ALX M5 Pallet Cost Model vs. Conventional Pallet Offerings

ALX M5 Pallet Cost Model vs.
Conventional Pallet Offerings
"
A Case Study in Food Service
June 2nd 2011
Overview of the ALX Pallet Technology:"
The revolutionary ALX Pallet was created in response to the industryʼs request for a lighter, ultra
durable, advanced technology pallet that could match the useful life of the manufacturing equipment
with which it interfaces.
ALX engineers developed the proprietary, patent pending Platform
Technology to enable the delivery of an ultra premium platform that could meet or exceed every
current and anticipated regulatory, safety, environmental and legal code requirement; all for around
the same long term cost as wood – a first for the pallet industry. Another unique feature of the ALX
Platform Technology lies in its ability to be customized for optimal performance. The M-Series pallet
dimensions, payload capacity, longevity and other key attributes can be “customized” to the
customerʼs specific application requirements – another first in flexibility and reliability for the pallet
industry."
"
The secret to the cost effectiveness of the ALX portfolio of products lies not only in their durability and
longevity, but also in their inherent residual value.
While dramatically improving the costeffectiveness of the platform, over the long term it yields considerable cost savings over traditional
lower technology pallet solutions.
In addition, ALXʼs innovative, fully automated Lean robotic
manufacturing process ensures world-class dimensional accuracy and consistency, at the lowest
possible cost, making the ALX Pallet the ideal platform for use in automated systems. In “open”
systems, the pallet can be managed with state of the art tracking systems utilizing data streaming
from bar code, Radio Frequency Identification (RFID) or other proprietary advanced tracking
technology sources."
"
The ALX Pallet is constructed in-house using a number of different aluminum alloys coupled with a
proprietary manufacturing process. The closed section, thin walled construction method employs
technologies derived from the aerospace and automotive industries that provide superior durability,
making it less susceptible to the everyday wear and tear that standard wooden and plastic pallets
cannot endure. The ALX Aluminum Pallet is also strong enough to support more product weight than
conventional pallets, while reducing cargo damage in the process. Its four-way entry and rackable/
stackable design provides the peace of mind from every perspective that traditional wooden, plastic
and even metal pallets simply cannot deliver."
"
The performance of the ALX Aluminum Pallet has been proven through the most stringent test criteria
and in the most demanding services within world class CPG and Food companies, while interfacing
with every piece of manufacturing and handling equipment commonly in use today. The product is
also designed with an eye to the future, ensuring compatibility with high velocity automated system.
Time and again in these environments, the ALX platform technology has proven its potential to
increase efficiency while reducing product damage, risk-insurance costs and employee injury claims.
The ALX pallet is the only pallet in the world to have won the coveted Green Flame award for
innovative excellence in fire safety, structural safety, environmental sustainability, and toxicology while
maintaining a significant commercial advantage. "
"
For additional information about ALX, please visit our global web site at www.alxpallet.com"
An ALX M5 Case Study Summary"
Background:"
Application:
"
Current Product: "
"Food Manufacturing"
"Wood – Class A heavy Duty GMA ($20/75 Lbs., 1 Year Life)"
Total Volume:
"30,000 Units – across 3 facilities"
"
Options Considered:
"
""
1.  Fire Retardant (FR) Plastic Pallet ($108, 3 Year Life, No Residual Value)"
2.  Non-FR Plastic Pallet ($85, 3 Year Life, Residual Value $10.00)†"
3.  Conventional Aluminum Pallet ($259, 3 Year Life, Residual $32.40)"
4.  ALX M5 – ($159, 10 Year Life, Residual Value $60.48) ††"
† Eliminated later as an option due to recent fire code changes and new severe restrictions governing the use of plastic pallets"
† † The Life of the ALX M5 in this Service was Estimated from Testing to be > 100 years
"
Summary of Identified Customer Issues:"
• 
• 
High operating cost of wooden pallets"
Mold and other contamination fears from wood pallets"
• 
Pallet damage causing unsafe load conditions"
• 
Inefficiency due to incompatibility with automated and manual equipment – jamming,
stoppages and misreads"
• 
Product (cargo) damage causing high cost of un-salable product"
• 
• 
Lack of warehouse utilization due to pallet fire stacking restrictions"
Employee pallet related injuries due to dislodging jammed pallets, splinters, nails and back
strain"
• 
Reduced equipment efficiency due to non-uniform and non-consistent pallet dimensions"
• 
Parasite infestation concerns"
• 
Exorbitant Fire Hazard Insurance rates due to the presence of flammable pallets"
• 
• 
Excessive housekeeping issues and cost due to wood debris – dedicated resources required"
Price fluctuations due to white wood supply and demand"
• 
Varying quality of purchased white wood pallets (no true specification)"
• 
Negative corporate image due to environmental impact of wood usage"
• 
Excessive pallet waste"
• 
Constantly purchasing wood pallets to replace damaged pallets"
• 
Constantly placing loads in “quarantine” due to damaged pallets"
Summary of Results:"
Attribute
(Averaged over 10 Years)
Unit!
