Shipper Demand, Government Mandates Lead Pallet Makers to Redesign Products
By Mindy Long, Special to Transport Topics
This story appears in the May 2 print edition of Transport Topics.
Customer demand for pallets — and government regulations aimed at ensuring their safety — are spurring innovations that allow shippers to take a customized, system-based approach that can best meet their needs. From wood to plastic to smaller pallets, shippers’ options are increasing in a fiercely competitive industry.
“Not all pallets are created equal. There are different designs and capabilities across the marketplace,” said Ralph Rupert, director of the Center for Unit Load Design at Virginia Polytechnic Institute and State University. “It is all about getting people to properly use the right pallet for the right application so we can streamline warehouse operations.”
There are about 1.8 billion pallets in circulation in the United States every day, said Bruce Scholnick, president of the National Wooden Pallet and Container Association in Alexandria, Va.
While wooden pallets make up the bulk of the industry, plastic pallets — which are lighter, more expensive and can be equipped with radio frequency identification (RFID) devices — appear to be gaining market share.
Many in the industry agree that Costco Wholesale Corp., Issaquah, Wash., helps set pallet industry trends. And for the past year, the company said, it has allowed only block pallets to be used for shipments.
(Block pallets have top deck boards supported by blocks of wood, while stringer pallets, also made of wood, have three long parallel boards sandwiched in between the top and bottom deck boards.)
Scholnick said block pallets can be accessed from all four sides with a pallet jack or forklift, thereby increasing efficiency. He also said the move to block pallets is happening industrywide.
“Does that mean the stringer pallet will disappear? No. But the block pallet offers more flexibility in movement,” Scholnick said.
The NWPCA president also discussed the steps being taken by members of his association to make sure the pallets are resistant to insect infestation. Scholnick said his association wants the U.S. Department of Agriculture to require all wooden pallets to be treated in a way that totally eliminates them as a suspected source of infestation and controls the spread of bugs already in this country (See story on government regulations for pallets in the May 16 issue of Equipment & Maintenance Update).
Costco recently began to support industry newcomer iGPS — Intelligent Global Pooling Systems — which makes plastic pallets. Costco now accepts rental pallets from the Orlando, Fla.-based manufacturer, as well as from wooden pallet manufacturers CHEP Americas, Milwaukee, and PECO Pallet Inc., Yonkers, N.Y.
“It is a very dynamic world and there is a lot of competition” in the pallet industry, said John Thelan, senior vice president of depots for Costco. “We have believed for a number of years that there is a role to play for an alternative to wood.”
Thelan said Costco is interested in plastic because it doesn’t create wood chips or broken boards — “things that don’t mix with the general public or our own employees.” Plastic also weighs less than wood, which helps Costco’s employees and saves on shippers’ freight costs, he said.
Bob Moore, founder and chairman of iGPS, said the company’s plastic pallets weigh 47 pounds, compared with the 75 to 80 pounds a wooden pallet weighs. However, plastic pallets cost more than their wooden counterparts, with iGPS pallets approaching $80 each, compared to about $22 each for wood.
“The reason our customers can use us is because we rent the pallets and our ability to track and trace them allows us to reclaim them,” Moore said.
Bryan Mason, product and marketing manager for pallet manufacturer Fabri-Form Co., New Concord, Ohio, said its plastic pallets are ideal for use in lower temperatures. Fabri-Form drills holes in the feet of its pallets to allow any water accumulation to drain out. In addition, the company said it can make its products out of food-grade material when requested.
Fabri-Form’s pallets weigh between 16 and 25 pounds, and the company can add hand-holes to make lifting and moving the pallets easier.
CHEP Americas Group President Jim Ritchie said his company manufactures plastic pallets in addition to wood. CHEP Americas is a unit of Australia-based CHEP.
“We’re the largest provider of plastic pallets in the world, but we do most of those overseas,” he said. “[In the United States] we’re trying to figure out if there is a business model that will support it and if the customers will support a higher cost.”
Plastic pallet manufacturers said an added benefit of their products is that they are nestable.
“Warehouse space is limited, so every inch matters. When our pallets are stacked, the complete height isn’t quite as high as it would be with a wood pallet,” Mason said.
While Costco has welcomed plastic pallets, Thelan praised wooden-pallet manufacturers for the innovations they are bringing to the industry.
“It is a very dynamic world and there is a lot of competition,” he said.
To help spur innovation, CHEP launched a pilot program in February that will allow the manufacturer to test pallets throughout the entire distribution life cycle and get more than two years worth of field data in 30 days or fewer.
In the past, field trials were expensive, time-consuming and interrupted a shipper’s business. This one uses a testing facility that has 28 different impact stations that simulate forklift-truck contact.
“Some are automated to simulate a forklift hitting a pallet on angles. Some are manual, where some people with forklifts are trying to jam the forks in the side,” said Ritchie.
There are also shake tests that simulate a pallet on a forklift being driven across the warehouse, and eventually CHEP will be able to run tests with a customer’s product on the pallet.
“As our customers try to go to thinner packaging or smaller packaging, they will want to know how it holds up on the pallet,” Ritchie said.
Ritchie also said there are a lot of alterations CHEP can make to a pallet: “We can change the configuration or add hardwood on the leading edges to increase durability or aesthetics — which are becoming more important as more and more ‘cost clubs’ are opening.”
While there are pros and cons to both plastic and wooden pallets, Rupert said it isn’t really an issue of one versus the other.
“More and more companies are looking at the total system, and both have a role to play,” he said.
While 48-inch by 40-inch pallets make up 35% of the total pallet market, Litco International, Vienna, Ohio, is seeing increased interest in its half-size pallets, which measure 24 inches by 40 inches. Litco Vice President Gary Sharon attributes that growth, in part, to retail point-of-sale displays that are loaded right onto the pallet.
“The pallets are a neutral color and do not draw the buyer’s eye away from the product display,” Sharon said.
Sharon also attributes sales growth to the fact that 48-inch by 40-inch pallets are sometimes more than shippers need, increasing the overall weight and causing inefficient loading.
“For every 1,000 pallets a shipper uses, you save 21,000 pounds of weight when using our 24-inch by 40-inch [model], when compared to the 48 by 40,” he said.
Rupert and Scholnick said the number of recycled pallets has grown over the past decade.
“It went from basically zero to 250 million refurbished pallets [being] made every year,” Rupert said.
CHEP retrieves 235 million pallets annually then inspects and repairs the pallets at its 90 facilities throughout the United States.
“There are 26 different components on the pallet, from a board to a block,” Ritchie said. “The most common repair is replacing some element of the wood component.”
Retrieving and re-renting pallets allows CHEP to offer pallets at a lower price.
“By picking up the pallet at a lower cost, you’re able to squeeze pennies out of the cost of your product,” Ritchie said.
Between 4% and 6% of CHEP’s pallets are either terminally damaged or lost each year.
“If you’re going to lose 4% to 6%, given the cost of the plastic pallets, the business model doesn’t make sense. I think the jury is still out,” Ritchie said.
