Will Brambles results change market perception?
Brambles financial results will be released next week and the industry is waiting with baited breath. Following the loss of ConAgra, Brambles has said that they have gained more accounts than they have lost. Brambles and CHEP have downplayed losses and trying to stay on message. The issue is, the market is unclear on what the message is as market value is at a 52-week low. Closing out the week Brambles stock has dipped to $5.23 per share. While there have been growth in several market sectors, Brambles organic growth was close to zero. The only market showing promise is the Asia-Pacific market and with the Loscam purchase could cause more problems in market perception. One thing for sure, next week will be fun!
iGPS signs Sunny Delight Beverages
iGPS announced today that Sunny Delight Beverages will ship products on the iGPS plastic pooled pallet. Sunny Delight will begin shipping immediately to all U.S. locations. “At Sunny Delight, we regard sustainability as a strategic imperative, and iGPS’ all-plastic pallets will further help us to meet our objective for continual sustainability improvements,” said Ellen Iobst, Senior Vice President of Manufacturing and Technology. “The lighter weight of iGPS’ pallet reduces fuel use and greenhouse gas emissions.”
“Sunny Delight is a great success story and we’re excited to begin working together,” said Bob Moore, Chairman and CEO of iGPS. “As two companies committed to environmental responsibility, I’m confident that this will be a great partnership.”
Bob Moore has been able to gain additional ground on the back of Dole and ConAgra wins. The Sunny Delight business will represent year around business that can be forecasted. This will help iGPS move pallet inventory to regions that are in demand. Correct forecasting for a rental pallet company is imperative to control asset management. The success of a pooled pallet model is the amount of times one pallet can be used in one year, or how many turns per year. Big wins in the Agriculture sector will challenge iGPS as produce is seasonal and has variables that can throw off forecasted numbers. Incorrect forecasting will require iGPS to move pallets from one region to another, which will adversely affect logistics cost.
Communication from iGPS has been positive, but they have yet to show how they intend to meet pallet manufacturing price point with a decaBDE substitute. Pending bills like HR 4394 and Maine State legislation banning decaBDE will give further ammunition to competitors on the safety of decaBDE within the food supply chain and the iGPS plastic pallet. Asset management challenges and proposed solutions like the SpiderAT asset tag could add to future operational failures.
Bob Moore and iGPS has shown that a plastic pallet can be used in all market sectors. However, his grow at all cost strategy could backfire. iGPS needs to strengthen their Customer Service and Asset Management apparatus if they continue at an accelerated growth rate.
About Sunny Delight Beverages
The Sunny Delight Beverages Co. is a leading producer of juice-based drinks in North America and Western Europe. The company has its U.S. headquarters in Cincinnati, Ohio, and its European headquarters in Barcelona, Spain. Privately held, the company’s brands include SunnyD citrus punch, FruitSimple fruit smoothies, Fruit2O flavored waters, Veryfine 100% juices and juice drinks and Elations dietary supplements for joint health.
About iGPS
iGPS operates the world’s first pallet rental service providing shippers and receivers with all-plastic pallets with embedded RFID tags. iGPS’ state-of-the-art pallets are 30 percent lighter than wood, which saves on transport costs and helps reduce green house gases. Its pallets are also more hygienic, easier to handle and, because they eliminate protruding nails and splinters, reduce workplace injuries and damaged equipment. Embedded RFID tags enable shippers and receivers to track and trace shipments. And iGPS pallets are 100 percent recyclable. Launched in March 2006, the company has created nearly 2,000 new green jobs in the U.S. and is led by pallet and supply chain veterans with decades of experience. iGPS (www.igps.net) is headquartered in Orlando, FL and has offices in Dallas, TX and Bentonville, AR.
Con-way Truckload Doublestack™ Optimizes Customer Value
Con-way Truckload today announced the introduction of the Doublestack ™ trailer, which is an advance cargo loading and capacity management system. The Doublestack trailers are converted 53’ trailers with a racking system that allows for multi-level loading of cargo. The racking system in the Doublestack allows for cargo to be tied down while providing maximum cube and product protection. The president of Con-way Truckload stated, “With DoubleStack trailers, we’re maximizing the available capacity customers can use and adding better protection systems to reduce claims, while driving benefits to our operations through more effective asset utilization.”