!
ALX!
Wood!
Non-FR Plastic!
FR Plastic!
Conventional
Aluminum!
Annual Product Cost!
$/Pal/Yr!
$14.92 !
$26.28 !
$36.95 !
$45.57 !
$62.21 !
Administrative Costs!
$/Pal/Yr!
$0.34 !
$3.42 !
$1.14 !
$1.14 !
$0.68 !
Housekeeping!
$/Pal/Yr!
$0.07 !
$2.73 !
$0.55 !
$0.55 !
$0.23 !
AS/RS - MHE Interruptions!
$/Pal/Yr!
$2.99 !
$0.60 !
$0.60 !
$0.60 !
Transportation Costs!
$/Pal/Yr!
$0.28 !
$2.83 !
$0.94 !
$0.94 !
$0.57 !
Total Avg. Annual Cost!
$/Pal/Yr!
$15.62 !
$38.25 !
$40.18 !
$48.80 !
$64.28 !
$- !
10 Year Average Pallet Annual Cost (Conventional Financing)
$70.00
$64.28
$52.50
$48.80
$38.25
$40.18
$35.00
$17.50
$15.62
$0
Wood"
Plastic"
Conventional"
FR"
Plastic" Aluminum"
Analysis of the ALX M5 pallet in operation also proved:"
•  A Total Cost Savings of $114 per pallet – or a staggering $3.42MM across 3 Plants was Attainable!
•  Packaging Waste Would be Reduced by ~ 31,500,000 Lbs."
•  CO2 Impact Would be Reduced by ~ 5,530,000 Lbs."
•  Manufacturing Efficiency may be Improved by ~4%"
•  The Product can Operate Flawlessly from -40°F to 160°F"
•  Fear of Contamination from Existing Wood Pallets Would be Eliminated!
•  Pallet Waste Would be Completely Eliminated!
•  Stoppages due to Automated and Manual Equipment Interference would be Eliminated"
•  The Fire Hazard Insurance Premium Could be Reduced"
•  Pallet Related OSHA Recordable Incidences would be Greatly Reduced"
Summary of Conclusions – Benefits of the ALX M5:"
• 
Even using Conventional Financing, the Cost of the ALX Solution Proved to be Significantly Lower
than Wood – even from Year 1"
• 
The Overall Cost Saving per Pallet over 10 Years was Projected to be $114 – or a Staggering
$3.42MM over the Three plants"
• 
Overall Equipment Efficiency could be Improved by Approximately 3-5% - Even AGVʼs Interfaced
Flawlessly with the ALX M5 due to its Dimensional Accuracy and Precision"
• 
The Customerʼs Risk Insurance Company Agreed to Reduce its Risk Insurance Rates due to the
Non-Combustible nature of ALX Pallets. Current Higher “Wood” Rates would also apply to FRPlastic Pallets, while non-FR Pallets Simply could Not be Considered due to Lack of Compliance
with Fire Code (NFPA 13)"
• 
The ALX Pallet was the Only Pallet to have been Awarded the International Green Flame – Providing
the Customer with the Security that the ALX Pallet Met the Most Stringent Global Requirements for
Safety, Fire Compliance, Toxicology and Environmental Sustainability"
• 
Use of the ALX M5 Eliminates All Pallet Handling and Idle Pallet Stacking Restrictions – Greatly
Improving Space Utilization and Further Increasing Manufacturing Efficiency"
• 
The Unsafe Load Conditions due to Damaged and Sub-Standard Pallets could be Eliminated –
3,000 Lb. Pallet Loads could be Comfortably Stacked 5 High."
