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International Pallet Footprints: Reports from the Front Line
Pallet user guru, Rick LeBlanc reports on the latest developments on international pallet sizes and standardization efforts around the globe.
By Rick LeBlanc
Date Posted: 12/1/2010
When the line of supply stretched precariously across the Pacific during World War II, pallets, for the first time, came along for the ride and provided enormous material handling efficiencies. Today as supply chains increasingly become global in scope, so do pallets.
The transition hasn’t always gone smoothly. This can be seen by the spread of wood pests that led to the ISPM-15 treatment standard. Or more recently the TBA-contamination problem experienced by the pharmaceutical industry (see the article on page 44). I sometimes get asked if we are heading towards a single global standard. Given the complexities of local and global supply chains, it doesn’t seem that things are ever going to be simple enough to allow for one major global footprint standard to take hold.
For international shipping, size does indeed matter. One must consider how a pallet of a particular size might impact the optimization of material handling systems in the country of origin as well as in the country of destination, and often most importantly, the impact on transport costs. In fact, recently there has been an active effort within the automotive industry to develop a footprint specifically targeted at optimizing sea transport. Other initiatives could be considered more of a multinational approach. These must meet the needs of legacy pallet sizes through market expansion and local adjustments. This article looks at various pallet standards around the globe and includes interviews from Europe, China, Taiwan, and the U.S. automotive industry.
ISO Sanctioned Sizes and How Things Work
By way of introduction, there are six pallet dimensions sanctioned by ISO Standard 6780 which are outlined in Table 1.
For several years, the approach of companies such as CHEP has been to supply pallets to the shipper that match the requirements in the destination customer. Thus, CHEP might supply a European bottled water manufacturer with a 48x40” pallet for the North American market.
One reason for this approach is that countries with developed logistics infrastructure have huge barriers to footprint change. As such, palletization onto the pallet of choice in the country of destination is often the preferred strategy. But not all international loads are shipped on pallets. Expensive freight rates can lead shippers to floor load product and then palletize goods at the final destination upon arrival. This may be changing in some cases as the cost to floor load and then palletize abroad escalate in comparison with the freight rate savings. Overall, the repalletization of products remains a significant supply chain inefficiency that exists in many global manufacturing hotspots.
UK Market Update, EPAL Expansion
Growth of EPAL, the world’s largest pallet pool, has been solid in the UK and Ireland, according to reports by BREPAL, the organization which operates the EPAL system in the UK. Production of EPAL pallets in the UK rose by 14% last year, following an increase of 22% during 2008, bringing BREPAL’s annual production to 1.3 million pallets.
Beyond the UK, Paul Davidson, chief executive of BREPAL, reports that the EPAL pool is growing fastest of all in Poland which enjoyed a 9% improvement last year to nearly 17 million new pallets produced, while repairs grew by 200% to 3 million.
“I think that EPAL works well in markets where the quality in the past has been poor and where there is a real requirement from users for something better,” Paul observed. “In the case of Poland the pallet industry really got its act together and made huge improvements.”
The result, according to Paul, is satisfied customers, steady growth and no room for the closed pool operators. “Maybe there is a lesson for the US there,” he observed.
In the UK, Paul noted that the dynamics are substantially different. “Here, CHEP solved the users quality problem many years ago and grew to dominate the market,” he said.
Paul speculated that complacency on the part of CHEP may have provided an opportunity for LPR and Logipal (other European pallet rental companies) to enter the market and attack CHEP from two different angles. He explained, “LPR cherry picked the best business with very keen pricing and Logipal offered simple trip pricing to almost anyone. This did not leave much room for the growth of a fourth 1200 x 1000 offering in the UK, particularly one where the user must make a big upfront investment.”
“However,” Paul continued, “Europe is the UK’s biggest trading partner and many customers in Europe are using EPAL and demanding that their UK suppliers export on 800 x1200 EPAL. Although not so spectacular as Poland, BREPAL grew 14% in 2008, 8% in 2009 and 7% so far this year.”
“Where we still have a lot of work to do is on repairs; most here are unauthorized and very poor quality,” said Paul.
With respect to the possibility of the UK embracing the smaller European footprint, Paul was quick to dismiss it. “I think migration to 800 x 1200 is about as likely as us changing the side of the road we drive,” he said. “The investment in infrastructure (racking, pallets, trucks etc) is just too big for the potential gain.”