Con-way truckload double stacked trailers are constructed with reinforced rails and adjustable cross-beams that allows cargo to be securely strapped into each track. Con-way Truckload commented on additional features as:
- Lower costs and reduced facility traffic through maximum trailer capacity utilization.
- The opportunity to consolidate more freight in few trailers.
- Flexibility to adjust and respond to varying capacity needs.
- Protection from damage due to highly secured freight that sits shifting, along with a 100 percent air-ride-equipped fleet.
- Reliable on-time performance exceeding 98 percent to meet time-sensitive delivery needs
- The professionalism of an established carrier with more than 50 years of transportation experience.
This is an example of a company adapting to meet economic conditions through innovation and customer needs. Product damage and unloading hassles have been a problem faced by receiving warehouses for many years. Loads are often less than a full truck load because of the inability to stack more than one or two pallet levels in an effort to prevent product damage. As any warehouse receiving department will tell you, there is nothing more frustrating than opening a trailer and all the product has tipped in transport making unloading difficult, not to mention damage claims against the carrier.
For details on Con-way Truckload’s DoubleStack trailers, visit www.con-way.com/DoubleStack or call 1-800-641-4747.
View a YouTube demonstration of the DoubleStack system at http://www.youtube.com/ConwayInc.
Follow the company on Twitter: http://twitter.com/Con_way_
Con-way equipment images are available at www.con-way.com/en/about_con_way/newsroom.
About Con-way Truckload
Joplin, Mo.-based Con-way Truckload is an operating company of Con-way Inc. (NYSE: CNW) and a leading provider of expedited, time-definite full-truckload transportation services across North America. Formerly Contract Freighters, Inc. (CFI), Con-way Truckload today employs over 3,000 drivers with a fleet of more than 2,700 tractors and 8,000 trailers operating throughout the United States as well as internationally in Mexico and Canada. The company provides full-truckload transportation serving the transcontinental shipping needs of commercial and industrial businesses as well as sister company Con-way Freight. For more about Con-way Truckload, visit us on the Web at www.con-way.com/truckload or call (800) 641-4747.
Con-way Inc. (NYSE: CNW) is a $4.3 billion diversified freight transportation and global logistics company.
A private conversation between CHEP and iGPS
- A conversation between Chip and Bro
In recent releases throughout the internet report after report says Dole has converted 100 percent of their pallet business to the “RFID” tagged iGPS pallet. While it is true the iGPS pallet is RFID capable, the technology has not been implemented in a way that will secure assets to achieve maximum turns per year. The illistration on the left is a conversation I overheard between Chip (a CHEP Pallet) and Bro (an iGPS Pallet). I photographed these pallets loaded with OCC bales headed towards a local recycler. There are a couple of things you can be certain of…1. The pallets were not reported to the store level. 2. neither CHEP or iGPS will be able to get them before they are shipped out. 3. The local store has no means of reporting into the recycler. 4. The OCC recycler does not care. 5. The shipper is financially responsible for the pallet.
Toll Rules Out CHEP Takeover
Paul Little is the Managing Director on the Board of Directors at Toll and recently gave an interview to SupplyChain Review on the company’s performance and interest in CHEP. Although he says “it’s old news” and that “Toll isn’t interested in Chep” anymore, Little adds: “Our view was that Chep was losing marketshare. They had a passing parade of executives. Our view was that if you don’t address the fundamentals then the rest of it doesn’t matter.
“Chep pays very poorly to the people that cart empty pallets, but I’m talking about the whole Chep model globally. Australia accounts for only about 15 percent of its revenue.
“We were concerned about Chep’s whole approach with regard to how the pallet fits into the supply chain. We felt the company’s ability to get a margin is reduced.” For the complete article read, “The Toll juggernaut rolls on”
Toll has acquired multiple companies that manage different aspects of the supply chain. Toll Global Forwarding has grown in annual sales of $1.5 billion with 100 offices and employing over 3000 people across 30 countries. Mr. Little adds that with cash on hand equaling over half a billion there is plenty of room for additional acquisitions both large and small.
Brambles stock continues a downward trend closing at $5.46AUD per share, which is quickly approaching a 52 week low. Brambles reorganization pains and hard fought battle with competitor iGPS seems to have shaken investor confidence and concerns that the company is not the right track. The question is, if Brambles continues to lose market value how vulnerable will the company become?