• 
Excessive Customer Product Damage (Cost of Un-Salable Merchandise) Caused by Inferior Pallets
could be Eliminated"
• 
Employee Injuries due to Splinters, Nails and Back Strain were Eliminated Over the Course of the
Study"
• 
Equipment Speed was Optimized due to Uniform and Consistent Pallet Dimensions"
• 
All Parasite Infestation Issues could be Completely Eliminated – the ALX M5 can be Sterilized or
even Autoclaved Routinely with No Negative Effects on its Performance"
• 
Housekeeping Issues were Non-Existent with the ALX Pallet"
• 
Product Price Fluctuations could be Eliminated – ALX Pallet Cost is Fixed over 10 Years, with a
Substantial Scrap Value “Credit” at EOL"
• 
The Customer Could Leverage ALXʼs International Green Flame Award to Improve its Corporate
Image and Credibility Internally and Externally"
• 
The ALX Pallet Contained No Harmful Toxins, Unlike the Fire Retardant Used in the FR Plastic Pallet"
Note: All assumptions and conclusions were independently validated, verified or provided to ALX by its customers
APPENDIX
Summary of Pallet Data and Assumptions Used:"
primary assumptions!
Pallet Weight!
Estimated Pallet Life:!
Estimated damage rate:!
Unit!
ALX!
Heavy Duty Wood!
Plastic Pallet!
FR Plastic Pallet!
Conventional
Aluminum!
Lbs."
56!
75!
60!
65!
30!
Months"
120!
12!
36!
36!
36!
%/Yr"
0.25%!
20%!
5%!
5%!
5%!
Purchase Price!
$"
$159 !
$20 !
$85 !
$108 !
$259 !
Residual Value!
$"
$60 !
$- !
$10 !
$10 !
$32 !
Admin. Cost per Acquisition/
Disposal!
$/Pal"
$1.71 !
$1.71 !
$1.71 !
$1.71 !
$1.71 !
Transportation Cost/Pallet Trip!
$/Pal"
$1.42 !
$1.42 !
$1.42 !
$1.42 !
$1.42 !
Pallet Volume!
Pallets"
30,000!
30,000!
30,000!
30,000!
30,000!
CO2 Reduction - Lbs/Yr in Service!
/Pal/Yr"
18.43!
0!
18!
18!
18!
%"
4%!
0%!
1%!
1%!
1%!
%/Yr"
2%!
2%!
2%!
2%!
2%!
%"
7%!
N/A!
7%!
7%!
7%!
Manufacturing Efficiency
Improvement (Est.)!
Inflation Rate:!
Conventional Financing Interest
Rate!
Note: All assumptions and conclusions were independently validated, verified or provided to ALX by its customers
Cumulative Annual Cost of Product Ownership "
Cumulative
Cost!
ALX!
Wood!
Non-FR Plastic!
FR Plastic!
Conventional
Aluminum!
Year 1"
$22 "
$24 "
$36 "
$45 "
$67 "
Year 2"
$44 "
$48 "
$71 "
$91 "
$134 "
Year 3"
$66 "
$73 "
$107 "
$136 "
$201 "
Year 4"
$89 "
$99 "
$140 "
$178 "
$239 "
Year 5"
$111 "
$125 "
$178 "
$225 "
$310 "
Year 6"
$133 "
$151 "
$216 "
$272 "
$381 "
Year 7"
$155 "
$178 "
$251 "
$315 "
$424 "
Year 8"
$177 "
$206 "
$292 "
$363 "
$499 "
Year 9"
$199 "
$234 "
$332 "
$411 "
$575 "
Year 10"
$149 "
$263 "
$370 "
$456 "
$622 "
Savings"
$114 "
$- "
$(107)"
$(193)"
$(359)"
Annual Operational Costs Associated with Product Operations"
Attribute
(Averaged over 10 Years)!
