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Markets in Transition: Export Pallets – Trending Toward Lightweight Alternative Materials; But Is That the Big Picture?
Reusable packaging guru, Rick LeBlanc, explores the impact of alternatives to wooden pallets for export shipments and the opportunities for domestic wooden pallet companies to take advantage of potential trends.
By Rick LeBlanc
Date Posted: 10/1/2013
While the players remain the same in terms of heat treated (HT) wooden pallets, presswood, paper or plastic, the makeup of the export pallet market is changing. One of those key trends seems to be in the growth of alternative material pallets versus solid wooden packaging and pallets for export shipments.
Let’s take a closer look. Although the evidence is far from definitive, alternative materials may have doubled their share of the export market over the last decade. A 2003 academic study estimated that the export pallet market in the United States was about 70 million pallets per year, with the market share of alternative materials such as plastic, presswood and paper totaling about 10%. Fast forward nine years to Modern Materials Handling’s 2012 pallet survey, and the pendulum is swinging towards alternative materials, with 20% of survey respondents telling Modern that they use alternative material pallets for export. This indicates a significant increase in less than ten years.
The Modern survey also noted that:
• 57% of readers reported shipping domestically and internationally
• 39% of readers were shipping only domestically
• 4% were shipping only internationally.
As to the destination of export shipments, Modern’s results showed:
• 74% of readers are shipping to Canada
• 66% to Mexico/South America/Caribbean
• 48% to Western Europe
• 36% to Eastern Europe
• 57% to Asia
Finally, Modern noted that shippers often take a different tact with pallet selection for international shipments than for domestic, with only 21% saying they don’t differentiate between domestic and export pallet selection. Meanwhile, 48% say they use HT pallets, and 20% of respondents reported using alternative material pallets.
This evidence towards greater use of alternative materials rings true to one large supplier of plastic export pallets. “Cabka has seen a large increase in revenue across nearly every industry with the compelling reason to switch varying between each industry,” I was told recently by Nathan Franck, director of sales and marketing for CABKA North America (www.cabka.com), in a discussion about export pallets.
According to Franck, the key factors may vary from customer to customer, but overall they result in increased interest in plastic. “They look for savings due to ISPM-15 regulations, sanitary improvements in food and pharmaceutical, improved efficiencies with automated systems, and freight savings due to lighter weight plastic pallets,” he commented.
When it comes to pallet options for export, treated wood pallets are still the clear favorite for a large majority of customers in terms of pricing and performance, but as Franck suggested, other factors can sway buyers towards alternative pallets such as plastic, presswood and paper.
As a supplier of plastic pallets for export, Nathan noted that while wooden pallets are his major competition, wooden pallet companies constitute some of his largest customers. They take advantage of reselling plastic pallets to their customers in order to fully meet shipper’s needs. In terms of the plastic reselling opportunity for wooden pallet suppliers, there are different approaches that can be taken. Stocking distributors can take receipt of plastic pallets to sell in full or partial load quantities. Other distributors that deal strictly in full load quantities may choose to have the plastic pallet manufacturers ship directly to customers.
John Clarke of Nelson Company (www.nelsoncompany.com) agrees that treated wooden pallets typically provide best value for users, while reporting that his company’s plastic pallet business is also on the uptick. Clarke regularly offers to help customers find the lowest overall cost. He suggested that for many applications, a lower overall cost might be achieved by conforming to the pallet system of the country of destination. For example, a used Europallet which may be acquired in the $8 – 10 range in the United States just might provide lower total cost for shipping into Europe than an HT GMA pallet that might sell for $2 – 3 less, when disposal costs for the end customer are considered.
The same business reality can be seen in the United States, where receivers can be forced to dispose of various non-conforming import pallets, often made of chipboard, when they would be better served by receiving a usable 48x40 pallet that would not only eliminate disposal cost, but might help generate revenue or avoid re-palletization costs. Clarke encourages customers to take a look at the big picture in terms of total cost and the ultimate goal of customer satisfaction. “If you want to look for lowest overall cost, there are always opportunities out there,” said Clarke.
For large importers, the pallet policy of the receiver may also have an impact on selection. IKEA, for example, turned heads a few years ago when it mandated either paper pallets or the plastic Optiledge system for inbound unit loads. Optiledge is a plastic ledge system with strapping that relies on the bridging strength of the load (often easily accomplished with knockdown wood furniture), while providing space for fork access underneath. One key attraction for IKEA, as for other companies, is the easy removal of corrugated cardboard, which is readily baled for recycling. Off the record reports from the frontline suggest there have been material handling challenges for IKEA under the new program.
• Chances are (57%) that your customer is exporting pallets of merchandise. Revisit this opportunity if you haven’t lately.
• Alternative materials continue to gain ground. A wooden pallet supplier can be a successful distributor of alternative material pallets.
• Think about total cost and the ultimate end game of enduring customer satisfaction. Your customer (and your customer’s customer) may not realize that ad hoc or agreed upon pallet selection can be a source of frustration and inefficiency in the importers logistical system. For many applications, however, this will continue to take a back seat to pallet price and more immediate performance requirements.