It is clear with iGPS fighting for U.S. market share, Loscam challenging in the Asia Pacific market and continued decline in market value the Gorman plan needs to make noticeable strides to regain consumer confidence.
CHEP vs. iGPS: Asset Management and Customer Service
CHEP is the largest pallet pooling company in the world, but they are not the only company to enter this growing industry. iGPS presents the biggest competition for CHEP USA. iGPS offers the only 48×40 pooled plastic pallet and under the leadership of Bob Moore is making significant competitive ground. The key drivers for a successful pallet pooling model is asset management, operations management and customer service management. From a consumer perspective, they do not care what pallet specification product is shipped as long as it meets market demand, safety and quality. Pallet specification matters more to the pallet company. Pallet management program is what the customer is concerned and is a point of contention. There are three levels in an organization that interacts with a pooled pallet company; management who decides a pooled pallet would benefit operations and sales, the purchasing department who orders and manages pallet assets and the warehouse personnel that load and ship goods. The pooled pallet user will order and manage the system and has a completely different perspective than management. Some reasons a manager will choose a pooled pallet are environmental sustainability, price point, end-user requests and acceptable operational risk. All pooled pallet companies must manage assets to meet financial sustainability. Asset management is an area that shareholders, stakeholders and investors monitor as each turn an asset achieves equate to higher returns.
Humanity is acquiring all the right technology for all the wrong reasons – R. Bunkminster Fuller
When my generation was young(er) movies like War Games intrigued us and the first home computers were available to all. I remember my brother writing simple computer programs on our Commodore 64 thinking we were masters of the universe as we put in those floppy disks into the disk drives. It must be how CHEP and iGPS feel now as they seem to be in a contest on which can develop the most complicated tracking systems.
In recent news iGPS will apply Spider Asset Tags on a selected number of their plastic pallets. The premise is they will be able to track assets through electronic monitoring in the field. CHEP is ahead of the curve on asset tracking technology, but has not employed the option in the field. The 3-in-1 tags offered by CHEP allows for three ways of identifying and tracking pallets. The tag allows for RFID capability, bar code capability and human reading. Since the conversion to RFID can be expensive and most modern warehouses already use bar code readers the 3-in-1 tag offers a cost effective way to monitor pallets. Both choices are a serious use of technology in an attempt answer the asset management issue facing the pooled pallet industry. While it appears the pooled pallet industry is acquiring the right technology, it my opinion they are using it for all the wrong reasons. Implementation of technology is the key to asset management for the industry.
The CHEP solution –
Brambles and CHEP USA has always had an environment of continuous improvement and has presented product development projects that have driven an industry. Given their greatness it is surprising that product offering like the 3-in-1 tag has not been presented as a solution to their customer’s pallet management woes. The CHEP Track and Trace program consists of the following:
- Real-time information on pallet movement and locations. (As they leave and arrive and scanned)
- Sends out alerts when potential issues arise within supply chain.
- Generates reports
- The 3-in-1 tag provides a cost effective solution that uses RFID and Bar Code technology.
The Track and Trace software provides an asset location report that will outline the customer’s supply chain. The tag can be scanned throughout the facility, shipped and arrive at the end user. A notification is sent to the Microsoft BizTalk Server 2006, which is then sent through SAP to the Microsoft SQL Server 2006 and finally back to the company to notify them where the pallet and the product is within their operations. The CHEP 3-in-1 Tag provides full supply chain visibility.
What the tag does not do is find all of the lost assets. The Track & Trace program will need to be implemented properly, both from the shipper and the end-user. It is a good tool that could be part of the asset management solution, but education and implementation would have to go hand and hand. The program was to be implemented in 2007 and is unclear if the program went the way of the Blue-Step Pallet, which was scrapped as the next evolution of the block pallet.
iGPS Alternative
iGPS recently release that they will use the Enfora Spider AT to monitor a small amount of pallets. iGPS is testing how their pallet interacts within the supply chain. According to the Enfora website the tag has the following features:
- Up to three years or more of operations.
- Fully integrated – no need for external antenna or power source.
- Wireless connection reliability.
- Superior GPS sensitivity& geofencing.
