The Canadian Pallet Council’s recent launch of its Electronic Container Transfer (ECT) software is yet another reminder that in logistics, lean and green are not contradictory. By simplifying the tracking and return of empty pallets, ECT will boost sustainability by reducing “empty miles” and cutting costs.
“This system is going to save members money and generate carbon credits,” says Cobourg ON-based CPC President & CEO Belinda Junkin.
By using algorithms – powerful mathematical models -- to crunch the raw numbers flowing into the CTSWeb database, ECT can present CPC members each morning with an update on their individual pallet inventories. Junkin compares such alerts to a debit/credit statement from the bank.
More important, the new system offers members options and choices to rebalance their pallet account using a paperless web-based platform. All the heavy lifting occurs within ECT’s black box so that members can make better business decisions with only minor changes to their current processes.
The options are issued to small groups of three within a tight local or regional zone. If all members agree -- suggestions are voluntary – they simply ship the empty pallets as directed to clear their books. But if members have other plans such as holding back pallets for a large project, the software will bring in another local partner, tumble the numbers again and offer them choices.
ECT’s efficiency and productivity breakthrough is based on taking a holistic view of the system-wide imbalances and proposing efficient solutions to recycle empty pallets in a more compact, local area. Before ECT, pallet imbalances were settled bilaterally, directly between supplier and receiver irrespective of distance. For example, if a Toronto-based shipper sent goods to a Halifax customer, the two firms had to resolve the pallet imbalance between themselves. Now, ECT reduces the solution space to tighter-knit circle of near-by CPC members.
But according to Huw Leonard, Toronto-based CTO, iLogic, Inc. which developed ECT software on CPC’s behalf, the new system has greater computing fire power to massage a wider range of logistical concerns to create strategic solutions. “The algorithms deploy advanced linear calculations that consider a list of factors relevant to shipping pallets including distance, fuel cost, products involved, possible damage, greenhouse gas (GHG) emissions etc. to propose an optimum solution,” he says.
“ECT can also calculate the estimated savings from using the more efficient balancing system.”
Along the way, CPC received $1.25 million from the Sustainable Development Technology Canada (SDTC) to assist in the development and demonstration of the ECT technology. SDTC is an arms-length, not-for-profit corporation funded by the Government of Canada.
“It’s amazing how everything comes down to that little pallet,” says Ottawa-based SDTC vice-president of Investments and Chief Technology Officer Rick Whittaker. “Freight is one of the largest carbon emission sources in Canada, and is hugely affected by oil prices. By shipping only loaded pallets, companies make their operations more efficient and transporters save fuel. The benefits can be passed along to consumers for example, by helping bring down the cost of food.”
The solid financial business case supporting ECT’s future benefits and savings helped clinch the funding. The project team showed that, by trading balances, a trio of companies in Toronto, Vancouver and Halifax could shave 12,000 kilometres of unnecessary transport from their routes, save more than 4,389 litres of diesel fuel, and collectively cut greenhouse gas (GHG) emissions by 155 tonnes. That adds up to an estimated savings of $118,000 -- just for that one route.
Such benefits come from lower transportation and management costs, reduced handling, less damage and greater productivity through higher pallet utilization – carrying more cargo with the same number or fewer pallets. Tracking and reconciling pallet ownership electronically will cut shipping and handling costs while reducing road traffic, diesel engine pollution and GHG emissions. ECT’s coverage also extends to tracking other standard returnable assets such as cases, totes, plastic pallets, thermal covers, milk crates and bread trays but without the ability to balance the inventories.
ECT also opens the door for carbon credits that create further value while improving sustainability. Ultimately, CPC plans to mine the enriched transportation data storehouse to calculate certifiable carbon credits that can be sold on public exchanges. The credits are based on lower GHG (greenhouse gas) emissions resulting from reduced transport and handling of empty pallets and containers compared against industry averages and statistics. Although such exchanges are still in their infancy and ECT only went live in late June, Junkin says the CPC has already received inquiries from a power plant in Alberta that’s interested in buying any carbon credits it could generate.
By 2020, CPC expects to cut annual carbon dioxide emissions by 41 kilotonnes, methane by 1,952 tonnes and nitrous oxide by 1,502 tonnes. Some of the biggest food retailers including Sobeys Inc. and Metro Ontario Inc. are on board to adopt the system.
As a membership-owned and managed cooperative, CPC members will decide the next steps regarding the carbon credits. Such a consensus-driven business model has enabled CPC to leverage member input to update its CTSWeb database and other systems annually and share the benefits all round. Its original breakthrough 35 year ago was to establish a national standard wood pallet in terms of dimensions, materials and number of nails that can support 3,500-lb load as an alternative to commercial solutions.
Although CPC pallets only circulate domestically, they help Canadian firms control costs and compete more effectively. Junkin estimates that CPC pallets are 20% to 30% cheaper than offerings from commercial suppliers such as CHEP.
One fly in the ointment could be change management -- getting members to use the new system. “Many of them are used to getting paper documents rather than electronic messages,” says Junkin. “They want to be sure that the transaction actually goes through. It’s a lot like signing the screen when the courier company makes a delivery instead of getting a receipt.
“We are working hard to get members to adopt the new system. I believe the payback from ECT will be many times the $1.25 million support from the SDTC.”