Some people wonder whether or not it is more difficult for pallet quality standards to stick in the United States than they are in Europe. All one has to do is spend some time traveling in Europe to realize that the North American and European pallet markets are different. A major reason is the mindsets that dominate the two different regions. What the customers want, they generally get. And pallet users in North America are focused on purchase price, convenience and supply. Pallet users in Europe are more concerned with the quality and performance of the pallet while price and supply are also critical factors.
Europe currently boasts the largest industry cooperative pool in the EPAL euro pallet pool with more than 450 million pallets in circulation. The EPAL network of pallet companies produced or repaired a record 115.8 million EPAL pallets and containers in 2017, which was nearly a 10% increase over the previous year. Some of this increase is due to an improving economy in Europe. But it also shows the European market’s interest in a quality pool of exchange pallets.
So, could a quality pool system like EPAL really ever thrive in North America? It did for years in the now defunct Canadian Pallet Council (CPC). The reasons for CPCs downfall are notable, primarily the difficulty in getting members to repair their fair share of the pool as well as retailers pulling out of the program. This reality brings us to the first critical factor for success.
You must have big champions in the supply chain to make a pallet pool work. This includes product manufacturers that ship on pallets as well as retailers. The pallet companies would line up in a minute if they could get the customers to embrace a new and improved exchange program. But the current dilemma has its roots in decisions made decades ago.
Brief History of the Grocery Pallet
In the United States, the Grocery Manufacturers’ Association developed its 48×40 GMA pallet specification during the 1970s. Over the years, GMA pallets experienced an erosion from their original heavy-duty 13/16" deck and 2×4 stringers. The original specification lost its influence. Today, a GMA pallet is often thought of as a partial four-way, 48×40 hardwood pallet with 5/8 of an inch deckboards or thinner, maybe down to 9/16th inch or even a half inch at the bottom of the spectrum. Currently, GMA pallet decking and stringer dimensions vary widely, but they contain much less lumber than they originally had.
The GMA exchange system deteriorated to the point that the food industry was looking for a better solution by 1990. The grocery industry’s Cleveland study suggested that a good cooperative exchange ownership pallet pool, such as the Canadian CPC pallet program, would be the best solution. But again the grocery industry was not willing to invest the necessary money to start a high-quality ownership exchange pool, even though their study suggested that it would pay off in a relatively short period of time.
Instead, the grocery industry pallet subcommittee wanted somebody else to finance the solution. They no longer wanted to deal with pallet headaches. This is what really opened the door for CHEP to enter the U.S. grocery industry. CHEP was promising to both eliminate pallet headaches and save its customers money.
Founded in 1991, the EPAL system was widely embraced by the rail and transportation sectors as well as retailers and product manufacturers. Quality assurance attempts in the United States have had limited support from product manufacturers, growers or retailers.
Specialty Pallets Lead to Size Fragmentation
Another major factor is that many products in the United States are designed with little thought to transport packaging. This means that those products fit best on specialty pallet sizes. The trend toward pallet specialization has grown significantly over the last decade. And that makes it harder to develop a consensus standard or quality pool program. Equipment is being produced for the North American market featuring quick change technology from one pallet design to the next due to the rapid growth in specialty sizes and designs. The development of pallet design software, such as the Pallet Design System™ and Best Pallet™ allow for greater pallet and container design options. Computer-aided design has become much more common in North America compared to Europe.
Learning from the Past
The North American pallet industry has tried to produce quality standards and inspection programs in the past. This includes a grade marking system in the 1950s, the CPC, SPEQ program developed by the NWPCA, PIMS, PARS and most recently 9BLOC. None of these alternatives have achieved critical mass and some have gone extinct. Today, 9BLOC remains a really good idea looking for considerable financial backing. It isn’t that the pallet industry can’t run a pool or design the right pallet. The real problem has always been the money. Who is going to pay to get the idea off the ground? Who is willing to pay more for a pallet when a decent quality used or new one will do the job?
Many pallet decisions are made today by purchasing managers who are only looking at the purchase price. They aren’t taking into account the supply chain savings for packaging reductions due to redesigning the corrugate, plastic or other packaging on the loads. In most cases, that would produce a much bigger total unit load savings even when you factor in a higher quality pallet to achieve the proper performance. That is because pallet buyers are buying pallets when they should be specifying and designing the best unit load.
Finally, the biggest key to developing better quality standards is to change the mindset where customers realize their biggest supply chain savings comes with packaging reduction not skimping on the pallet. If this were to happen, pallet manufacturers could develop a number of sizes that are inspected to a high-quality standard. Those pallets would then catch a premium on the market when resold. Better quality new pallets would improve the overall quality of the repaired pallet market.
All it takes is changing the customer mindset one conversation at a time. Are you ready to plant those seeds or are you just going to chase the next order?
