An Industry with a Future and a City with a History

Anybody who has enjoyed a visit to Quebec City will agree that the city is loaded with history. As one person commented, “It is even more French than France.” Quaint shops and restaurants, delicious food, and magnificent cathedrals are just part of the charm of the “old city.” The Chateau Frontenac, a true landmark hotel, is one of the most photographed hotels in the world. The Loews Concorde was within walking distance of the old city, and it was a nice way to walk off at least some of the calories that were so gladly consumed.

This year the CWPCA held a joint meeting with its French sibling, the Quebec Pallet Association. This joint session allowed members of both organizations to interact and enjoy an information-packed program.

Dr. Marshall (Mark) White, director of the Virginia Tech pallet and container research laboratory, made two presentations that were the highlight of the meeting. Although Mark had spoken to audiences in Canada before, he had never addressed a CWPCA convention. He was the same Mark White that NWPCA members have enjoyed listening to for the better part of two decades.

Pallet Lab and Research

First, Mark gave our Canadian friends an overview of the work of the pallet lab, a 7,600-square-foot facility with an annual budget of nearly $900,000. As the design center of the pallet industry, the lab receives an average of about 18 technical requests a day. Its equipment makes it possible to simulate about three years of wear and tear on a pallet in about 3-1/2 hours.

Mark spoke on designing unit loads, particularly for automated materials handling systems, as a customer service and. A unit load design may look relatively simple, but it is a complicated structure from an engineering perspective. Designing unit loads may be viewed as a problem or an opportunity. A systems design approach examines the interaction between the package, the pallet, and unit load handling devices. Functioning as the platform in distribution systems, the pallet represents an opportunity to serve as a solution to materials handling challenges.

The opportunities for unit load management seem to be huge. Mark suggested that pallet people develop strategic partnerships with packaging and equipment designers. Working together with a systems approach, the three parties can develop better solutions to problems of customers. In some instances, the cost of containers and packaging exceeds the cost of the product. Mark emphasized the importance of getting the pallet and packaging to work together.

Load bridging, designing the unit load to help hold itself together and thus providing added strength, will be an important area of research at the pallet lab in the future, Mark indicated.

Plastic Pallets

Mark’s second presentation provided valuable information about plastic pallets. Chep estimates that plastic pallet production in the U.S. has grown from about 3.5 million in 1995 to about 12 million since 1995, according to Mark; the pallet rental company projects growth to some 20 million or more by the year 2001.

The economics of plastic pallet use and performance is determined by the type of plastic, pallet design and manufacturing method.

Thermosetting and thermoplastic resins are the two types of plastic used to make pallets. A particular plastic is chosen for such characteristics as high static strength, high static stiffness, high impact resistance, low density, low cost, and ease of processing. Polyethylene is the most common type of plastic in the U.S. while polypropylene is more common in Europe. High-density polyethylene, often used in plastic pallets, comes from ethylene gas, not petroleum; its price is more stable than petroleum. Mark estimated that plastic pallets used about 2% to 3% of the 11 billion pounds of plastic made in the U.S. in 1998.

While plastics typically are strong, they are not stiff. Low static stiffness equals high impact resistance, Mark noted, while high static stiffness equals low impact resistance. The solution is to use composites or combinations of two or more materials. Many visionaries believe that composites represent the future of materials for many products and applications.

There are several different methods of manufacturing plastic pallets and containers; thermoforming and structural foam molding are two of the most common. Some pallets are made of plastic lumber; plastic lumber generally is manufactured by profile extrusion. Most molding processes use a form of uniform virgin material; except for extrusion, they do not use recycled plastics.

Plastics can be molded into efficient product profiles. While this can be an advantage, it is also an expensive proposition.

Fire and product slippage have been two big disadvantages of plastics; fire retardants and modifying surfaces to increase friction are helping solve these two problems.

Plastics have only a 3% to 4% share of the U.S. pallet market. Why? They only compete in some reusable pallet markets, press capacity is limited, plastics have a high initial cost, the pallet market is fragmented, and designs are numerous.

Mark made a statement that wood pallet manufacturers like to hear: “Plastic will never replace 50% of the market. Wood will dominate — it is less expensive!”

Yet, plastic may be best suited for certain applications. Mark finished with these words of wisdom: “Turn a problem into an opportunity…Consider adding plastic pallets to your product lines via strategic partnerships.”