- Simplified Over-The-Air configuration & provisioning
The tag is less than 168 grams with versions that work on a radio frequency between 850 – 1900 MHz. Physical interface uses internal USB, laminated external power switch, flexible mounting and communicates through the Enfora Services Gateway2.0. For more information on Enfora and the Spider AT asset tag visit their website at www.enfora.com.
The Spider AT is an excellent tool to track assets of significant value, but I am not sure how it would add to the financial sustainability of the iGPS plastic pallet. While asset management is high on market concerns implementing an expensive solution may not be the answer. From the consumer’s perspective, they may think that iGPS will revolutionize pallet management by decreasing customer responsibility. In my opinion, the Spider AT should be used to create a map of how the iGPS plastic pallet flows throughout the supply chain. With that information a plan can be developed to better manage the pool and obtain greater turns per unit. This is not a solution to the customers management of the pooled pallet.
There something happening here…what it is ain’t exactly clear…
Buffalo Springfield was not singing about the pallet business but some of the lyrics this industry can relate. The pallet industry is underestimated in terms of its significance to commerce, economic growth and investment opportunities. It appears that the major pooled pallet players are more focused on internal controls rather than market needs. Accusations of food contamination from both have resulted in regulatory, policy and consumer advocates to engage the pallet industry that could have long-term negative effects on the market and economy.
I believe existing technology used by both companies are sufficient enough to lessen customer management burden and lost equipment. During my time at CHEP we were exposed to a sales philosophy and training by Miller Hieman, The Sales Performance Company, www.millerhieman.com. I first I thought, great…more training to fill the day at a convention that seem to go on for days. Although, Brambles spared no cost and accommodations were excellent. The one lesson that remains with me today asks the question, “What motivates your customer”. As we filled out our answers the majority seemed to show results that benefited us. So I would put it to Mr. Gorman of Brambles and Mr. Moore of iGPs, what motivates your customers when it comes to asset management and customer service?
On the CHEP side, I have seen the rollout of Portfolio Plus. The on-line pallet manage program designed to give the customers all the tools to manage your pool. I ask, who is Portfolio Plus for? In the reorganization of Brambles CHEP USA pulled 89 Customer Service and reassigned those positions to Orlando. Marketing Directors at CHEP USA will tell you that customer surveys show a positive reaction to the move. The thing about having local representation with mandatory visits is the ability of the representatives to be proactive. I would ask, was pulling local reps for the BVA (Brambles Value Added) or the customer?
On iGPS side, the constant call for wood pallet safety regulation will result with regulations for all as the wood pallet industry will not go quietly into the gentle night without a fight. A plastic pooled pallet model with a $50-$70 price point for manufacturing would require a minimum of 5-7 turns to Brambles 3.5 turns. Mr. Moore needs to focus on asset management and how to get back the thousands of pallets sitting in the lots of pallet recyclers throughout the country. If you need confirmation look out your window next time driving by one. On decBDE the bill HR 4394 from Congresswoman Pingree, I would say enough tomfoolery (to use a term from the generation prior). Some produce require temperature management from the field to the end-user. It is the opinion of some that produce can become contaminated by decaBDE through the hydro-cooling process. That is not the case and it is irresponsible to make that claim.
Brambles and a thought
Brambles started in 1875 by Walter Brambles as a butchering business whose slogan was “cut up and deliver”. A couple of generations later Brambles entered the transport business and listed on the Australian stock exchange in 1956. The pooled pallet concept was created after World War II by the Australian Government and was named Commonwealth Housing Equipment Pool (CHEP). Brambles purchased CHEP in 1958 from the Australian Government. A half a century later Brambles is the leading pallet pooling company and is a multi-billion dollar business. The CHEP pool originated with 60,000 pallets abandoned by the U.S. Government and is now over 300 million pallets strong worldwide. There are between 1.5 and 2 billion pallets in the United States and the competitive landscape for a safe and reliable pallet is fiercer than it has ever been. My word to Brambles is…Basics. It is time to “cut up and deliver” and look beyond the trees and get back to basics.
Brambles Stock Slides
Brambles shares have touched an 11 month low on concerns one of its rivals is making good headway. Read “Brambles shares slide amid lost contract“
Wood Pallet TBA Contamination at Another Drug Company
The chemical called 2,4,6, tribromoanisole (TBA) has been linked to another contamination claim from Glumetza. The company filed with the Security Exchange Commission to alert investors and alerted the FDA. The contamination affects 52 lots of the 500mg tablets which is about 4000 bottles, far less than the 56 million bottle recall from Johnson & Johnson over-the-counter drug earlier this year. Glumetza nor the FDA has released lot numbers or recall announcement.
