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Walmart Sustainability Index, Packaging Scorecard Affect Pallet & Packaging Industries
Walmart pushes sustainable packaging standards as part of its purchasing matrix, points to need for wood pallet industry to tell and quantify its green story.
By Lana F. Flowers
Date Posted: 5/1/2010
Walmart pushes sustainable packaging standards as part of its purchasing matrix, points to need for the wood pallet industry to tell and quantify its green story.
BENTONVILLE, ARK. — The world’s largest retailer recently announced it wants to eliminate 20% of greenhouse gases and carbon emissions from its supply chain by 2015.
That means pallet manufacturers and suppliers, if they want the business of Walmart and its numerous suppliers, must adapt and provide green shipping and packaging solutions.
Eliminating about 20% — or about 20 million metric tons — of greenhouse gases equals 1.5 times Walmart’s expected carbon emissions growth in the next five years, said Mike Duke, Walmart president and chief executive officer, in a recent Webcast.
Sam’s Club, Walmart’s warehouse club division, no longer is making sustainability an option: It’s a requirement, according to Linda Hefner, Sam’s Club executive vice president for merchandising. She spoke to about 330 Walmart vendors at a conference in early April.
Sam’s Club buyers will use a value framework of six components to decide which products to stock for members. Those six components include sustainability, product quality, value of the brand, service, pack size and unit price. Sustainability no longer is an overlay, something to be considered with all other things being equal, Hefner said. It is a component buyers must consider when evaluating products.
Sam’s Club reported $47 billion in sales for the fiscal year ended Jan. 31, so it is easy to see how anyone in the supply chain would want the business of one of Walmart’s three business divisions.
It becomes even more financially important when examining the company’s entire annual sales of all three divisions, which also include Walmart U.S. and International. The company’s sales totaled $405 billion for the fiscal year ended Jan. 31, with another $3.16 billion in membership fees and other revenue, for total fiscal year revenue of $408.2 billion. (Figures are rounded).
To get Walmart’s business, suppliers and manufacturers aren’t alone. The company is working with suppliers to set guidelines, share information and reach solutions.
For example, Walmart held its fifth annual packaging expo in early April where about 180 packaging suppliers displayed pallets, containers and end cap displays.
Some of those items on display will compete with traditional wooden pallets.
Scott White of Impact Manufacturing, Lake Forest, Calif. showed onlookers a display named The Cube. It is made from layers of recycled paper, pressed tightly together. It’s open on all four sides, but plastic straps criss-cross over one another to hold merchandise in place.
The Cube is meant to be both a shipping unit and a display unit, White said, saving the need for a traditional wooden pallet to be used during shipping. It also saves the need for brand merchandising employees to take items off a pallet and place them on a traditional end cap or gazebo display once the items arrive at stores.
The Cube also will last for three months or longer, eliminating the need to replace displays that get dented by shopping carts, climbing children or other in-store hazards, White said.
“It will last longer than the promotion, which is the idea,” White said.
The Cube can be broken down and recycled again once the promotion concludes, he said.
Fresh Pak Corp. of Houston, Texas showed a plastic slip sheet, a two-pound piece of recycled plastic. It’s black and about the thickness of a sheet of notebook paper.
The slip sheet is meant to replace wooden pallets, which can weigh as much as 50 pounds, in the supply chain, reducing fuel and greenhouse gas emissions, Fresh Pak representatives told those who stopped at their booth.
The slip sheets reduce freight and shipping costs by 25%, he said, again a selling point to Walmart whose focus is on saving customers money so they can live better, in addition to reducing greenhouse gas emissions.
Fresh Pak conducted a case study with Dell Computer. Promotional materials stated that Dell removed 1 million pallets from its supply chain in the first year by switching to the Eco-Sheet plastic slip sheets. Fresh Pak indicated that Dell saved more than $30 million in packaging expenses and allowed 25% more freight to be loaded in containers, as wooden pallets took up more room than the thin slip sheets.
The Eco-Sheet system reduced freight weight by more than 17,000 tons and improved environmental awareness of Dell employees, according to Fresh Pak. There is a downside to converting from wooden pallets to the slip sheets, as using the Eco Sheets requires getting special attachments on forklifts. The attachments are so the forklifts can reach out and grab a tab at the ends of the Eco Sheets, to lift or pull the merchandise along warehouse floors or transfer merchandise on slip sheets from distribution center docks to 18-wheeler tractor-trailer rigs.
However, Fresh Pak representatives said the Eco Sheets cost $750 per 500 units, cheaper than the $8-10 or so for a traditional wooden pallet. The cost savings of using the slip sheets helps pay for the expense of adding the forklift attachments, according to Fresh Pak.
Wooden pallet makers also get some competition from plastic pallets, which suppliers displayed at the packaging expo and touted as being made from recycled materials and able to be recycled again. There were no wooden pallet representatives at the Walmart packaging expo although about a half a dozen plastic companies showcased their pallet lines.
