For over 30 years the leading pallet and sawmill magazine in America.
Letter from Ed: Block Pallets — Past and Future Costco Makes a Move
In spite of the talk about block pallets, the non-rental market has thus far not made any significant shift in the possible emergence of block pallets in North America.
By Edward C. Brindley, Jr
Date Posted: 10/1/2010
Block Pallet History
Over the last few years there has been quite a lot of talk about the possible emergence of block pallets in North America. Yet, the stringer pallet continues to dominate the non-rental pool market. Will that continue? Nobody knows for sure. But there are signs that the tide toward block pallets may be growing. The question is, “Will the white wood industry have a viable solution to offer?”
There are some pallet manufacturers that can build block pallets efficiently in large quantities on automated nailing systems from both European and U.S. manufacturers. Many more manufacture block pallets in smaller quantities on tables.
Numerous industry sources suggest that in spite of the talk about block pallets, the non-rental market has thus far not made any significant shift in that direction. Tomorrow may be different, but that has been the trend so far.
There may be more block pallets manufactured today than our industry often recognizes. Production numbers may be deceiving because of the large number of unit loads moving on block pallets in the CHEP, PECO and iGPS systems that make a number of trips per year. More pallet users have been exposed to block pallets; many reportedly like them due to easier handling efficiency, true four-way access, perceived strength and durability benefits, and other advantages.
In today’s competitive environment, CHEP has indicated that it has targeted white wood customers and is looking to expand aggressively into markets beyond its typical stable of large grocery manufacturers. It remains to be seen how successful this attempt will be. But it does appear that new pallet manufacturers supplying the 48x40 market are the most at risk.
A group of industry leaders led by members of the National Wooden Pallet and Container Association has announced their intentions to launch a block pallet pool called the Pallet Industry Management System (PIMS). At this point the PIMS model shows promise, but it has to become a reality first. And that will take millions of dollars in investment.
Nailing machine manufacturers have been looking at block pallet manufacturing options hoping to be ready for any major industry push in that direction. Our lead article in this issue profiles a new block pallet machine developed by Pallet Chief. But you need more than nailing capacity, the industry needs to have a system to manage those pallets and compete against rental companies.
When somebody asks what I think about the future of pallets in North America, I don’t believe customers are going to move more toward alternative materials, such as plastic or composites. But I do believe that many shippers may opt for either perimeter-based pallets or the Euro-style block pallet that has three block-stringers nailed to a top mat.
Why will block pallets become more prominent in this market? Think about the factors that will drive the future direction of the industry. CHEP is unquestionably the biggest international pallet supplier; its system uses block pallets in most parts of the world. The largest pallet pool in the world is the EUR-pallet pool in Europe. EPAL, the EUR-pallet management organization, claims its pool contains approximately 500 million block pallets. Anybody who has dealt with Europeans knows that they can be pretty set in their ways, and block pallets are entrenched in Europe. Any movement toward worldwide pallet specifications is likely to be on block pallets because CHEP, EPAL and many multinational corporations have shown their support for block pallets.
China and other Asian countries are not nearly as palletized as North America and Europe, but the Pacific Rim leans more toward block pallets, including plastic block pallets. In recent years, EPAL’s leadership has been working to encourage Asian countries to increase their number of EUR-style block pallets. So, both block pallets and 800x1200mm and 1000x1200mm dimensions are likely to dominate any international standards. This may occur despite the fact that the EUR-pallet footprint is not the most efficient for cubing out many transit vehicles and containers.
Costco Turns to Block Pallets
On the local front, earlier this year Costco Wholesale, a major club store retailer, revised its “Structural Packaging Specifications.” Costco announced that as of January 1, 2011, it will accept iGPS, PECO, and CHEP block pallets in North America while ceasing to accept stringer style GMA pallets.
Costco stated, “Pallets not rented from iGPS, PECO, or CHEP must meet equivalent structural and performance standards, are not returned or exchanged, and must be pre-approved. We do not accept pallet exchange deliveries (we do not return or exchange pallets for the ones being delivered).”
While Costco does not prohibit white wood block GMA-style pallets, it has pushed suppliers toward rental options believing that the costs will be lower. For odd-sized loads, Costco’s specifications include a section entitled “Purpose-Built Pallets.” Costco approves purpose-built pallets only when it is not possible to transport or handle certain products safely and efficiently on pallets compliant with its general delivery requirements.
Expecting all of this to happen by the beginning of next year seems awful enthusiastic. We have heard major pallet using customers make claims and announce programs before. Often they do not develop as quickly as the announcement suggested. Sometimes they do not happen at all. Keep in mind, however, that Costco has been trying to make the switch for a number of years. Some suppliers have indicated that Costco seems more determined than ever to make this effort work.
While PIMS pallets are not specifically mentioned on Costco’s specification, a picture of a white wood block pallet along with the NWPCA logo for a purchased pallet is listed along side of the iGPS, PECO, and CHEP pallet offerings. Getting an effective white wood block pool is more critical now than ever. This is needed if the industry is going to answer the market challenges that lie ahead. PIMS may be a good solution if the funding and customer support come on line.
We know that a growing number of shippers are not totally happy with their logistics systems. They have hopes for a better tomorrow – more efficiency and better quality control. The environment is set for changes that once might have been only a pipe dream.
Costco’s initiative may be only one lone retailer taking a stand, or it could be the beginning of a paradigm shift. Either way, the wooden pallet industry needs to be prepared to supply what the market wants, and we need to be thinking one-step ahead to be ready when the time comes.