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Markets in Trasition: Pallets - Public Enemy #1? Short and Long Term Reflections on the Future of Pallet Usage
Future of Palletization: With changing to more localized production and e-commerce distribution, pallets may face significant challenges in the future.
By Rick LeBlanc
Date Posted: 2/1/2016
Is getting rid of pallets critical to our survival? Must pallets fade so that we do not?
I was first exposed to this line of thinking in 2012 when I interviewed Dr. Benoit Montreuil, now of Georgia Institute of Technology, for an article called, A World Without Pallets?
“Environmentally,” Montreuil told me, “logistics is among the worst polluters, most greenhouse gases emitted, and among the most materials wasted.”
His approach has been to provide leadership to an initiative known as the “Physical Internet.” This concept doesn’t eliminate global logistics so much as optimize it through standardization, collaboration and technology in an effort to reduce the carbon footprint and other inefficiencies.
But what if you could get rid of logistics altogether? Given that 15% of greenhouse gases in developed countries is generated from moving commercial freight, it seems obvious that eliminating it would go a long way toward cooling down our global warming angst. This is a possibility I frankly had not entertained, until I read a recent edition of the Kiplinger Letter, which offered a vision of the world we might be inhabiting in the next 10-15 years. It paints a picture of food plants grown vertically in intelligent high-rise buildings, and meat generated under laboratory conditions from stem cells. This would free up one-third of the Earth’s surface previously tied up in agricultural production and returning it to its natural state. The Kiplinger Letter went on to forecast, “With food now produced in growing facilities near population centers... There’s scant need to transport fruit and veggies across vast distances...Now such facilities are common.”
Although we are not currently producing crops in these types of environment, the trends do point toward efforts for better land utilization and to grow crops closer to cities in unconventional spaces such as warehouses or industrial spaces. Case in point, Freight Farms, a Boston-based company, is converting 40-foot shipping containers into hydroponic growing spaces. Automated irrigation, light and climate control enable these containers to grow the equivalent crop as a one-acre plot of farmland.
Meanwhile Back in 2016, Pallets Still Carry On
Transported in time back to today, there is definitely interest in eliminating the costs and risks involved in global supply chains. But while there is a desire to create more local production, the challenge for most local operations is the cost. The efficiency of commercial agriculture and manufacturing on a global scale is still such that many or most local operators can’t match the value proposition. And when local production does increase, as I believe it increasingly will, pallets will still be needed, albeit more locally. In that scenario a local company would be able to provide pooling services, given the local nature of the supply chain. A global provider would not be necessary.
While the trend towards local production will undoubtedly increase (and I haven’t even mentioned 3-D printing), reducing the need for logistics and inventory, there are other trends already taking place in the economy that will impact palletization.
At Pallet Enterprise, we used to talk about passionate pallet people with woodchips in their veins. Now we have entire generations with computer chips in their veins. And as their rise converges with massive technological change, the shift to e-commerce is just the starting point.
Already, the largest workforce demographic is the millennial group (19-35 years old in 2016), and the techno-intuitive post-millennials after them are just a click or two away from further tipping the cyber apple cart. The Circular Economy and its pillars, such as asset sharing, are also gaining serious traction. Hands up if you think that Uber and Airbnb are one-offs, or just the first of a new wave of asset utilization breakthroughs. Once you use Uber, you get a more visceral sense of the possibilities.
In terms of packaging and pallets related to the rise of e-commerce, we see a few related trends developing. One of the e-commerce trends of note is the creation of distribution centers located in close proximity to large cities. This will become even more important as e-commerce providers strive for next day and even same day delivery. The JIT economy will impact everything including the expectations of your customers.
There is increasingly a flow of mixed SKU palletized goods between regional hubs and these local urban DCs where orders can be quickly cross-docked or assembled. Because we are talking about closed loops, and because small quantity e-commerce orders can be difficult to stack in a cube-efficient manner, some of these applications have converted to collapsible plastic bulk container systems, or to a plastic pallet and sleeve pack approach. Both of these systems provide unit load stability and stackability to allow good cube utilization and efficient empty return.
Other trends associated with e-commerce include the need to more tightly space top deck boards or move to a solid top deck for smaller, consumer sized items. In terms of packaging with e-commerce business, there is no longer a need to use packaging as point of sale marketing. As a result, a plain brown box has become more common, negating the cost of glossy promotional printing. This has become a point of debate for some because some firms see the home delivery of products as a brand building opportunity through vibrant packaging. Efforts to minimize container dimensions have also taken on a greater urgency, as major carriers have instituted strict dimensional (DIM) weight rules for ground shipments.
One interesting pooling opportunity in the e-commerce landscape has emerged in Finland, where RePack offers reusable shipping bags for e-commerce home deliveries. When a customer orders goods from a participating vendor, a nominal deposit is collected against the buyer’s credit card, and then credited back to him/her after the bag has been returned. After the purchased items are emptied, the customer deposits the empty bag into a mailbox. The post office has a return agreement with RePack. This seems to me to be a brilliant opportunity to take advantage of the under-utilized postal system.
Getting back to pallets, new technologies aimed at serving the “Internet of Things” continue to roll out. Some of these may prove to be of greater interest than RFID for pallet applications in terms of better pricing and in that they do not require a system of portals and infrastructure in the supply chain to read them. For example, BeWhere is a Toronto-based company that relies on a cellular signal with a range of 250 miles. A French company, ffly4u, offers what it says is an inexpensive ultra-narrow band solution for tracking the location and condition of pallets or other assets.
If there is one takeaway from e-commerce predictions, it is that new generations of people and technologies are converging to cause waves of disruptive change. Smart companies are building their business to be flexible and able to accommodate change quickly. Also, as I suggested in the beginning of this column, logistics in its present incarnation is in danger of becoming Public Enemy #1. Take care that the agile and ever-adaptive pallet does not get taken out of commission with it.