Pallet Industry – Are changes on the horizon?

Unless you have a direct interest in pallet design or manufacture, you probably have not followed recent trends in the industry.  Which means, you are probably unaware there are no universal standards regarding pallet sizes, design or components.  This lack of universality is surprising.  Globalization has resulted in a surge in pallets packed with exports traveling across the world, and the international community has done a good job of implementing universal codes and regulations for just about every aspect of the commerce and trade process.  So a glaring omission seems to be the lack of universal standards for pallets.

For example, the “block pallet” is the dominant type of pallet used throughout the European Union, while North American businesses tend to favor the “stringer pallet.”  Australia makes use of its own unique pallet, which fits nicely aboard Australian railcars.  In Asia, which according to Pallet Enterprise magazine is “still in its pallet infancy,” manufacturers tend to favor block pallets, although many of them are plastic.

The main difference between the two types of pallets?  The block pallet uses a perpendicular overlay of construction materials – usually wood – so that a forklift may have access to any of the pallet’s four sides.  A stringer pallet is generally not as strong as a block pallet, and uses a system of parallel construction materials, so that a forklift can only access the pallet from two sides.

While the various pallet designs have tended to coexist, a potential game changer took place when Costco announced, beginning in 2011, it would only accept merchandise from suppliers on block pallets.  According to Modern Materials Handling, the change was driven in part by the quality of some pallets Costco was receiving.

So what impact has the Costco decision had on the rest of the industry?  An immediate reaction was the formation of a coalition of pallet manufacturers to try and offset some of the economic costs of suddenly finding themselves shut out from the lucrative Costco business.  The new coalition, the Pallet Logistic Unit-load Solutions (PLUS), is an attempt to compete with Costco’s three main block pallet suppliers:  CHEP, iGPS and PECO.

Although Costco’s move was an eye-opener, and sparked talk about whether or not it would ignite moves by other major retailers, no one is predicting the end of stringer pallets.  One trend that has emerged is a growing tendency to rent, rather than purchase pallets.  Modern Materials Handler’s 2011 Pallet Survey, found the number of respondents managing their own pallet pools had dropped by 13 percent, and that CHEP saw “interest and/or participation” in their business jump from 22 percent to 43 percent.  Since block pallets are more expensive to manufacture, a trend could be emerging in which manufacturers are opting to rent from a third party.

While it’s an interesting time in the pallet industry, Bruce Scholnick, president of the National Wood Pallet&Container Association (NWPCA) seemed to sum up the situation by noting that:  “All pallets have a place in the market.”