This case adds more fuel to the call for government intervention in the wood pallet industry. Bob Moore, CEO of iGPS, is urging for government regulation as well as consumer advocate The National Consumer League (NCL). The NCL has conducted independent testing that has shown random wood pallets to be contaminated with E.coli, salmonella and listeria. The company released test results earlier this year. Their release in part stated:
The results came back with 10 percent of the wood pallets positive for E. coli and 1.4 percent positive on the plastic pallets. In addition, the aerobic plate count reflects unsanitary conditions on approximately one third of the wood pallets and one fifth of the plastic pallets. The aerobic plate count indicates the level of microorganisms which help determine the quality, spoilage level, sanitary practices during processes and handling that can lead to contamination. The more serious result showed that 2.9 percent of the wood pallets tested positive for Listeria, which causes 2,500 illnesses and 500 deaths in the United States annually. The NCL goes on to state: “Furthermore, regardless of the materials from which it is made, any pallet that is not properly cleaned between trips increases the likelihood of cross-contamination. Storing a pallet outside, in unsanitary areas, in places accessible to vermin, or near potential contaminants increases the chances that the pallet could harbor dangerous pathogens. In conducting our testing, we observed that wood pallets – which we found to have a higher incidence of pathogens – are more often stored outside and exposed to weather, rodents, bird droppings, and insects.” For more analysis on this subject click here.
It is concerning that another drug company has experienced contamination through TBA transference. TBA is a metabolite of Tribomophenol fungicide and not a product typically used by U.S. pallet companies. The question is pallet source and operational practices. The economic reality has caused companies to take the lowest bid rather than a combination of a fair market price and quality. Due to the slowing economy millions of pallets are sitting in yards across the country. The surplus has allowed large pallet companies to offer less than fair market price, which manufactures are taking advantage of. However, the old adage “you get what you pay for” must apply. There are benefits to working with a reliable, financially stable pallet company even if their pricing is higher. Pallet companies offering a product that requires special handling like pesticides or fire retardants and offers less than market value pricing will look for shortcuts. If TBA is the cheapest product to meet buyer requirements that is what they will use to meet price point.
I believe the focus needs to be on product handling and operational choices. The cheapest alternative is not always the best choice and managers that only look at the bottom line can put the company and the public in danger. There are no cases that link E.coli, Salmonella and/or Listeria contamination due to transference from wood or plastic pallets. The cases of TBA contamination are due to product handling and transference of chemicals into plastic packaging, not food-borne pathogens. Continued pressure from environmentalist, consumer advocates and aggressive marketing from iGPS will lead to government regulation that will affect the supply chain and commerce.
ConAgra Sale of Gilroy Foods Sparks Opportunity for Brambles
ConAgra agreed to sell Gilroy Foods & Flavors to Olam International for $250 million and expects to close the deal within 30-60 days. The sale includes plants in Gilroy, Hanford, New Mexico and Oregon and a warehouse in King City. ConAgra believes that Olam will help the company grow and has no plans to close plants or layoff personnel.
For Brambles, it gives them another shot at the produce business of former customer ConAgra. The Gilroy division of ConAgra represents hundreds of thousands rental pallets annually. It is unclear if Olam International will use iGPS or CHEP Pallets. ConAgra has estimated it would take 60-90 days to transfer pallet business and the sale of Gilroy Foods will be complete within 30-60 days.
Olam purchased SK Foods for $39 million last year which subsidiaries RHM Industrial/Specialty Foods has an account with CHEP USA. If CHEP is able to retain Gilroy it will soften the ConAgra blow and take back some business lost to iGPS. Gilroy Foods and Olam will have to determine if the risk is worth the benefit iGPS is claiming. With the signing of Dole and now ConAgra it could stretch iGPS resources during seasonal high levels in multiple regions.
