Business Case for Pallets

Plastic pallets 101

“Plastics!” If you’re old enough to remember “The Graduate,” plastics was the one-word piece of career advice offered to Dustin Hoffman after college graduation.

Things may not be quite that dramatic in the pallet industry – wood is still by far the material of choice for pallets by most shippers. The last time Modern surveyed its readers, fewer than 9% were using plastic pallets. But the interest in plastic pallets is clearly growing.

In part, that interest is the result of regulatory concerns in the food and beverage industry as well as a highly-publicized product recall by Johnson & Johnson that was blamed on a chemical treatment used in wooden pallets produced overseas. “Companies in the food industry, especially the agricultural industry, are converting to plastic because of FDA regulations.” “Plastic is non-porous, so nothing will seep in to contaminate the pallets, and they’re washable.” When hygiene counts, plastic has real advantages over wood.

And in part, renewed interest is being driven by the plastic pallet pooling system. The pool allows end users who can control their assets to rent plastic pallets on a per trip basis that’s comparable to wooden pallets. “We are seeing some organic growth, but the companies that are converting from wood to pallet are participating in a pool.”

Ergonomics: As a general rule a plastic pallet weighs less than a comparable wooden pallet designed to handle the same load. That can result in fewer lifting-related back and shoulder injuries.

Safety: Plastic pallets are not only washable, there are no nails, splinters or wooden shavings that can damage product or injure an employee.

Long life: While some wooden pallets have delivered years of service, they will have been repaired multiple times over that period. The expense of repairs has to be factored into the overall cost of using wood pallets.

Sustainable: Like a wood pallet, plastic pallets can be recycled at the end of their useful life. Are they green? Wood pallet manufacturers will argue that plastic pallets are a byproduct of petroleum and treated with flame-retardant chemicals, making their green bonafides suspect. Plastic pallet manufacturers will argue that wood pallets are the result of cutting down valuable hardwood forests, are also sometimes treated with noxious chemicals and can transport pests and bacteria. We’ll let end users sort through those arguments with their in-house sustainability experts. Depending on your corporate priorities, both wood and plastic have pluses and minuses when it comes to sustainability.

Still, there’s a reason that plastic remains a niche option for pallet users: A plastic pallet is significantly more expensive than a new or used wood pallet. “If you can’t control your assets return that plastic pallet into the supply chain, you can’t justify the difference in price between a wooden pallet and a plastic pallet.” And, if your pallets don’t turn very often, you may not see a return on investment.” Likewise, if you need a rackable pallet, plastic pallets can be reinforced with steel, but they’re costly if they’re not part of a pallet pool.

Where, then, do plastic pallets fit? Here are some factors to consider:

Closed loop supply chain: Whether you own your plastic pallets or participate in a plastic pallet pool, you have to control the asset to make it work. It’s one thing to lose a $10 wooden pallet; it’s another thing entirely to lose a $35 – or more – plastic pallet. Beverage manufacturers, for instance, will use plastic pallets for direct to store delivery, where they can pick up an empty pallet when they drop off a pallet of new stock.

Inside the four walls: While most pallets are used to ship product across the supply chain, pallets are also used for strictly internal processes. Examples include slave pallets that are used for storage or captive pallets used for storing work-in-process between manufacturing processes. In those situations, a plastic pallet can deliver a longer life than wood. Likewise, a number of retailers prefer plastic pallets to wood for their in-store floor displays.

Automated systems: Since plastic pallets are highly-engineered and manufactured in a mold, they are more consistent than even new wood pallets. That makes them ideal for automated storage and conveyor systems. Since there are no deck boards to break or stringers to collapse, they are less likely to fail during use and stop the line. 

Whether those benefits will justify the added expense of a plastic pallet will be determined by individual users’ processes. “Each customer’s economics are different.” But what it usually comes down to is how many times you can turn the pallet during the year. If you’re turning your pallet one or two times a year, plastic will have a hard time competing. If you’re turning that pallet 4, 5 or 6 times a year and you can control you’re supply chain, it gets more interesting.”

Steady growth trend for plastic pallets

When it comes to specialty pallets for niche applications, there are more money-saving pallet alternatives than ever.

By Bob Trebilcock, Executive Editor, Modern Materials Handling 
September 01, 2010

When it comes to versatility and cost, wood, plastic and steel pallets are still the kings of the hill when it comes to the materials used for pallet construction. Together, they account for more than 90% of the pallets on the market.

Still, increasing freight costs, new export regulations, and growing concerns over product contamination have pallet users looking for alternatives to traditional pallets.

“All of our major customers, especially in the food packaging and pharmaceuticals industries, are asking how can we replace wood,” says Ron Lanier Jr., sales and marketing manager for Sonoco Transport Packaging. “They’re concerned about contamination, the cleanliness of the facility, and the ergonomics of handling 60-pound pallets.”

The good news is that there are more proven alternative pallets on the market today than at any time in the past. Let’s be clear: None of these products is as versatile or as economical as a wood pallet in all applications. They are niche products. But, in the right application, they are one more tool in the materials handling toolkit. Here are four examples of alternative pallets currently available:

Coated foam pallets: For manufacturers shipping high-value products, like consumer electronics, by air freight or even by sea, the freight cost of shipping a heavy wooden pallet with a load may exceed the cost of the pallet. Enter Airdex, which manufactures a lightweight, high-performance pallet from coated foam material that is popular with some name-brand manufacturers of computers.

