PALLET CIRCULATION UPDATE AND FURTHER CALL TO ACTION

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PALLET CIRCULATION UPDATE AND FURTHER CALL TO ACTION

CHEP AUSTRALIA ANNOUNCEMENT

Dear valued customer,

PALLET CIRCULATION UPDATE & FURTHER CALL TO ACTION

Further to our letter dated 1 November 2021, we are reaching out to provide you with an update on steps that we are taking to address the current pallet challenges and to again request your urgent co-operation.

As you are aware, the unprecedented and unpredictable shifts in supply chains arising from the COVID-19 pandemic have resulted in higher inventory levels being held on pallets in warehouses to buffer against multiple COVID-19 impacts on global supply chains and logistics, including international shipping disruption.

Inventory stored on pallets in warehouses across Australia remains at an all-time high, as does the customer demand for pallets. With the decline in pallet returns to our CHEP Service Centres, we are unable to provide full supply to customers at this time.

What we are doing

We continue to make extraordinary efforts to manage available pallets, including triaging the situation and allocating available pallets on a daily (and sometimes hourly) basis. Our Service Centres are staffed and ready to complete the professional inspection, speedy conditioning and re-issue of pallets as they return.

  • Our pallet pool today is larger than it was pre-pandemic and we are continuing to inject new pallets into the pool with a 41% increase in new pallet purchases this year, versus our prior 5-year average. We have contracted new timber sources, increased milling capability, and added additional pallet manufacturers.
  • Noting that CHEP retains ownership of its equipment throughout the supply chain, we have continued to engage directly with our major ‘de-hiring’ customers, formally requesting their urgent attention and co-operation in returning pallets to CHEP. We are also directly engaging with other customers who may be contributing to poor circulation, requesting that they urgently review their immediate needs and de-hire any pallets that are surplus to those needs.
  • Where viable for customers, we are continuing to offer CHEP alternatives including fractional plastic pallets, crates, pallecons, containers and bins.
  • We have upgraded our online ordering systems, making it easier for you to manage your orders and enabling CHEP to provide you with the most up to date supply information. We have also increased our capacity to condition returned pallets with new ‘state of the art’ pallet plants recently commissioned in Melbourne, Perth, and Sydney.

All participants in our shared CHEP pool of pallets have a role to play

We urge you to:

  • Return pallets surplus to your needs, directly to CHEP, as you have done in prior years.
  • Review your pre-Christmas production plans and consider whether any of these can be rephased into the new year, reducing your pallet requirements between now and Christmas.
  • Encourage all your suppliers, customers, or other parties you interact with, to also return pallets direct to poolers, in a timely manner.
  • Report any hoarding of pallets you observe via our ‘CHEP BlueCode’ application (available as a free download from the respective Google and Apple apps stores) so we can investigate further.

We can navigate these challenges together

If pallets are returned directly to CHEP, we would expect a level of easing to the current situation as inventory stored on pallets flows through for Christmas trading. Looking ahead to 2022, we will be continuing to add increased levels of new pallets to our pool as well as seeking enhanced customer forecasts. Further recovery would be expected once higher than usual safety stocks of inventory can be drawn down.

We greatly appreciate and thank you for your support and patience as we work together to address these unprecedented COVID-19, industry supply chain challenges.

Lis Mannes
General Manager
CHEP Australia

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PALLET CIRCULATION UPDATE AND FURTHER CALL TO ACTION | CHEP