Retailers manufacturers hoarding trays fuels pallet-gate shortage

Australia’s two major owners of reusable pallets say retailers, producers and manufacturers are hoarding and refusing to return the crucial shipping items, contributing to a stock shortage in the lead up to Christmas.

Supermarket giants Coles and Woolworths have both raised concerns in recent weeks about a shortage of pallets â€" the wooden trays used for shipping goods which form the unglamorous backbone of supply chains â€" as COVID-19 causes major snarls in global shipping networks.

Pallet supplies say customers won’t send their pallets back to them.Credit:Luis Enrique Ascui

Coles boss Steven Cain dubbed the situation “pallet-gate” two weeks ago, and said there was not enough wood to build new pallets while existing ones were stuck in warehouses during Victoria’s COVID-19 lock down.

But CHEP Australia and Loscam, the two major operators of the country’s shared “pallet pool”, say the shortage is caused by their customers amassing a backlog of trays, as they stockpile goods in warehouses to guard against future COVID-19 supply chain disruptions.

Customers are also moving pallets back and forth among themselves to safeguard their own supply lines, they say, rather than sending them backto CHEP and Loscam for redistribution in the shared pallet pool.

CHEP Australia managing director Lis Mannes estimated her customers were holding the equivalent of one month’s extra stock in warehouses ahead of Christmas compared to last year.

“A short-term consequence of this is that... substantially fewer pallets are returning to our service centres for onward supply,” she said in a statement.

CHEP had contacted all of its customers to request “urgent co-operation and support in addressing this issue”, she said, and was working with supermarkets and the Australian Food and Grocery Council on the problem.

The letter CHEP sent to customers last week said there was also a “a growing trend to both hoard pallets” and “circumvent the usual flows in the shared pooling model” by sending them between themselves.

CHEP is owned by the $14 billion ASX-listed Brambles, which operates the largest pool of reusable pallets in the world. Ms Mannes said CHEP’s total pool of pallets had increased in the past year, with it buying 41 per cent more pallets compared to a normal year.

Daniel Bunnet, the local executive vice president of Loscam, said the number of pallets being returned to its depots dropped almost 50 per cent in September.

“Over the past few months we have witnessed a significant increase in pallet sharing among our customers,” he said in a letter sent to customers last month and obtained by this masthead.

“This will continue to seriously impede our ability to meet the basic market demand until this practice ceases.”

Mr Bunnet said the practice was also a safety risk, as Loscam could not inspect or repair the pallets, and the group could not meet market demand until it ceased.

“We also encourage you to raise this with your own trading parties, including retailers, who may be supporting this practice,” he said.

The major supermarkets and the Australian Food and Grocery Council (AFGC) have established a “pallet taskforce” to try and get more wooden trays into circulation.

AFGC CEO Tanya Barden said that would include coordinating communication between suppliers, retailers and governments.

“Many companies are currently building stock ahead of the peak Christmas period and the importance of making sure production is optimised across the industry is a key reason for the AFGC bringing stakeholders together to ensure pallet availability impacts are minimised over the next few months,” she said.

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