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.

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There’s a big debate in the pallet world about whether using pooled or one-way pallets is preferable, just one of the many distinctions within the industry explained to me by Bob Trebilcock, the executive editor of Modern Materials Handling (which, as it happens, grew out of Norman Cahners’ World War II newsletter The Palletizer). Trebilcock grew up in the industry—his father owned a pallet company in northeastern Ohio. “Most kids’ dads take them to Disney World,” he says, “Mine took me to the Borg Warner Auto Parts plant in North Tonawanda, New York.” Pooled vs. one-way, block vs. stringer, wood vs. plastic (there’s a lot of claims, but little peer-reviewed research, on which has a greater environmental footprint)—one can quickly find themselves on the wrong side of an argument at a materials handling convention.

Pallet.
“Pallets move the world,” says Mark White, an emeritus professor at Virginia Tech.

Photograph by Thinkstock.

To illustrate the implications of pallets, Trebilcock describes a recent conversation with Costco, which last year shook up the pallet world by shifting to “block” pallets, which have long been common in Europe and other regions. Block pallets are essentially an improvement on the four-way pallet that debuted during WWII; the pallet deckboards rest on sturdy blocks, rather than long crossboards (or “stringers”), which make them even easier for forklifts and pallet jacks to pick up from any angle. With “stringer” pallets, Costco warehouse workers couldn’t fit pallet jack forks into pallets if they were facing the wrong side; instead, he says, they’d have to “pinwheel” the pallet around before picking it up.  A small maneuver, but, he adds, “Costco unloads a million trucks a year.” Do the math, and the company was sitting on an institutional-size jar of corporate inefficiency.

So why don’t all companies use block pallets? Indeed, no major retailer has yet followed Costco’s lead. As with everything in the pallet world, says Virginia Tech’s White, it boils down to economics. Block pallets cost more to build than stringer pallets. More expensive pallets lend themselves to rental programs. Rental programs need to have systems in place to track and retrieve pallets, and they need industries that use standardized pallets. While rental block pallets are common in Europe, White says the geography of the United States has discouraged their use. “When the supply chain between raw materials and man is very long and protracted, and the volumes are smaller, it doesn’t make sense for rental companies to get into that business.”

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Given the increasing interconnectedness of the global economy, White says there is a surprising, and disheartening, lack of standardization among pallets. In the United States, pallets commonly measure 48 inches by 40 inches (the size of the Grocery Manufacturer Association’s pallet, which makes up 30 percent of new U.S. wood pallets each year). Europe tends to use a standard of 1000 millimeters  by 1200 millimeters standard. Japan’s most common pallet is 1100 by 1100. All told, the ISO (the International Organization for Standardization) recognizes six pallet standards. Packaging itself, meanwhile, is set to a 400 millimeter by 600 millimeter footprint—ideal for metric pallets. But shipping containers, notes White, are still set to a U.S. customary standard: 20 feet by 40 feet. The math doesn’t add up. Because of this, he says, most containers today bearing consumer goods and industrial products are “floor loaded,” i.e, loaded by hand, only to be hand unloaded and then “palletized” as they enter the U.S. supply chain. “With a 40-foot container, it could take two lumpers four to eight hours to unload it, whereas on pallets, we could unload it in 30 minutes.”

Of course, nothing in supply chains is so simple: To be effectively used in containers, pallets would have to become thinner — “you want to max the cube,” White says, i.e., fill the container’s volume with as much product  as possible, and current pallets would take up valuable space. But creating thinner pallets, he says, would require changes down the line in the way companies store products. Warehouse rack storage, he says, would have to be retrofit to accommodate the newer designs.

Such changes are not impossible. In fact, it’s already been done by Ikea, a company famous for its fixation on logistics. Last year, Ikea abandoned wooden pallets in a favor of a low-profile system called “Optiledge.” The system consists of one-pound “load carriers,” little ledges with feet that are placed under stacks of boxes and then held in place with giant bands. (There’s a cool demo of the system here.) The benefit, says the company, is that the system—which is one-way and 100 percent recyclable—can adapt to the dimensions of the load being carried, rather than vice versa. It’s also lighter and takes up less space. “One truckload of OptiLedges,” the company notes, “would be the equivalent of 23 truckloads of traditional pallets.” But overhauling the pallet required a massive overhaul of Ikea’s stores: In Europe alone more than 500,000 new metal shelves had to be installed.

Ikea’s is perhaps the most thoroughgoing reinvention of a product that has, with some minor refinements in design and engineering, stayed quite similar to its World War II origins. But there are other changes afoot that may reduce our dependence on pallets, says Trebilcock. Businesses like grocery stores, which might once have taken delivery of an entire pallet’s worth of, say, Cambpell’s Soup, have moved to smaller and more frequent delivery schedules. “They’ve gotten rid of their back rooms,” he says, and instead of receiving pallet loads they’re hand-unloading pallets of boxes of “mixed product SKUs” versus “single SKU pallets,” part of a larger trend toward leaner, more rapid distribution, itself driven by a proliferation of choice.

Then there’s what might be called the Amazon effect. “The biggest thing impacting distribution right now is the Internet,” he says. “You and I are ordering so much stuff online. We’re just getting a small box with stuff. Those things don’t go onto pallets, they go into the back of a UPS truck.” Indeed, one has to wonder if we might eventually take all the labor saved from containerization and palletization and simply put it onto the back of the UPS driver. But Trebilcock has no actual evidence that pallet use is down.

The pallet is one of those things that, once you start to look for it, you see everywhere: Clustered in stacks near freight depots and distribution centers (where they are targets for theft), holding pyramids of Coke in an “endcap display” at your local big-box retailer, providing gritty atmosphere in movies, forming the dramatic stage-setting for wartime boondoggles (news accounts of the Iraqi scandal seemed obsessed with the fact the money was delivered on pallets, as if to underscore the sheer mass of the currency), being broken up for a beach bonfire somewhere, even repurposed into innovative modern architecture. Trebilcock likens the industry to the slogan once used by the company BASF: “At BASF, we don't make a lot of the products you buy. We make a lot of the products you buy better." At parties he’ll tell people who ask what he does: “Without a pallet, most of what you and I eat or wear or sit on or whatnot would not have gotten to us as easily or inexpensively as it got to us.”

Just don’t get him started on the “raggle stick,” another quietly ubiquitous feature of the supply chain. Raggle sticks are the scalloped pieces of wood or plastic you’ve no doubt seen (or better yet, not seen) used to help efficiently stack pipes or rods on the back of trucks. They are basically pallets for round objects. It turns out his father also had a raggle stick company. “You don’t want to know how many raggle sticks they sold.”