SMART NEWS

The Most Important Piece of the Global Economy is Something You Burn at Bonfires

Pallets, the unassuming collection of wooden slats, are perhaps the most important thing in our global economy

Contributor

August 21, 2012

Towers of pallets. Image: paulv

We see them at the back of grocery stores, burn them at bonfires and pluck gallon tubs of Mayonaise off them at Costco. But pallets, the unassuming collection of wooden slats, are perhaps the most important thing in our global economy.

First, there are a lot of them. Billions. About 80 percent of the goods in the United States are carried on them. We use about 46 percent of our hard wood production to make pallets to carry things around.

But they’re not just a piece of wood we carry things around on, either. They effect the way we design our products. Slate explains:

Companies like Ikea have literally designed products around pallets: Its “Bang” mug, notes Colin White in his book Strategic Management, has had three redesigns, each done not for aesthetics but to ensure that more mugs would fit on a pallet (not to mention in a customer’s cupboard). After the changes, it was possible to fit 2,204 mugs on a pallet, rather than the original 864, which created a 60 percent reduction in shipping costs. There is a whole science of “pallet cube optimization,” a kind of Tetris for packaging; and an associated engineering, filled with analyses of “pallet overhang” (stacking cartons so they hang over the edge of the pallet, resulting in losses of carton strength) and efforts to reduce “pallet gaps” (too much spacing between deckboards). The “pallet loading problem,”—or the question of how to fit the most boxes onto a single pallet—is a common operations research thought exercise.

Pallets changed the speed at which our shipping economy could move, too. In 1931, it took three days to unload a boxcar carrying 13,000 cases of canned goods without pallets. With pallets, the same unloading took four hours. With the 1937 invention of the gas-powered fork lift, the pallet was set to change our global economy for good.

Pallet Enterprise, the “leading pallet and sawmill magazine in American” (yes, this exists) explains how World War II solidified the pallets place in shipping:

The improved efficiency that resulted from palletized cargo handling in World War II is not particularly surprising to anyone in the pallet or material handling industries today. At the time, however, the use of pallets and forklift trucks was extremely innovative. “The use of the forklift trucks and pallets was the most significant and revolutionary storage development of the war,” observed Dr. Erna Risch in a 1953 history of the Quartermaster Corps. “The forklift truck represented the culmination of efforts extending over half a century to combine horizontal and vertical motion in one materials-handling vehicle.”

When the war ended, the United States military left the Austrailian government with about 60,000 pallets. The country is now home to a worldwide pallet powerhouse, which controls 90 percent of the “pooled” pallets in the United States. Pooled pallets are simply rented pallets – they go out, deliver things, and then return to the company. The alternate, one-way pallets, are the ones you see scrapped outside of grocery stores. They, like their name implies, only go one way.

And today, like any industry, there are glitches, preferences, idiosynchracies. If you see a blue pallet, that’s a CHEP pallet, the company spawned from the leftovers in Australia. A red pallet is its competitor, PECO. Costco recently switched to “block” pallets, surprising the industry. Pallet sizes are variable – in the United States they’re generally 48 inches by 40 inches while in Europe they’re 10,000 millimeters by 12,000 millimeters. Japan has a different size. The International Organization for Standardization recognizes six different pallet sizes. The math gets messy, quickly.

But even if it is a rag-tag system of measurement, the pallet is probably far more important than you ever realized. Slate sums up:

The pallet is one of those things that, once you start to look for it, you see everywhere: Clustered in stacks near freight depots and distribution centers (where they are targets for theft), holding pyramids of Coke in an “endcap display” at your local big-box retailer, providing gritty atmosphere in movies, forming the dramatic stage-setting for wartime boondoggles (news accounts of the Iraqi scandal seemed obsessed with the fact the money was delivered on pallets, as if to underscore the sheer mass of the currency), being broken up for a beach bonfire somewhere, even repurposed into innovative modern architecture. Trebilcock likens the industry to the slogan once used by the company BASF: “At BASF, we don’t make a lot of the products you buy. We make a lot of the products you buy better.” At parties he’ll tell people who ask what he does: “Without a pallet, most of what you and I eat or wear or sit on or whatnot would not have gotten to us as easily or inexpensively as it got to us.”