In my opinion, pool pallet companies have continuously underestimated agriculture pallet requirements. There are many variables to the produce sector and seasonal demand makes it almost impossible for pooled pallet companies to forecast. The results of inaccurate forecasting is less than full loads of pallets, late or no show loads, poor quality and increased contamination threats. In the last two seasons CHEP has met West Coast seasonal demands by using creative logistic methods, but it took several years to make it right. iGPS will not have the luxury of years to dial in Ag operational requirements as CHEP will fight to re-take lost market share at the first opportunity.
Brambles Rejects Impact of ConAgra Loss
In a response to analyst and media, Brambles confirmed that ConAgra advised CHEP Americas of the intention to transfer most of their business to iGPS. Brambles expect ConAgra to transfer pallet volumes over the course of the 2011 financial year, which ends June 30. According to Brambles it will have no affect on their 2010 financial year results. ConAgra has suggested that the transfer will take place within three months. Brambles is quick to point out that the ConAgra account makes up less than 1 percent of Brambles total annual revenue. Brambles CEO Tom Gorman said: “It is always disappointing to lose business. We are focused on delivering customer needs and strengthening our product offering in the CHEP USA through the Better Everyday program, which remains on track. Customer feedback on Better Everyday continues to be positive.” Mr. Gorman continues to point out that CHEP USA has won contracts with annualized volume greater than that of the contracts it has lost, including the volumes to ConAgra.
Brambles simplistic view
In any other market sector, if a business lost an account the size of ConAgra the revenue lost and damage could be calculated. In the pooled pallet market a loss of a major food supplier will send shockwaves throughout the supply chain, far beyond the millions of pallet issues lost. Brambles reaction would suggest that they are only reacting to the straight pallet issues. In the early years of CHEP USA, leadership used a “grow at all cost” strategy. When the CEO of iGPS was an executive at CHEP he was part of that strategy. Part of that strategy is to “pull” the customer on to a pooled pallet model. Once major distributors like Proctor & Gamble, Wal-Mart and others joined CHEP they requested vendors use CHEP to ship products in. Vendors where then forced to call CHEP and request a contract so they can meet distributor request. This strategy helped CHEP become a dominant player in the pallet supplier market. I have no doubt Bob Moore will now continue that tradition. What Brambles is not discussing publically is the ripple affect the ConAgra move will have. Like a map, Mr. Moore will follow the supply chain to every opportunity. Because many of the raw suppliers and vendors are small and medium-sized companies, they will not receive the preferred pricing ConAgra was sure to negotiate. ConAgra products are in 96 percent of American households and make up many brands we would all recognize. A few of the brands are:
| Chef Boyardee | David Seeds | Egg Beaters | Healthy Choice |
| Hebrew National | Hunt’s | Orville Redenbacher’s | Pam |
| Peter Pan | Swiss Miss | Wesson | Andy Capp’s |
| Act II | Manwich | Parkay | Marie Calander’s |
- ConAgra Pallet Supply Chain
It is true that ConAgra sales make up less than 1 percent of Brambles sales. The ConAgra switch is not so much a Brambles loss as it is an iGPS win. CHEP not only delivers pallets directly to ConAgra, but to ConAgra vendors that may have requested raw materials and supplies on CHEP. For a pooled pallet company, those vendors are sales leads. Once a contract is signed the pooled pallet company is an approved pallet source and can be used to pull customers onto the program. The diversity of ConAgra products spans multiple market sectors from agriculture, manufacturing and packaging the majority of which is received on pallets. The ConAgra supply chain is not in a vacuum and involves thousands of companies that support its products. Now, if you take the vendors of ConAgra, they have their own supply chain elements. Companies that supply them with the tools necessary to meet market demand, not to mention customers other than ConAgra. Those other customers are open to CHEP as they now have a list of companies as sales leads. It terms of pooled pallet sales it is not all about following the money but following the supply chain, and it is never ending. Now the ConAgra pooled pallet map looks like this:
- New ConAgra Pallet Supply Chain
Along with millions of pallet issues the ConAgra account brings is a map of their supply chain. The map will supply sales leads for thousands of vendors that make up the diverse products that is ConAgra. Tom Gorman is correct, for Brambles it will not affect the 2010 financial year and will make up less than 1 percent of sales for 2011…however, what about 2012? iGPS is in an all or nothing game and they now have the ball. If the iGPS model is truly sustainable the test will be the ability to supply ConAgra, sign and supply their vendors and take more market share from Brambles and CHEP USA.
