Pallet Exchange

Pallet exchange is an arrangement where carriers and receivers swap pallets during delivery—the driver gives pallets with freight and takes back an equal number of empty pallets. This keeps pallet inventories balanced and reduces costs.

How Pallet Exchange Works

Basic Process

Driver arrives with:
- 10 pallets of freight

Delivery process:
1. Unload 10 loaded pallets
2. Receiver gives 10 empty pallets
3. Driver leaves with 10 empties

Result:
- Receiver: +10 loaded pallets
- Driver: Even exchange (no pallet loss)

Why It Matters

Without exchange:
Shipper buys pallets → Ships → Receiver keeps pallets
Shipper: Constant pallet expense
Receiver: Pallet accumulation

With exchange:
Shipper sends loaded → Gets empties back
Pallets cycle through system
Lower total cost

Types of Pallet Exchange

Direct Exchange

• 1-for-1 swap at delivery
• Same quantity
• Immediate exchange
• Most common

Deferred Exchange

• Pallets returned later
• Credit/debit tracking
• Periodic reconciliation
• More flexible

Pool System

• Third-party pallet pool
• CHEP, PECO, etc.
• Rented pallets
• Managed exchange

Pallet Quality Requirements

Exchange Standards

Quality Grades

Grade A: New or like-new
Grade B: Good, minor wear
Grade C: Usable, visible wear
Grade D: Damaged, not exchangeable

Pallet Exchange Policies

Typical Terms

Exchange Agreement:
- 1-for-1 exchange at delivery
- Same quality pallets
- Damaged pallets not accepted
- Shortages tracked and reconciled
- Disputes resolved within 30 days

Handling Discrepancies

Pallet Exchange Programs

CHEP Pallet Pool

• Blue pallets
• Rental model
• Shipper rents from CHEP
• Receiver returns to CHEP or exchanges
• Fee per pallet issued

PECO

• Red pallets
• Similar to CHEP
• North American focus
• Pool management

Private Exchanges

• Company-specific pallets
• Direct shipper-receiver agreement
• Branded or marked pallets
• Internal tracking

Pallet Exchange Economics

Cost Comparison

Without exchange (pallet expense):
1,000 shipments/month
1,000 pallets @ $10 each = $10,000/month

With exchange:
Initial investment: 1,000 pallets @ $10 = $10,000
Monthly exchange: Pallets return
Ongoing cost: Replacement only (~10%) = $1,000/month

Annual savings: ~$100,000

Pallet Pool Costs

CHEP-style pool:
Issue fee: $0.50-$1.00/pallet
Daily rental: $0.06-$0.10/pallet
Transfer fee: $2.50-$4.00/pallet

Depends on:
- Volume
- Cycle time
- Geography

Managing Pallet Exchange

Tracking

Pallet ledger:
Date      | Out   | In    | Balance
─────────────────────────────────────
Feb 1     | 100   | 0     | -100
Feb 5     | 50    | 95    | -55
Feb 10    | 75    | 50    | -80
Feb 15    | 0     | 85    | +5
─────────────────────────────────────
Net: +5 (receiver owes 5 pallets)

Reconciliation

• Weekly or monthly review
• Compare sent vs. received
• Settle imbalances
• Adjust accounts

Pallet Exchange Challenges

Common Issues

Enforcement

• Driver training on exchange
• Document at delivery
• Reconciliation process
• Consequences for non-compliance

When to Use Pallet Exchange

Good Fit

• Regular shipments to same locations
• High pallet volume
• Consistent pallet types
• Willing trading partners

Challenges

• Inconsistent trading partners
• Mixed pallet types
• Low volume
• Long delivery distances

Best Practices

For Shippers

1. Track all outbound pallets
2. Mark/brand pallets
3. Clear exchange agreements
4. Regular reconciliation
5. Quality standards documented

For Receivers

1. Stage empties before arrivals
2. Inspect quality
3. Match counts accurately
4. Document exchanges
5. Return promptly

For Carriers

1. Driver training
2. Load empties properly
3. Document exchanges
4. Report discrepancies
5. Handle carefully