Unit!
ALX!
Wood!
Non-FR
Plastic!
FR Plastic!
Conventional
Aluminum!
Administrative Costs"
$/Pal/Yr"
$0.34 "
$3.42 "
$1.14 "
$1.14 "
$0.68 "
Housekeeping"
$/Pal/Yr"
$0.07 "
$2.73 "
$0.55 "
$0.55 "
$0.23 "
AS/RS - MHE Interruptions"
$/Pal/Yr"
$- "
$2.99 "
$0.60 "
$0.60 "
$0.60 "
Transportation Costs"
$/Pal/Yr"
$0.28 "
$2.83 "
$0.94 "
$0.94 "
$0.57 "
Total"
$/Pal/Yr"
$0.69 "
$11.97 "
$3.23 "
$3.23 "
$2.08 "
Average Annual Cost of Product Ownership "
$70.0
$62.21
$52.5
$45.57
$36.95
$35.0
$26.28
$17.5
$14.92
$0
Plastic
Wood
FR
Plastic
Conventional
Aluminum
Average Annual Operational Costs Associated with Product Ownership"
$15.00
$11.25
$7.50
$3.75
$0
Wood
Plastic
FR
Plastic
Conventional
Aluminum
Product Comparison"
ALX M5 Pallet Features"
Innova&ve Design Constructed of non-­‐toxic, high-­‐performance thin walled aluminum extrusions that are close-­‐sec8on welding to deliver high-­‐strength and light-­‐weight. Bo<om and Top Deck design prevents product damage by elimina8ng the “pillowing” effect. Reduces Down&me & Shrinkage Dimensional consistency and strength provide excellent performance in AS/RS systems and other automated systems. No broken boards & exposed nails equates to reduced product shrinkage. •  Precision 48” x 40” Dimensions •  9-­‐Block Pallet with 4-­‐Way Entry •  GMA Guideline Compliant •  Customized Deck Coverage Strength & Durability Designed for 20 years of useful life and exceeds all current and foreseeable industry benchmarks. Designed for UL SU 2417 and tested by Underwriters Laboratories, the M5 yields excep8onal safety and durability factors. •  100% Sealed; No Open Cavi8es •  Lightweight Design •  100% Recyclable Aluminum Alloy •  ~20% Lighter than Wooden 9-­‐Block Fire Performance As an NFPA 13 Class-­‐1 Commodity (non-­‐combus8ble), the M5 is exempt from all idle pallet storage restric8ons. Exceeds UL 2335 and FM 4996 Requirements. •  NFPA 13, UL 2335 and FM Compliant •  IPPC and APHIS Compliant •  Non-­‐Toxic; NSF & HACCP Compliant Fit for Every Environment With excellent resistance to extreme temperatures, moisture, bacterial growth, corrosion, creep, and UV, the M5 is ideal for use in any environment. •  RFID Compa8ble •  Environmentally Sustainable •  Green Flame™ Award Winner ALX M5 48x40 Pallet Specifica&ons 48.0
18.4
3.6
4.0
3.0
40.0
14.4
4.0
4.2
5.6
3.0
Top View
Side View
TOP
BOTTOM
COVERAGE‡ COVERAGE‡
Bottom View
TOP DECK
SPACING‡
44" EDGE
RACKING*
RATING
CONVEYOR TOP DECK
SUPPORT* STACKING*
RATING
RATING
FORK TINE
IMPACT*
LENGTH
WIDTH
HEIGHT
WEIGHT‡
Inches
Inches
Inches
Lbs.
%
%
Inches
Lbs.
Lbs.
Lbs.
10 Reps
48
40
5.6
56
85
55
0.75 Min.
5,000
5,000
20,000
No Failure
•  Reference Tes&ng Conducted by Underwriters Laboratories on M1 Series Pallet in Accordance with UL SU2417 (AS/RS) Test Protocol. ‡ Can be Customized to meet the Specific Demands of the Applica&on and Customer Preference Specifica8ons subject to change without no8ce