CHEP’s iconic blue pallet is not just a product offered to customers—it’s also a unique source of data that helps eliminate waste across CHEP’s network of partners, which include most of the largest consumer packaged goods companies in the world.
The Australian pallet, crate, and container pooling company began U.S. operations in 1990 and now has more than 110 million pallets circulating in North America. A pallet that starts its career at a P&G plant today might be headed to a Kroger distribution center and then get recycled back into service at Unilever next month, for instance.
While the humble wooden pallet carrying so many different kinds of freight may seem like a forgotten part of the transportation and logistics industry, managing the flow of those pallets is an incredibly complex task. CHEP works in more than 500 supply chain points in North America, including its own facilities as well as operations set up in customer locations, and supplies pallets to approximately 14,000 manufacturing locations in the United States.
Those pallets are taken in by customers, loaded with freight, shipped to distribution centers and warehouses, deconsolidated, reconsolidated, and then sent further downstream to more than 19,000 retail locations. CHEP collects pallets from those locations and refurbishes them to be used again.
CHEP’s customer data ultimately generates profound insights into North American freight flows, and CHEP has made it part of the company’s mission to help its customers meet their sustainability goals by eliminating physical waste, reducing empty miles, and driving out other inefficiencies in the supply chain.
“Our business model is inherently circular,” said Jonathan North, who heads CHEP’s Zero Waste World program in North America, a collaboration platform that helps CHEP’s customers solve their biggest environmental challenges. In other words, CHEP’s business model is based on recycling its pallets and eliminating physical waste; now the company uses what it has learned about efficiency to help its customers reduce emissions and meet other goals.
North said that CHEP counts 43 of the top 50 consumer packaged goods shippers among its customers, and that they are all becoming increasingly committed to sustainability as a corporate value.
“How do we take this inherently circular and sustainable business that we have, and add to that our tremendous network visibility, and leverage that and help our customers with their goals?” North asked.
CHEP uses its visibility into its customers’ networks to identify lanes of opportunity, where the shipper’s private fleet has an empty backhaul. First, CHEP sees if any of its pallets need to be moved in the same lane and can fill the truck, but it also looks across its customer base to see if it can optimize matching loads to trucks.
“If there’s not a CHEP pallet flow available, then we look at another customer to share assets and resources on the road,” North explained. “The whole goal is to reduce empty miles, and to better utilize the equipment, a key circular economy attribute.”
That includes empty miles in CHEP’s own network, which consists of three basic types of movements. First, CHEP’s supply chain points move pallets into customers’ manufacturing sites. CHEP’s locations are close to their customers’ facilities so that pallet orders can be filled responsively. Secondly, CHEP takes in used pallets from downstream locations to assess and recycle them.
But it’s the third type of movement in CHEP’s network where most of its empty miles lie: the relocation of pallets from surplus markets to deficit markets. Freight flows in the United States tend to be unbalanced because production and consumption are unevenly distributed. For example, many products—from food to automotive parts—are manufactured in the Midwest, but the American population is concentrated on the coasts. This imbalance requires CHEP to relocate a certain proportion of pallets, resulting in longer lengths of haul between their own supply chain points.
That’s where Convoy, the Seattle-based digital freight network, comes in. Convoy, a Zero Waste World collaborative partner, helps CHEP balance its longer pallet relocation moves and eliminate empty miles while giving CHEP feedback from drivers on the efficiency of its locations. While CHEP’s shorter moves are typically handled by dedicated carriers, it uses contracted carriers for its linehaul moves, and Convoy is able to source reliable capacity in those lanes.
“What’s interesting about Convoy is that they’re really tapping into where the capacity is in the market,” said George Brehovsky, director of customer solutions at CHEP North America. “The average size of an owner-operator fleet is anywhere from three to five drivers, and quite often we wouldn’t partner with a carrier that size. With Convoy, it’s a collective, and we’re able to tap into that capacity.
Convoy’s Automated Reloads program establishes optimized loops for carriers to run in, efficiently utilizing carrier assets and lowering CHEP’s transportation costs. In a study, Convoy found that Automated Reloads has cut carrier CO2 emissions by 45% by reducing empty miles. Meanwhile, Convoy has used its drop trailer program—Convoy Go—to increase fluidity and build a virtual dedicated fleet servicing CHEP’s freight.
“One of the unique things about Convoy is we get specific feedback around our service centers and supply chain points,” added Brehovsky. “When we kicked off the partnership, we found there were some locations where drivers were experiencing longer than what we would consider acceptable waiting times. We were able to take that feedback from those drivers and look at those supply chain points within our network and actually reduce driver waiting time.”
This article is published jointly with our partners at Convoy. To view more Future of Freight content, click here.