Costs had to come down and Midland Haulage’s CFO, Karen Jones, was looking at the latest pallet hire invoice. Each month the invoice value seemed to be increasing and she had never been able to find the time to dig deeper but now they had lost a major customer and she had been asked to urgently reduce costs in all areas
She picked up the phone and asked Peter Cross, the company’s pallet controller to come and see her. Peter was busy raising manifests and asked if he could catch up later.
The meeting never took place, both having had to deal with conflicting priorities. The next month Karen received another pallet hire invoice and saw that it had again increased. Feeling very frustrated and annoyed, she picked up the invoice and headed for the Operations room.
Her annoyance grew as she found that Peter had just gone on two weeks leave and there was no one else who knew anything about pallets. She noted in her diary to have a meeting with Peter when he returned from leave.
Two weeks later the CFO and the Pallet Controller met in the company’s boardroom.
“Peter, I can see from the pallet invoices that the pallet balances and costs are going up every month. It looks like we are bleeding pallets. Can you tell me what our losses are and what can we do to get under control?”
Peter had brought a large box of pallet dockets to the meeting and he pointed to it. “I’m way behind, all these dockets need to be entered into the pallet control system. I was behind before I went on leave and then there was nobody to do them when I was away. Once these are entered we’ll have a better idea of where we are at”.
Karen flipped to the page on the pallet hire invoice showing the closing balance. She pointed at the balance and said, “This shows a closing balance of 12,723 pallets. We don’t do storage so we would only have around 2,000 pallets on the trucks. Does this mean we could have a loss of 10,000 pallets?”
Peter was feeling uncomfortable. “It’s hard to say. It’s difficult to work out how many we should have as trucks are moving all the time and you can’t stop them to count. Apart from that, I have to help out in Operations and pallets is a full time job. I don’t have the time to do the job properly”.
Karen flipped to another page on the invoice. “It’s costing us $50,000 a month and if we have lost 10,000 pallets, that’s a liability of over $300,000. We’ll have to find the time for you”. She opened her note book and said, “We’ve got a big problem here and you need to help me fix it. Tell me what needs to be done”.
Peter looked at the box of dockets and said, “I don’t think we can fix it. There’s too many people who don’t give a stuff about pallets”.
Karen made a note in her book. NO CARE. “If we don’t fix it then we may not be in business much longer so don’t worry about other people. Now tell me, what needs to be done”.
Peter started. “We could be here all day but the first thing that needs fixing is that I shouldn’t be reporting to Mick in Operations. Every time he is short he grabs me to help out. I’ve even been out in the ute doing deliveries”.
The second thing is that nobody tells the drivers what they need to do with pallet dockets. I’ve tried but they won’t listen to me. We try to give them pallet dockets before they leave the depot but we can’t do it every time and have to rely on the driver to raise dockets but quite a few drivers don’t. If we use agency drivers then you’ve got no hope. There has never been pallet training for anybody.
Another big problem we have is that drivers don’t get pallet dockets when they pick up or if they do, they lose them. When I get the invoice there are hundreds of missing transfer on dockets. I try and get copies but if I can’t find them then I either have to reject them or accept them. I only have a month to do rejections so sometimes I have to accept transfers on to our account even if I don’t have the paperwork”.
“That doesn’t sound like good business practice.” , said Karen. “How can you accept transfers without proof?”
Peter tried to hide his annoyance. “Just imagine the complaints we would get from customers if I rejected their transfers when the problem is that more than likely we have lost their pallet dockets. I did a heap of rejections once and got my bum kicked by the National Sales Manager and abusive phone calls from our customers’ pallet controllers so I’m not going through that again.
Another big problem is IOUs. We deliver to people who don’t have pallet accounts. When the driver delivers to them, they often have no pallets to exchange. That means we have to go back later to try and collect them. Often, I don’t have any documentation to show what happened and even if it shows the pallets were exchanged I have no way of telling what happened to them. They should bring them back to the depot but nobody checks them off the truck and what do you do if the truck arrives back at the depot when depot staff have knocked off. We have around 2,500 owed pallets outstanding but a lot of them are more than 6 months old”.
Karen interrupted, “2,500 pallets. That’s a big part of this problem. Why aren’t they picked up?”
“Well, even if I had documentation I can’t get Operations to pick them up. Every time I try to
organise it they end up not doing it. Moving freight will always be a priority and some drivers will make any excuse not to pick up empty pallets. They can get in the way, especially if it is a tailgate loaded truck. Even if the company who owes us pallets agrees for us to pick them up, when our truck gets there another carrier has got there before and taken them all. The company with our pallets just wants to clear their docks so the first truck that comes gets them. Cases of beer have been known to change hands. Drivers can get around $10 a pallet”.
Karen said, “This is crazy. What if we stopped lending pallets? What if the receiver didn’t
have pallets to exchange then we wouldn’t drop any off?”
Peter shook his head, “Your business development people are one of the biggest problems. They sign up a new customer with no mention of pallets or, if they do, it’s to agree to lend the customer pallets so that the customer doesn’t have to pay for them”.
He put a piece of paper in front of Karen and said, “We drop off 420 pallets a week to Budgie Food, we do 20 a day to Jimmys Possums and there are quite a few more that have been agreed to by our business development people. What hope do I have?
Another thing they don’t do is take into account the cost of delay days. We can do a pick up for delivery to IGA and we end up paying hire for 45 days after we do the delivery but the customer we picked up from transferred the hire on to us the day we picked it up. Nobody thinks about pallet costs when they are with a customer.
Speaking about the major retailers, I spend a lot of time just keeping an eye on Coles and Aldi transfers”.
“What do you mean?”, Karen asked.
“Pallet hire companies will not process our transfers to Coles and some others – they call these accounts receiver declare. Pallet hire companies will only process our transfers if notified by the receiver. If they fail to do this and I don’t pick it up then we lose the pallets Another thing, if we deliver to IGA, Big W or Bidvest they don’t accept our transfers – instead they give us one of theirs and that is the only way we can transfer pallets to them.
Another thing, if we don’t make a claim on the major retailers within 6 months then they keep the pallets and we keep paying hire for ever. Some of our losses would be over 6 months old so they’re gone”.
Karen was beginning to see that there was going to be some pain before the pallet problem could be fixed. “Anything else?”
“Sometimes we do a delivery and the receiver rejects our transfer. I need to provide a pallet docket signed by them and often I can’t find the paperwork and sometimes when I do find it there is no signature on it. I’ve got no idea what happens to the paperwork coming from our Adelaide depot”.
Karen nodded, “It’s not only pallet paperwork that goes missing. We’ve had some big claims because we couldn’t provide proof of delivery. Look, Peter I have taken on board what you have said and I will speak to the CEO about getting some changes in as quick as possible. I will need to be able to quantify our pallet losses to him as soon as possible. Are you able to come up with a number for me?”
Peter shook his head. “It would not be that accurate. The pallet control system we have is not up to date and there is a lot of rubbish in it. If you give me a few weeks I could give you my best guess”.
Karen shook her head, “I know it’s hard but I need something by next Friday. In the meantime I will go through the list I have made and see what we can do. Thanks for your time”.
Peter picked up the box of dockets and headed off to his cramped workspace. Making sure that no one was looking over his shoulder he started scanning the web for employment opportunities.