The Single Most Important Object in the Global Economy

How we get from here to there.
Aug. 14 2012 11:45 AM

The Single Most Important Object in the Global Economy

The pallet.

Illustration by Robert Neubecker.

Illustration by Robert Neubecker.

Earlier this spring, the Washington Conservation Corps faced a sudden influx of beach debris on the state’s southwestern shore. Time and tide were beginning to deposit the aftereffects of Japan’s March 11, 2011, tsunami. One of the myriad objects retrieved was a plastic pallet, scuffed and swimming-pool green, bearing the words: “19-4 (salt) (return required), and, below that, “Japan salt service.” 

A year earlier, Dubai’s police made the region’s largest narcotics bust when they intercepted a container, carried on a Liberian registered-ship, that had originated from Pakistan and transited through what Ethan Zuckerman has called the “ley lines of globalization,” that constellation of dusty, never-touristed entrepôts like Oman’s Salalah Port or Nigeria’s Tin Can Island Port. Acting on an informant’s tip, police searched the container’s cargo—heavy bags of iron filings—to no avail. Only after removing every bag did police decide to check the pallets on which the bags had rested. Inside each was a hollowed-out section holding 500 to 700 grams of heroin.

Two random stories plucked from the annals of shipping. What unites these disparate tales of things lost (and hidden) on the seas is that they each draw attention to something that usually goes unnoticed: The pallet, that humble construction of wood joists and planks (or, less typically, plastic or metal ones) upon which most every object in the world, at some time or another, is carried. “Pallets move the world,” says Mark White, an emeritus professor at Virginia Tech and director of the William H. Sardo Jr. Pallet & Container Research Laboratory and the Center for Packaging and Unit Load Design. And, as the above stories illustrate, the world moves pallets, often in mysterious ways.

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Pallets, of course, are merely one cog in the global machine for moving things. But while shipping containers, for instance, have had their due, in Marc Levinson’s surprisingly illustrative book The Box (“the container made shipping cheap, and by doing so changed the shape of the world economy”), pallets rest outside of our imagination, regarded as scrap wood sitting outside grocery stores or holding massive jars of olives at Costco. As one German article, translated via Google, put it: “How exciting can such a pile of boards be?”

And yet pallets are arguably as integral to globalization as containers. For an invisible object, they are everywhere: There are said to be billions circulating through global supply chain (2 billion in the United States alone). Some 80 percent of all U.S. commerce is carried on pallets. So widespread is their use that they account for, according to one estimate, more than 46 percent of total U.S. hardwood lumber production.

Companies like Ikea have literally designed products around pallets: Its “Bang” mug, notes Colin White in his book Strategic Management, has had three redesigns, each done not for aesthetics but to ensure that more mugs would fit on a pallet (not to mention in a customer’s cupboard). After the changes, it was possible to fit 2,204 mugs on a pallet, rather than the original 864, which created a 60 percent reduction in shipping costs. There is a whole science of “pallet cube optimization,” a kind of Tetris for packaging; and an associated engineering, filled with analyses of “pallet overhang” (stacking cartons so they hang over the edge of the pallet, resulting in losses of carton strength) and efforts to reduce “pallet gaps” (too much spacing between deckboards). The “pallet loading problem,”—or the question of how to fit the most boxes onto a single pallet—is a common operations research thought exercise.

Pallet history is both humble and dramatic. As Pallet Enterprise (“For 30 years the leading pallet and sawmill magazine”) recounts, pallets grew out of simple wooden “skids”, which had been used to help transport goods from shore to ship and were, essentially, pallets without a bottom set of boards, hand-loaded by longshoremen and then, typically, hoisted by winch into a ship’s cargo hold. Both skids and pallets allowed shippers to “unitize” goods, with clear efficiency benefits: “According to an article in a 1931 railway trade magazine, three days were required to unload a boxcar containing 13,000 cases of unpalletized canned goods. When the same amount of goods was loaded into the boxcar on pallets or skids, the identical task took only four hours.”

As USDA Forest Service researchers Gilbert P. Dempsey and David G. Martens noted in a conference paper, two factors led to the real rise of the pallet. The first was the 1937 invention of gas-powered forklift trucks, which “allowed goods to be moved, stacked, and stored with extraordinary speed and versatility.”

The second factor in the rise of the pallet was World War II. Logistics—the “Big ‘L’,” as one history puts it—is the secret story behind any successful military campaign, and pallets played a large role in the extraordinary supply efforts in the world’s first truly global war. As one historian, quoted by Rick Le Blanc in Pallet Enterprise, notes, “the use of the forklift trucks and pallets was the most significant and revolutionary storage development of the war.” Tens of millions of pallets were employed—particularly in the Pacific campaigns, with their elongated supply lines. Looking to improve turnaround times for materials handling, a Navy Supply Corps officer named Norman Cahners—who would go on to found the publishing giant of the same name—invented the “four-way pallet.” This relatively minor refinement, which featured notches cut in the side so that forklifts could pick up pallets from any direction, doubled material-handling productivity per man. If there’s a Silver Star for optimization, it belongs to Cahners.

As a sort of peace dividend, at war’s end the U.S. military left the Australian government with not only many forklifts and cranes, but about 60,000 pallets. To handle these resources, the Australian government created the Commonwealth Handling Equipment Pool, and the company eventually spawned a modern pallet powerhouse, CHEP USA, which now controls about 90 percent of the “pooled” pallet market in the United States.  Pooled pallets are rented from one company that takes care of delivering and retrieving them; the alternative is a “one-way” pallet, essentially a disposable item that is scrapped, recycled or reused when its initial journey is done. You can identify pooled pallet brands by their color: If you see a blue pallet at a store like Home Depot, that’s a CHEP pallet; a red pallet comes from competitor PECO.