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Sunday, August 19, 2012 - Page updated at 07:30 p.m.

The humble pallet's role in the global economy

By Tom Vanderbilt
Slate

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 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. 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 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.

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," pallets rest outside of our imagination, regarded as scrap wood sitting outside grocery stores or holding massive jars of olives at Costco.

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. 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 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 is the secret story behind any successful military campaign. 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.

Rent vs. one way

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.

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 grew out of Cahners' World War II newsletter The Palletizer. Trebilcock's 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 on which has a greater environmental footprint.

Costco shift

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 World War II; 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."

Ikea's invention

Last year, Ikea abandoned wooden pallets in 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. 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.

Other changes afoot may reduce our dependence on pallets, Trebilcock says. Businesses like grocery stores, which might once have taken delivery of an entire pallet's worth of, say, Campbell's Soup, have moved to smaller and more frequent delivery schedules.

"They've gotten rid of their backrooms," 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.

Amazon effect

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.

He 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 Trebilcock will 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."

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