Another slip sheet manufacturer, Rehrig Pacific Co., exhibited slip sheets made from 100% post-consumer recycled materials, such as high-density polyethylene bottles. The slip sheets are picked up at end users, sorted, and returned to suppliers to use again. Rehrig also makes reusable plastic crates for shipping beverages and produce.
Pallet makers can take some heart, as Walmart in an information sheet about understanding the company’s distribution network says “merchandise shipped to this network should be palletized.” However, the sheet does not specify what kind of pallet must be used.
In that sentence, “this network” refers to Walmart’s grocery distribution network. Walmart also has a regional distribution network which uses high-speed conveyors and sorting equipment to move freight into trailers bound for stores.
The regional distribution centers can handle full pallets of freight, conveyable cases of freight, non-conveyable cases and break-pack quantities, according to the information sheet provided to suppliers.
The importance of pallets, or pallet replacements, is magnified in the supply chain. Walmart not only has the goal of reducing carbon emissions by 2015, the company also wants suppliers to fill out packaging scorecards.
Any supplier with access to Walmart’s Retail Link proprietary database has access to the packaging scorecard, a tool to score the sustainability of various packaging options. Walmart again is not leaving suppliers in the dark. The retailer recently shared information with suppliers and conducted a sustainability Webinar.
Walmart wants suppliers to use packaging and shipping material made from sustainable materials, that use 100% renewable energy and create zero waste, said Amy Zettlemoyer-Lazar, Sam’s Club senior director of packaging and supplier diversity.
A supplier cannot create a score card for one product or item, but must compare results for one item against packaging results across a category, Zettlemoyer-Lazar said.
For example, Procter & Gamble’s shampoo packaging would be compared with Unilever’s packaging. A Nabisco cracker product would be compared with a Keebler or Great Value (Walmart private label) product.
Vendors who score 80 to 100 on the packaging scorecard are above target. They measure waste and set reduction targets.
Vendors whose packaging scores are 60 to 80 take some steps to measure waste and are on target, Zettlemoyer-Lazar said. Those who score 0 to 59 are not measuring waste and are below target. Zettlemoyer-Lazar did not give a particular supplier’s packaging score or any comparisons.
Walmart is going beyond the confines of its corporate headquarters in Bentonville, Ark., and is working with environmental groups, nonprofits and other organizations on sustainability and waste reduction. The Environmental Defense Fund has an office in Bentonville to work with Walmart. Improved packages and designs, along with lighter freight loads, help suppliers and retailers reduce solid waste and emissions, said Andy Wunder of the Environmental Defense Fund.
Improved packaging also cuts the use of raw materials and the creation of hazardous wastes. “You won’t have to pay disposal costs and won’t have to pay for raw materials that created the waste to begin with,” Wunder said.
Wunder added that shippers should reuse wooden pallets to reduce waste, or use alternative materials. He suggested, “For example, reduce the use of wooden pallets by switching to plastic.” This shows that plastic continues to be regarded as environmentally friendlier than wood by many in the environmental movement.
Walmart is not only working with suppliers, the company wants to tell customers about a product’s origin, how much in packaging and raw materials the product used and how much damage (or less damage) the product, its packaging and transportation did to the environment.
Walmart announced last year it wants to create a sustainability index. A sustainability consortium of the University of Arkansas at Fayetteville and Arizona State University is compiling data and research to start formulating the sustainability index.
Walmart and consortium members have said it could take as long as 10 years to put sustainability labels on products. That label would tell customers where the raw materials originated, if a supplier or manufacturer took steps to reseed a crop or preserve land, how much energy was used in manufacturing and shipping, what went into the packaging and how much in greenhouse gases were used or saved.
The sustainability consortium has a wide membership. Its most recent member, Darden Restaurants, is the parent company of Olive Garden and Red Lobster restaurants.
It costs money to join the sustainability consortium, but membership has its privileges. Those who join the higher tiers of the consortium pay more, but also get to attend more meetings and have more input.
Pallet suppliers who want to shape their futures, and the futures of the sustainability index customers eventually will see on packages, might want to get out their checkbooks. Those who participate at the highest levels get a seat on the Sustainability Consortium Advisory Council, a seat on a sector working committee, invitations to annual meetings and quarterly workshops, and participation in training and education programs. Others can join at lower levels and still contribute to the discussion as well as stay informed about developments in sustainable business practices through periodic private meetings. For more information on this opportunity, visit www.sustainabilityconsortium.org.
Between the packaging scorecard, the sustainability index development and the commitment to cutting greenhouse gases, Walmart has made it clear that the retailer and its suppliers will participate in environmental issues that save money.
“We have learned that by taking a leadership role and collaborating with companies that share our commitment and passion to sustainability and want to lead with us, we will benefit entire business systems across the globe,” Matt Kistler, Walmart senior vice president of sustainability, wrote in a guest column to Connecting Northwest Arkansas. It’s a regional publication targeted to Walmart vendors with offices near Walmart’s headquarters.