Third-Party Management

Michael Gauthier of Chep Canada spoke on the growth in pallet pooling, the company’s extended pallet pooling model, and pallet pooling and material handling equipment.

Chep, a joint venture between Brambles and GKN, grew from Australia to Europe to Canada in the 1980s, and then to the U.S. and South America in the 1990s. Chep grew rapidly as its customers evolved and began out-sourcing non-core activities.

Michael spoke about marketplace globalization as more products move internationally. A single global pallet design will not work, he said. However, the global flow of pallets can be advanced by using a common size pallet.

Michael discussed the perceived benefits of plastic pallets. “Perceived benefits can be the driving force in potential growth of alternative materials,” he said. Chep has not made a decision on using wood or plastic in the future, he said.

Chep has five major pooled products: full pallets, half pallets (the 20×48 is preferred by customers), quarter pallets (used in the Canadian hardware industry), and returnable plastic containers (applications in automotive and produce). Future products may include reels and containers for air and sea freight.

Discussing new technology, Michael mentioned the possibility of radio frequency identification for “smart” containers that would improve asset identification and control. Global positioning systems offer the potential for greater control of assets anywhere in the world. “It is a matter of economics,” he said.

He summarized the unfolding future of third party management. According to Michael, out-sourcing has been a proven success, advances are being made in materials, pooling is expanding beyond pallets, and high technology offers new opportunities.

Joe Dewitt of Pallet Pallet also spoke on third-party pallet management, which he said requires well executed programs. He emphasized the importance of recovery, repair, and return of any platform or container that has value on both ends of the supply chain. Pallet Pallet’s leasing through NPLS can be used in both open and closed loop systems. The company is beginning to lease containers and totes — returnable plastic container systems — in meat, poultry, and industrial markets in Canada, Atlanta, and Boston.

On-site pallet programs have blossomed since Chep’s recent Wal-Mart program in the U.S. Pallet Pallet has an on-site pallet management program in the U.S. with K-Mart.

Pallet Globalization

Dr. Ed Brindley, publisher of the Pallet Enterprise, addressed the CWPCA on pallet globalization and the fast pace of change. The Euro pallet has been a dominant block pallet in Europe for years, but inferior pallets have been coming out of former Eastern European countries since the fall of the Iron Curtain, he noted. The NWPCA is testing a U.S. version of the Euro pallet at the Virginia Tech lab. There has been little interest among U.S. pallet people so far, but that likely will change when they can become licensed to manufacture logo-marked Euro pallets.

Wood imports and exports have become an important issue in the North American pallet community, Ed observed. The discovery of the tree-eating Asian long-horned beetle in the U.S. and phytosanitary regulations that go deep beneath the surface to fungi and molds within the wood could explode into major issues. Quotas under the U.S.-Canadian softwood lumber agreement have sharply reduced the volume of random length Spruce Pine Fir (SPF) shipped from Canada to the states while encouraging an increase in SPF cut-to-size pallet lumber.

There has been a lot written in trade journals of the materials handling industry about plastic pallets and containers, Ed noted, but market gains are slow to come. Plastics are increasing in market share, however, and there are some signs the pace is picking up and may accelerate even more in the next few years. The Reusable Plastic Container Coalition, a new trade organization based in Washington, D.C., recently held its first annual meeting.

Ed updated the audience on some companies involved in pallet management, including Pallet Pallet, First Alliance, PalEx, and Chep. Much of his emphasis was on Chep because it has generated the most news recently and it stands to have the greatest impact on the pallet industry. Chep likely will have a major influence in encouraging global acceptance of block pallets as a standard; it favors this kind of design and has a huge jump over other competitors on pallet management.

Chep’s U.S. pallet pool has grown to over 30 million pallets and it is forecast to grow by 16 million more over the next 16 months. Worldwide, Chep has over 110 million rental pallets in some 30 countries. The European estimate is around 63 million pallets; new European markets include Italy, Germany, Greece, and Scandinavia.

Ed also explained what is happening with the recent agreement between Chep and Wal-Mart. It is potentially the biggest coup in the pallet industry, perhaps in the entire materials handling industry. Wal-Mart’s 1,841 stores and 613 Supercenters have 20% of the general merchandise and grocery market; it is a staggering market opportunity in the arena of materials handling.

