The Single Most Important Object in the Global Economy
Earlier this spring, the Washington Conservation Corps faced a sudden influx of beach debris on the state’s southwestern shore.
There are dozens of 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.
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.
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 as explained 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.
“Pallets move the world,” says Mark White, an emeritus professor at Virginia Tech.
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 deck boards 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.”
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. The 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.”