HOW TO HANDLE CHEP PALLETS AND NOT DIE (FINANCIALLY)

Edit: 251222 : Turns out Chep has mandatory appointment pickups! This significantly increases costs, especially small orders to you. See

What is this all about?

I’ve worked in various warehouses, on various levels and have always seen the back-breakingly heavy and (probably) brand-specific pantone blue colour around the warehouse. I hate moving them, but I like their strength, consistency and colour. As long as you have electric pallet jacks and forklifts and never have to actually lift one with your hands, you’ll probably have fond memories of them….

However, the nice sky blue colour quickly becomes a shade of deathly black in my mind because of one story I heard from a distribution company. One day I was visiting this nearby company grabbing some warehouse equipment while they were closing from their bankruptcy. One of the owners said, as I was picking up a few pieces of equipment this while pointing to the ‘Property of CHEP’ white painted text: “See that? One thing that really messed us up in the end was CHEP pallets. We didn’t understand how it worked and that it’s ‘CHEP’s property’ and one day they sent us an invoice for $250,000 for missing pallets and it messed us up real bad! Be careful if you ever touch a CHEP pallet, man! They’ll get you!” After he said this in that most terrifying context, I was afraid to ever have one in my possession again. Whether the numbers were true or not, I don’t know, but there was definitely some truth and pain in his eyes, whether from negligence or lack of understanding… I just knew I didn’t want to end up like him.

So, with that picture painted, this document is an attempt to log my journey of learning how to handle CHEP pallets and not die (financially). Instead of just ‘signing up for the program’, I decided to spend some quality time learning how this CHEP game works.

THE CHEP PALLET MODEL

Admittedly, the CHEP model is kind of cool (in concept) and seems all greeny-ESG, however, in execution, is it possible to track all the pallets that are moving in the supply chain? I’ll leave that un-answered since I don’t know.

Here is a How CHEP works video by CHEP themselves and with a British accent to make it sound more friendly and less scary. See? Pretty cool model, in concept.

But, you must understand a critical point: those pallets are not your pallets.

CHEP PALLETS ARE PROPERTY OF CHEP, NOT YOU

Know this fact: whether you give CHEP money or not, you don’t own those blue pallets: CHEP does.

They have a ‘rental model’ and they are here to protect it. But don’t believe me, watch their own cryptic video called Property of Chep. See? They will get you if you’re not careful, and they have disclosed it clearly to the public. Look at that cute innocent home DIY guy in the animation with his CHEP garden pallets that he decided to take home… To keep it family-friendly they cut the scene when the swat team came in, tackled him and beat him like a mule against his blue CHEP garden…

Now that you know that the legal agreement is clearly painted on every pallet, it’s time to figure out how to run our businesses without having CHEP show up in a few years to put a lien on our assets.

HOW DOES IT WORK, THEN? A DETAILED EXAMPLE SHIPMENT.

In theory, here is how it is supposed to work. Let’s use a fake (but realistic) example of a warehouse that needs 20 pallets (only) in order to fulfill a single container load for a customer who is demanding the pretty blue pallets. For this example, here are the details and assumptions so we can make sense of it all:

ASSUMPTIONS FOR SCENARIO

• We are the producer and the shipper, and call ourselves the “Shipper” – we have a CHEP account (and online login credentials)
• We’ll call the CHEP-demanding customer the “Receiver” – they are a ‘Fully participating’ CHEP partner with their own CHEP login credentials and account number
• We give CHEP 48 hours (or more) notice – Ideally one month notice if possible
• Our customer has given us an order that will require 20 CHEP pallets
• The production for this order begins in 15 days
• The product needs to sit on the floor for 5 days after production (for laboratory release)
• The shipping will be scheduled for 3 days after the laboratory release date
• The transit of the shipment will be 5 days

THE WORKFLOW

1. Login and Order

The Shipper logs into the CHEP website and orders 20 pallets through the portal.

2. Coordinate the Carrier

Because it is not a full truckload (520 pallets) CHEP will not deliver it, so, we contact our favourite local cartage / carrier or get in our own 5 tonne truck (if we conveniently have one) and drive over to the nearest CHEP warehouse (you can enter ‘Chep Canada’ into mapping software and usually find one near you quickly).

