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Pallets move the world

The timber pallet industry is facing tough times. Besides having to deal with the ongoing issues related to health and safety and environmental concerns, the effects of an unavoidable global economy is shaking the way traditional timber pallet manufacturers operate. With international trade came the need to standardise the supply line and to increase pest controls across frontiers.

This export related initiatives are having major consequences as the Animal and Plant Health Inspection Service (APHIS) — with the UN and WTO’s support — is contemplating the introduction of a final rule to entirely eliminate the use of wood packaging materials. In response, Mr Bruce Scholnick, president of the National Wooden Pallet and Container Association (NWPCA), pointed out that if such a goal is reached it would not only destroy an industry, it would significantly increase costs for shippers — which would ultimately be passed on to consumers — and that these replacements would be an environmental disaster.

What are the alternatives? Metal pallets are currently in limited use for transporting goods by air, are extremely heavy and expensive and would not likely be used in any large quantity. Plastic pallets on the other hand are approximately four times the cost of wood pallets and are not biodegradable or easily recyclable. Generally corrugated pallets are not weather resistant and have load carry limitations. Cost arguably remains the largest concern when it comes to comparing wooden pallets to any other type of handling material. But even with the cost advantage of traditionally large volumes, can the timber pallet survive a more global and strict focus on pest control?

Talking about corrugated the present situation of this industry, which, at least in the United States, is facing its toughest set of industry dynamics in fifty years. The International Corrugated Case Association (ICCA) indicated that the 2002 regional share of corrugated production/shipments was evenly spread out amongst the US, Asia and Europe, sharing almost 30 per cent of the market share each. According to the European Federation of Corrugated Board Manufacturers (FEFCO), in Europe corrugated demand will grow from the current level of 29 billion sq.m and reach 33 billion sq.m by the year 2006 and anticipate that corrugated will continue to succeed in displacing wooden packaging in a variety of sectors. Choices for corrugated boxmakers are daunting, with overcapacity, plant closures, reduced profit margins, and the loss of customers to overseas locations. Once again the effects of the global economy are shaking the roots of a solid industry. Internal challenges for the corrugated industry include venturing into new markets, introducing new products, embracing new technology, increasing margins and reducing prices.

Evolving challenges
Retailers, as well as pallet purchasers, are driving the decision-making for pallet requirements. Pallet providers need to play a consultative role with their customers to discover the real needs of not only end users, but also their customers. As presented during the “Deliver the Goods End User Panel” organised by the NWPCA at their Annual Leadership Conference here is some insight of what the future holds for the packaging industry.

  • Mr Ronald Ree, Corporate Manager of Packaging, Wal-mart Stores Inc. commented “We’re looking at safety, cleanliness and durability. We do not want any metal crates, wood crates and those kinds of platforms coming into our distribution centers.”
  • Susie Burleigh, Staff Engineer, IBM Corporate Packaging stated, “I see us using different platforms, for example maybe different alternative designs or different handling equipment will be available. We may also move toward alternate materials.”
  • Mr Robert Rankin, Manager Packaging Procurement, Armstrong World Industries, Inc. pointed out, “I think we’re all going to be looking for ways to reduce cost by looking at alternative products and materials to use.”

Australia’s supermarkets giants are striving to reduce cost that can be reflected on the customer’s bills. The logistics and packaging areas of the supply-chain are under severe scrutiny to implement efficiencies to change the way suppliers supply into retailers distribution centres. For Woolworths and Coles Myer the objective is to reduce inventories, increase transport efficiency and bring on-shelf availability to best world practice. According to these retailers there is room for improvement when it comes to moving the goods straight from distribution centres on to shop floors. Moving the goods from the store’s dock and stacking the display shelves represent the most expensive 50 meters of the supply-chain. Hence, there is a latent need to more efficient shelf-replenishment systems to cut out product handling and get goods to the point of sale faster. For example, according to BRW, Coca-Cola Amatil is testing direct-into-store pallets, which present merchandise without boxes having to be opened or handled. In other words there is the need to develop multi-purpose packaging and handling materials that can have more than one application to simplify the supply-chain, from transport and storage items to merchandising and display devices.

Walmart on the other hand, is requiring its top 100 suppliers to use EPC (electronic product Code) technology at the case and pallet level by 2005. It has been estimated by Allied Business Intelligence that the global RFID market will grow to more than $3.1 billion by 2008. Retailers are obviously not only seeking the benefits of inventory and labour cost savings but also to have more control over the product distribution channels. But, what would be the implications for pallet makers? Beyond the obvious financial expenditure impositions there would be technological issues to overcome. Mr Ralph Rupert, research associate with Virginia Tech’s Center for Unit Load Design, said, “Putting an RFID tag on a wood pallet is like attaching a license plate to a car in a demolition derby.” Virginia Tech’s initial research shows that the tags might last multiple trips but would certainly not survive 10 trips. Since nobody knows when a tag might give out due to forklift damage, the poor impact resistance of RFID could affect the reliability of technology. Researchers have worked with encasing tags in polypropylene and polyethylene plastic sleeves because more durable plastics affect signal strength. Mr Rupert added, “It will be difficult to make these tags truly durable and cost effective for wood pallets at this time. Beyond protecting the tag from damage, the moisture in wood pallets tended to act as an energy sink for the radio frequency signal.”

On the other hand, there is news that product has been contaminated during transport because of the chemicals used to treat the pallets/containers e.g., Coca-Cola’s Belgium recall in 1999. To prevent this, the Food and Drug Administration (FDA) and HACCP are adopting new food safety measures to assure packaging does not adversely affect the quality of food. Although these measures have not yet reached the status of a rule, more and more customers are demanding that manufacturers utilise FDA approved products and that food safety programs are in place at their plants.