The pallets cost around $25 in volume, depending on the size of the pallet, or about three times the cost of a wooden pallet. However, it weighs just 7 pounds and can support a racked load of 2,300 pounds, a dynamic load of 3,600 pounds, and a stacked weight of 12,000 pounds. “We’re taking between 25- and 30-pounds of weight out of a typical palletized load,” says CEO Vance Seagle, who patented the technology used to make the Airdex pallet in North America.

The weight savings alone is enough to justify the cost of the pallet on one use, and some customers have a pallet recovery program in place to get multiple uses from their pallets, Seagle says. The pallets can be produced anywhere there’s a nearby foam plant. “Our machine fits in 40-foot container,” Seagle says. “If you want a pallet in Botswana near a foam plant, I can set up a machine that will turn out 17,000 pallets a month.” Airdex is working with AT&T to introduce a pallet equipped with a battery-powered GPS transponder that will communicate its location in real time as the pallet moves through the supply chain. “We will be able to provide the world’s first real-time tracking of a pallet, regardless of where it’s located and without passing through an RFID portal,” Seagle says.

Corrugated, plastic and composite pallets: For the past five years, Sonoco Transport Packaging, a global packaging company with more than 300 facilities in 33 companies, has been researching and developing a line of five alternative pallet solutions that includes corrugated, plastic and composite materials. Each was developed for a specific situation, ranging from a corrugated sheet with two split corrugated cores (tubes) to accommodate lift truck forks designed to handle bulk bags to a high-performance corrugated pallet that can support 2,800 pounds in an open rack to plastic pallets to composite engineered-wood components (blocks and lead deck boards) that add strength and durability to a traditional wood pallet. The real selling point to all of these products, says Lanier, is that Sonoco can bring a customer’s products into its packaging test facility and design the right pallet and industrial packaging for that customer’s needs. “We can evaluate the different pallets and packaging available and design a total system for their product,” says Lanier.

Presswood pallets: One of the first users of the Inca presswood pallet from Litco International in North America was the postal service. The pallet, manufactured from wood fibers and synthetic resins and molded into shape under high heat and pressure, has no moisture content that can be absorbed by paper products. Today, the pallet is popular for export because it’s guaranteed to be free of bugs, bark and mold without any further treatment.

“Many people think that heat treating a pallet is enough to make it mold resistant for export,” says Gary Sharon, vice president. “While that may be enough to kill insects, it’s not enough to kill mold for export.” Because the pallets are nestable, they also save space over conventional wood pallets. More than 1,000 Inca pallets will fit on a truck, compared to 500 wooden pallets, and 50 pallets stack 7 feet high, compared to about 17 to 20 wooden pallets. For companies with sustainability programs in place, Inca pallets have been cradle-to-cradle certified as sustainable.

Plastic pallets gain ground in an eco-conscious world.

Publication: Plastics Technology
Low-cost wood is still king, but plastics’ reusability is a growing attraction among manufacturers looking for sustainable material-handling options. The one major hurdle is today’s high resin prices.

The iconic wood pallet remains an omni-present force in transportation, distribution, and storage of manufactured products throughout the world. Its pre-eminence has been dictated largely by cost, but plastic pallets continue to make inroads because of their durability, reusability, and light weight. Plastic pallets made by injection molding, structural foam, thermoforming, rotational molding, and compression molding are gaining acceptance in a range of markets including foods, beverages, pharmaceuticals, groceries, automotive, and the U.S. Postal Service.

The difficulty and cost of wood pallet disposal has always been a concern, but today’s focus on the environment is fueling a renewed interest in the plastics alternative. Reusability is a major attraction. Several plastic pallet makers have capitalized by coming out with low-cost versions that compete favorably with wood. One method of holding down costs is to use recycled resin and scrap regrind. Also favoring plastics are international regulations that require treatment of wood to reduce pest migration in export pallets. Meanwhile, the industry’s first plastic pallet “pool” system has been launched. These RFID-enabled pallets play to plastics’ reusability, making them more economically feasible on a cost-per-trip basis.

“The sustainability issue is front and center and has given plastics an advantage,” asserts Bill Mashy, general manager of the materials handling group for injection molder Rehrig Pacific Co., Los Angeles. “But at the end of the day, it ultimately has to he the economics; I haven’t seen where industry will sacrifice economics for sustainability.”

Many observers envision plastic pallets playing an even larger role as companies adopt greater levels of automation in their warehouses. Greater automation requires repeatability and reliability, and plastics’ tailored designs and consistent dimensions and weights offer a distinct advantage over wood pallets, which are vulnerable to splintering off shards and pulling apart as nails loosen.

Plastic vs Wood Pallets, what to consider when calculating ROI

How to calculate ROI when considering a transition from wood to plastic pallets…

  • How much is your monthly purchase of non plastic pallets?
  • Do you use refurbished pallets? What are your monthly repair costs of non plastic pallets?
  • What is your monthly cost of damaged product due to broken non plastic pallets?
  • Determine your monthly cost for lost hours due to work injuries from non plastic pallets, this includes anything from splinters to back issues from employees lifting and moving wood or metal pallets by hand.
  • Determine monthly cost of hours associated with purchasing/warehousing, receiving/freight transportation for expendable non plastic pallets.

When you add these numbers up you will get a total monthly cost of expendable non plastic pallets.

Next determine the proper pallet for your application. You need to come up with the one time cost of your warehouse-use plastic pallet.

Payback calculation is done by dividing the acquisition cost of plastic pallets by monthly cost of non plastic.  The resulting number is the number of months it will take for you to get your return on your investment.