20 empty pallets will occupy approximately 2 pallet positions in a 5 tonne truck so your costs will be the shipping on those ‘two pallets. Let’s use $50.00 per stack of 10 for our example, or $5.00 per pallet. UPDATE! As per edit at the top of this blog CHEP directly confirmed to me that they **require an appointment pickup**. This means what should have been about $50.00 for those two stacks is now about $170.00 for the same thing (yes, you read that correctly) boosting that from $5.00 up to over $8.25 per pallet. Perhaps I can find someone who will do it cheaper, but that’s my new costing reality. Very disappointing, but of course their story would be to ‘reduce logistics chaos at the CHEP docks’ which of course is a valid story. Anyways, just make sure you calculate the ‘appointment pickup fee’ into your costing.

However, the good news is that if you are coordinated enough, the CHEP website gives you ‘pickup windows’. So if you can plan far enough in advance, there is a good chance there will be a lot of choices for the pickup time so the carrier could be quite willing to give you a better price if they are able to plan better on their side. Just keep this all in mind. So what you ‘could’ do is this workflow:

• Log into CHEP
• Start to book your pickup
• When the pickup availability times on the calendar pop up, phone the carrier and ask them what time they would like
• Conclude the booking
• Send the CHEP booking information to your carrier

3. Carrier Picks up the CHEP Pallets

From the point where the 20 pallets leave the docks of CHEP warehouse, your CHEP Shipper account is paying:
a) Pallet Issuance Fee of (let’s use a fictitious number of $4.00 per pallet) and,
b) Rental fee on those 20 pallets (let’s use a fictitious number of $0.10 per day), plus:
c) Fuel & Lumber Recovery Fee: $0.70 (for our example) “depending on current rates.” they say…

4. Production and Laboratory Release Wait Time

The pallets go through 15 days production, 5 days lab release and 3 days pre-shipment for a total of 23 days.

5. Product Ships on CHEPS

Finally the shipping day comes and the product is shipped and the door closes

6. Shipper Logs into CHEP Portal and Registers Ship-out Event

The Shipper logs into his/her CHEP account and logs how many pallets went out, and to which CHEP account (Receiver’s account). This matters very much because of the ‘transfer fee’ (see above). Thankfully, our customer is in a ‘Fully Participating Distributor’ relationship with CHEP…
Now that the 20 pallets have left, the Shipper has logged it, and there are zero pallets left in our warehouse, we are ‘done’. Now the Receiver will log the inbound pallets when they get there with their CHEP login account

7. Transfer Fees Are Triggered

CHEP says that fees vary based on customer classification and province. Here are some examples of classifications of Receivers and what you (as the Shipper) will be charged on your account when you ship there, based on the Receiver’s relationship with CHEP and some ideas of possible pricing**:

• Participating Distributor / Retailer – $2.75
• Cooperative Distributor / Retailer – $4.50
• Semi-Cooperative Distributor / Retailer: $8.00
• Non-Cooperative Distributor / Retailer: $15.00
• Low-Volume Distributor / Retailer: $26.00
• Lost (zero confidence, zero to low chance of recovering pallet): $33.00

** Disclaimer: These prices are not 100% verified and you’ll have to confirm these with CHEP directly, but they give a pretty good idea for your understanding and planning. Of course prices change over time so the older this post gets the less reliable these prices.

Next we’ll run through the calculations after our scenario has concluded and also dabble into the ‘customer classification’ comment.

CALCULATING YOUR COSTS

Now let’s see how much this pretty blue pallet will cost us, using our example, and breaking it down to a per-pallet cost:

1. Pallet Issuance fee: $4.00
2. Shipment of pallet from CHEP to our dock: $8.25
3. “Fuel and Recovery Fee”: $0.70
4. Rental costs: 23 days x 0.10 per day: $2.30
5. Transfer fee to “participating CHEP partner”: $2.75

Our Total: $18.00

Not so bad considering the amazing blue colour and back-breaking weight.

However! These numbers may start to get scary if you are shipping to a ‘non-participating’ company (see Transfer Rates above).

So, having done this exercise, it would seem that if you are a large volume company and have a very strict management over the in-out records with CHEP you might even come out ahead with costs. However, failing that, you do have the very real risk of getting beaten like a stubborn mule by your garden pallets, so be careful! “Property of CHEP”. Don’t let CHEP own you.

OTHER NOTES

Annual Audit

CHEP does an annual audit (maybe more if you are big?) where all your numbers need to line up. They might walk in and say “You reported you have 5 pallets when in fact there are zero here.” And then ‘adjust’ your account accordingly.

Farewell

Hope this helps. If anything is inaccurate or incorrect, especially from you seasoned shippers and operators out there, updates and improvements would be welcome and I can edit the post over time if interest.