pallets and other reusable assets, does business and help its customers save money? CEO Victor Mendes says yes.
By Mark Roberti
Jan 01, 2004—At a sprawling, 280,000-square-foot low-rise building nestled among the lush green fields of Davenport, Fla., CHEP recycles wooden pallets. Eighteen-wheelers back up to large dock doors on the east side of the building. Battered forklifts unload stacks of empty, blue-sided wooden pallets. Each pallet is inspected and put on an intricate network of conveyors. Damaged pallets are diverted to a repair station; good ones snake their way to a painting area and finally to the other side of the building, where forklifts put them onto semis waiting to take them to a manufacturing facility, where they’ll be loaded up with product and sent through the supply chain again. It all looks very low tech. But looks can be deceiving.

CEO Mendes (left) with CIO Slyster in the data center

CHEP, the world’s largest supplier of wooden pallets, is in the process of taking pallet tracking high tech. This Florida facility, which handles more than 10,000 pallets a day, was the hub for one of ultra-high frequency (UHF) RFID technology’s single largest tests, a yearlong project that began in May 2002. The company has invested a total of $20 million over the past five years to put itself at the center of the RFID revolution. “When you look at the lowest common denominator in the supply chain, it’s the pallet,” says CEO Victor Mendes. “No other company is so well positioned in the supply chain” to help transform product tracking with RFID.

CHEP is a subsidiary of Brambles, an Anglo-Australian conglomerate with more than $5.4 billion in revenue. CHEP accounts for about $2 billion of that. The company manages more than 250 million pallets and reusable containers through a global network of more than 550 service centers in 42 countries. Among its more than 100,000 customers
worldwide are such global giants as Carrefour, General Motors, Hewlett-Packard, The Home Depot, Kraft, Nestlé, Procter & Gamble, Tesco, Unilever, Wal-Mart and Woolworths.

CHEP would like to use RFID to add value to the service it provides to these companies and use the technology to solve one of its own problems: keeping track of its pallets and using them more efficiently. The problem has to do with the nature of the business. CHEP issues pallets from a service center such as the one in Davenport to, say, Kraft. Kraft loads cases of Tang on the pallets and ships them to a retail distribution center or perhaps directly to a store. The retailer takes the cases of Tang off the pallets and returns the pallets to a different CHEP service center. Given that the pallets move among 50,000 different manufacturing facilities and 400,000 retail sites, it’s not hard to understand why CHEP has trouble maximizing the utilization of its assets and knowing which customer or location is responsible for lost or damaged pallets.

Discovering the potential of RFID
About five years ago, John Fletcher, then the CEO of Brambles, pushed CHEP to begin exploring RFID as a way to improve asset tracking and customer service. In 1999, when the Uniform Code Council, Gillette and Procter & Gamble teamed up with MIT to create the Auto-ID Center, CHEP saw the potential benefits of creating a low-cost RFID system and became one of the organization’s earliest sponsors. When the Auto-ID Center planned a field trial to track product stacked on pallets from manufacturing plants to distribution centers, CHEP provided the pallets fitted with RFID tags.
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