Chep’s dock sweeping concept at Wal-Mart distribution centers replaces white pallets with Chep blue pallets and puts plastic pallets into the system for shipping goods downstream to stores. In addition, Wal-Mart is encouraging its suppliers to ship on Chep rental pallets to make the entire system work more efficiently.

Pallet Ownership

The pallet industry and its customers took pallet ownership for granted for years. Once a pallet was no longer under load, it became the property of whoever possessed it. However, Chep’s pallet rental pool and other retrieval programs are making pallet ownership more complex.

Don Black, a former lawyer and notable pallet manager in the Northwestern U.S., spoke with authority on the ownership issue as it relates to a retrieved pallet that has been branded or imprinted. Some of his remarks appeared in the September issue of the Pallet Enterprise.

The National Wooden Pallet and Container Association and a group of Washington state recyclers teamed to obtain a legal opinion on the issue after a new law took effect in Washington that restricted pallet ownership. Legislation impacting pallet ownership also is pending in Arizona and Illinois. Don also talked about fungibles, products that look the same and seem to be interchangeable.

A group of pallet recyclers is scrutinizing this suddenly important issue of pallet ownership. This question of who owns a pallet likely will have a significant impact on every pallet person before it is resolved. The group of recyclers expects by early fall to have developed a packet of information that it can send to lawmakers in states like Arizona and Illinois that may be considering laws impacting pallet recycling and retrieval.

Other Programs

Chris Reichenbacher of MTW Solutions spoke about software that can be used to efficiently and inexpensively manage the office functions of a pallet or box manufacturing company. MTW is working with Ross Beverley, president of the CWPCA. Ross spoke highly about his successful experience with MTW and its integrated office accounting system.

One of the biggest challenges in the pallet industry is labor. Paul Wilson, a human resources manager for Manpower, spoke wisely about the importance of recruiting and maintaining key personnel. He admitted that finding and hiring the “best fit” candidates is one of the hardest personnel steps to complete successfully. Two of the recruitment problems mentioned by attendees were relating resumes to real abilities and assessing how someone’s personality will fit with your people and your needs.

No pallet meeting is complete without some discussion about lumber. This agenda included presentations or discussions about such issues as marketing qualities of aspen lumber, the future commodity trends and their effect on the softwood and hardwood market, and the direction and impact of quotas on lumber being shipped from Canada to the U.S. While it has become more difficult to ship random length softwood to the states, the low Canadian dollar has worked to significantly increase the volume of finished pallets shipped from Canada to the U.S. since 1996.

Nsimba Kinuani, director of the QLMA Economics and Marketing Department, spoke about the new environmental program, Y to Y (Yellowstone toYukon). Lumber production reductions in the Northwest and Southwest have been offset by increases in the Southeast and Northeast.

Carl Grenier, executive vice president of the Free Trade Lumber Council, discussed the free trade and managed trade options. Strategically, free trade is the only sensible option, he said. Carl expects the next managed trade agreement to cover all provinces and to apply to more products. He believes the quota size will remain roughly the same with some minor changes.

Carl stressed the importance of building relationships with segments of the U.S. that oppose the quota system. The FTLC action plan is to strengthen the organization, continue expanding U.S. alliances, undertake economic research, counteract the U.S. Lumber Coalition, and implement a communication strategy. Tune in for this changing saga as we enter the last 18 months of the current five-year agreement.

Other topics discussed included how pallet manufacturers and recyclers can work together in today’s changing pallet world and the advancement of automation in the recycled pallet industry.

Canadian Pallet Business

Since the CWPCA now elects its slate of officers for two years, there was no election held at this year’s meeting.

The association will hold a series of regional meetings this fall. It also is working with the NWPCA to co-host a meeting in conjunction with the Richmond Expo May 19-20, 2000, and it is planning to sponsor a pallet plant tour in northern California in the fall of 2000.

Gordon Hughes, the CWPCA’s executive director, recently moved the association’s offices out of his home into an office. The association has new phone and fax numbers to match this change. The move was made to prepare the organization for the time when Gordon eventually no longer manages the CWPCA.

After 2000, the CWPCA is considering the possibility of going back to a spring or winter annual meeting date. People are not anxious to give up vacation time to attend a meeting. Halifax is one of the locations being considered for 2001.