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Dec. 2013 Issue: LOGISTICS

The pallet pooler’s bankruptcy and sale underscore the need for better asset management.

The pallet world was shaken up by this summer’s sale of Orlando, Fla.-based Intelligent Global Pooling Systems (iGPS) to iGPS Logistics LLC.

(Photo: www.canstockphoto.com)

 

A Delaware bankruptcy judge approved the sale for $39 million in late July, overruling objections that iGPS was worth far more, according to Law360.com. This allowed iGPS Logistics — a joint venture formed by Balmoral Funds, One Equity Partners, certain of their affiliates, and Jeff and Robert Liebesman — to announce completion of the sale on Aug. 1.

 

EXPANSION PREDICTED

 

As the owners of South African-based Palogix International, the Liebesmans are no strangers to the pallet pooling business, something Jeff Liebesman, chief executive of iGPS Logistics, touted in the announcement of the sale. “Our new capital structure, combined with the pooling experience brought by existing management team, Robert and myself, will enable us to enhance our current operations and expand our product offerings in the years ahead.”

 

However, when recently contacted about the progress iGPS Logistics has made since August, Liebesman said he would prefer to wait a few more months, adding that anything he said now would be “premature.”

 

Jerry Welcome, president, Reusable Packaging Association, Arlington, Va., is bullish on the company’s prospects. “The bankruptcy as I see it just allows them to reorganize and regroup,” he said. “I think they still have a great product.”

 

Founded in 2006, iGPS billed itself as “the world’s first pallet rental service featuring lightweight, 100% recyclable plastic pallets with embedded radio frequency identification (RFID) technology.” In its effort to attract users of wood pallets, which still dominate the market, the company claimed it could save manufacturers and retailers up to $5 per pallet load based on “savings in transport, reduced product damage and other operational efficiencies.”

 

But IGPS’ biggest problem proved to be loss of its plastic pallets, especially in light of their higher cost relative to wood pallets. When the company filed a voluntary Chapter 11 petition in the Delaware Bankruptcy Court in June, it reportedly could not account for as many as 1.5 million of its 15 million pallets. “We have seen recent activity by GMA vendors that include moving away from iGPS to either CHEP or PECO,” said Lewis R. “Randy“ Fletcher, senior vice president distribution and transportation, for Associated Grocers, Baton Rouge, La.

 

One hint of iGPS Logistics’ direction is that it has been employing GPS (global positioning system) technology on some of its pallets, according to Brian Lindell, director, business development for Rehrig Pacific Co., which is supplying pallets to iGPS Logistics. Lindell is a big believer in using GPS and RFID to manage reusable transportation assets and is also trying to spread awareness among manufacturers and retailers about the importance of better asset management.

 

$500 MILLION ANNUAL LOSS

 

To that end, Lindell, along with Mark Howl, selling and delivery operations manager, PepsiCo, will be giving a session, “How to Reduce Loss/theft of Reusable Packaging,” at the GMA/FMI Supply Chain Conference in Orlando, Fla., Feb. 17- 19. In the description of the session, reusable packaging loss — for wood and plastic pallets as well as other types of plastic crates, trays and carts — is estimated to exceed $500 million annually in replacement costs.

 

DSD suppliers, who typically own their pallets and other reusable shipping assets, lose them when route drivers allow them to accumulate at retail locations, where they are subject to theft, Lindell noted. In the case of pallet poolers such as iGPS and CHEP, which generally supply manufacturers who ship to retail warehouses, there is even less control over how pallets are handled than in the DSD model, he added. RFID is one way to track pallets. In addition to tags, RFID requires readers to be stationed at strategic points — warehouses, stores, etc. — in order to accumulate location data. “RFID is good for understanding the trips (made by reusable assets) in a given time period, especially for DSD,” noted Lindell, whose customers use the technology, but “the cost and complexity of the (RFID) infrastructure can be difficult.”

 

GPS is a more powerful technology than RFID since it doesn’t rely on stationary readers. Over the past few years GPS tags have started to be used to locate and retrieve lost or stolen assets — and even shut down illegal recyclers. their high price point — about $160 per tag — means they are usually used on only a handful of pallets, though those serve as an indicator of where hundreds of other, non-tagged pallets are located. “We employ GPS with a number of our customers,” noted Lindell. “You can save thousands of dollars by employing a few of those tags.”

 

– Michael Garry

Paul Chapa

Paul Chapa

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Paul Chapa, Co-Founder & Managing Partner
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