Brambles Highlights Value of C-Level IoT Planning with Four-Fold ROI on Its Digital Transformation Strategy in FY 2024 Alone

On August 21, pooling company Brambles announced its Fiscal Year (FY) 2024 financial results. The company operates through its subsidiary CHEP, offering a pool of 347 million pallets, crates, and containers, with an emphasis on high-quality pallets, and is the largest Returnable Transport Asset (RTA) pooler in the world. As Brambles Chief Executive Officer (CEO) Graham Chipchase said about Brambles’ market share in the accompanying conference call, with reference to rumors of Brambles’ interest in acquiring Asia-Pacific competitor Loscam (which acquired CHEP’s Chinese operation in 2022), “I think the broader context around inorganic [growth] is there isn’t much we can do. If you look at our market shares in most countries around the world, there isn’t much we can do and [the Loscam opportunity] is about the only one that we would be silly not to look at.”

Brambles’ results were interesting in highlighting the progress of its digital transformation efforts and the impact they have had on the broader business. While these digital transformation initiatives have now been ongoing for 3 years, it is interesting to consider them now, as 3 years is about the expected time to allow meaningful commentary on benefits from the deployment. Taking a step back from the Internet of Things (IoT) technology itself, this ABI Insight highlights a few of the benefits that companies can derive more broadly from digital transformation initiatives.

One of the main data points that helps lay the groundwork of Brambles’ digital transformation is its deployment of asset tracking devices on its pallet pool. Brambles announced that it had deployed over 550,000 trackers across its “continuous diagnostics” and “targeted diagnostics” initiatives. Its continuous diagnostics initiative aims to gather data on a country’s asset pool’s normal operation and is under rollout in in four countries: Canada, the United Kingdom, the United States, and Chile (with the United Kingdom and Canada fully rolled out). Its targeted diagnostics initiative is being rolled out in 32 countries, and enables specific issues to be investigated with “ground-truth” IoT data. The 550,000 number represents an increase of 22% from the 450,000 devices installed in FY 2023, itself a 125% increase over the 200,000 devices installed in FY 2022.

These devices are a mixture of Bluetooth® tags and cellular trackers in a “hub and spoke” architecture, likely provided by Brambles’ subsidiary BXB Digital. In addition to these IoT solutions, Brambles is also implementing a serialization solution in Chile alongside the smart assets initiatives, as well as investing in automated pallet repair processes as part of its broader digital transformation goals.

While the number is important and reflects Brambles’ leadership in digital transformation as the first pooler to pull the trigger on a massive IoT deployment, more interesting still is the impact on Brambles’ business. One of the most striking numbers cited is the recovery and salvage of 16 million pallets in FY 2024 alone, an increase from 10 million pallets recovered in FY 2023 and 4 million pallets in FY 2022. This resulted in 15 million fewer pallet purchases, which Brambles was able to achieve thanks to these asset productivity initiatives—resulting in a US$436 million reduction in Capital Expenditure (CAPEX) on its pallet pool. Overall, Brambles’ pooling CAPEX to sales ratio (the proportion of sales revenue it spends on maintaining or replenishing its pallet pool) decreased from 29.8% at FY 2022, when it was toward the start of its digital transformation initiatives, to 13% at FY 2024—the majority of this reduction driven by the decrease in new pallet purchases.

As a result of these savings, Brambles’ cash flow also increased to US$883 million in FY 2024—again, a significant increase from US$498 million in FY 2023 and from US$86 million in FY 2022. As well as being used for share buybacks and dividends, these savings continue to be invested in digital transformation initiatives; in FY 2024 (August 2023 to August 2024), Brambles spent US$99 million on its digital transformation strategy, with a planned increase (CAPEX and Operational Expenditure (OPEX)) to US$110 million for FY 2025. With the clear savings created by the asset productivity initiatives, the Return on Investment (ROI) seems clear.

Brambles’ medium-term plans also go beyond internal efficiency processes (“Better for Brambles”) and extend to better customer satisfaction (“Better for Customers”). In the FY 2024 results, Brambles announced that it had signed commercial agreements on two digital customer solutions. Brambles is holding off giving specifics of these solutions until its Investors’ Day in September, but importantly, it considers these “not our traditional business … but a new type of business for us.” Broadly, these initiatives concern data services to customers to help them optimize their own supply chain operations; these could include analytics on the flow of goods in a customer’s supply chain, in effect offering Visibility-as-a-Service. The promise of new revenue streams based on Visibility-as-a-Service is not unforeseen, as it has been marketed as a Holy Grail by RTA tracking solution providers, but it is important that Brambles is one of the first to push forward with commercial agreements in this area.

More insight on Brambles’ digital initiatives will come at its Investors’ Day, but it was clear from the call that investors should be happy with the direction of travel.

What is striking is Brambles’ clear mandate from the top driving systematic digital transformation, rather than project-based initiatives. Other reportable targets by the company include training employees in digital and analytics skills—with 5,000 roles in these areas across the company by FY 2023. While the deployment approach remains cautious, and the company is still assessing the full extent of the possible benefits it can derive, it is clear that Brambles is looking to embed digital as a core enabler of its business, rather than running projects on the side.

What is additionally striking is that Brambles has a multi-year head start on all of its competitors. Vendors such as Loscam, PECO, and IFCO all have some digital initiatives ongoing, but Brambles is the first to pull the trigger on a massive scale. It is a mindset challenge that has held back the deployment of the IoT in supply chain visibility initiatives, rather than a technology challenge. The 550,000 trackers deployed represent a paltry 0.16% penetration of Brambles’ total asset pool—and yet, this fraction alone, along with other intelligent investments, is generating an enormous transformation of Brambles’ business. While competitors continue to hold back with project-based IoT, rather than systematic transformation, Brambles’ unconcern with its market share is likely to continue.