Taiwan Pallet Rental Company Enters the US, Conforms to 48x40
Taiwan-based Asian Pallet Pooling is taking baby steps into the U.S. market by participating in a new Hawaiian pilot program which is being looked at as a potential model for trans-Pacific cold chain monitoring. The company is supplying a 48x40” RFID-enabled plastic pallet for a Hawaiian pilot project with Armstrong Produce, according to Stan Tseng, managing director of Asia Pallet Pooling. Initially, the pallets will be used within Armstrong Produce’s operations in Hawaii, and eventually expanding to shipments from the mainland U.S. as well as internationally into Hawaii.
Asia Pallet Pooling operates predominantly in Taiwan and China, currently issuing about 600,000 to 700,000 pallets annually. For shipments between Taiwan and China, the company uses a 1200x1000 plastic pallet. Stan indicated that this is the most popular footprint for both of these countries, but for the U.S., it intended to conform to the 48x40” requirement. The company offers flexible solutions for customers, ranging from a 28 pound plastic distribution pallet to a 48 pound 48×40 plastic pallet edge rackable to 2700 pounds. The company has a U.S. sales representative based in New York.
Loscam Establishes Presence in China with 1200x1000 Pallet
The 1200x1000 footprint has established itself as the size of choice in China, according to David Edwards, General Manager, Marketing for Loscam. Loscam, the long time rental competitor to CHEP in Australia but the market leader in Asia, has now established itself in China as well. This move has been strengthened through Loscam being acquired by the China Merchants Group (CMG), announced this July. CMG, David stated, is partially owned by the Chinese government.
With CHEP and EPAL also both promoting the 1200x1000 footprint, and with retailers such as Coca Cola and Walmart asking for it, the future certainly seems to be headed in this direction. Walmart has begun renting Loscam pallets, David indicated. He noted that there is an existing presence of 1100x1100 pallets, primarily used by Japanese companies in the electronics and chemicals sector.
Loscam is supplying a timber pallet to the marketplace, with lumber sourced from various locations including Russian plantations. There is also some supply from New Zealand plantations.
While new state of the art distribution facilities are being constructed, the Chinese logistics infrastructure is still very much a work in progress. David commented that typically palletized movements would not exceed more than a few hundred kilometers. Many pallets are being rented for captive use within distribution centers. He forsees that there will initially be clusters of pallet rental activity associated with major cities, for example, and that in time, as transportation improvements are made, pallet flows will follow the establishment of those lanes.
AIAG Looks to Establish a Standard Footprint to Optimize International Shipments
While companies obviously prefer to receive product on their normal pallet, there remains the issue of freight optimization. The Automotive Industry Action Group (AIAG) is taking dead aim at this issue through its new document, AIAG RC-12 Intercontinental Pallet Standard.
“45x48” pallets are peculiar to North America and are not effective elsewhere,” the foreword to the document states. “The growing international trade requires pallets, cartons, totes, etc., that fit both the supplier and customer facilities world-wide. Another goal is to have these items fit trucks, sea containers and rail cares everywhere, but especially cube out most efficiently in sea containers, as this has the largest effect on the cost of intercontinental transportation.”
“There was an industry meeting last October,” explained Paul Phelps of Molex, chairman of the pallet footprint standardization project. Molex is an electronics component supplier to automotive tier suppliers. When Phelps started with the company 12 years ago, they shipped products mostly by air. In today’s cost conscious environment, most shipments move by sea container. “Most of that (October meeting) group was more focused on reusable pallets and lids.” For Molex, however, the company increasingly has found itself shipping overseas, with various pallet requirements for customers in a number of international destinations. An international standard pallet would help harmonize operations and reduce shipping costs for automotive parts suppliers such as Molex.
As part of the pallet standard group’s work, it surveyed automotive companies as well as various international automotive associations. For example, it discovered that Ford and General Motors were already using a 1140x980 pallet footprint, the eventual size agreed upon. Other companies were using pallet sizes that were close in size. The 1140x980 footprint results in less than 3.5% wasted floor space in a 40 foot container.
The group has been in discussion with Odette, the European automotive association about the 1140x980 standard and has contacted other automotive associations. China, Phelps indicated, is picking up on the size. For now, however, the international pallet footprint will be an AIAG standard only.
“If we can make it into an international standard later, we will,” Phelps said. He also stressed that the footprint will make sense for the shipment of other goods by sea container rather than just automotive. The group is currently assessing what size of box to utilize in conjunction with the pallet.
In the final analysis, we can see that the potential for major footprint changes in existing markets faces substantial barriers, while emerging markets will be more amenable to standardization – most often the 1200x1000. Although the expense of sea container freight often favors floor loaded shipments, there is an opportunity for pallets that best facilitate shipping optimization. An example is the 1140x980 automotive pallet, in conjunction with technology that can transition them more efficiently into legacy material handling systems.