Shipping on the wrong pallet could cost your foreign operations or business partners more than you realize. It can be easy to think that a pallet is just a pallet. But many globlal companies are discovering that the packaging decisions made in one country can become a headache and financial burden in others.
Europe has discovered this to be the case as it strives to enhance its primary exchange pool of 800 x 1200 mm block pallets. Goods that are shipped from outside of Europe frequently have to be re-palletized onto the right size and style pallet to work in European supply chains. Non-compliant packaging must be disposed of at the expense of the receiver.
New Designs for a New Age
Hoping to increase production and global acceptance of its pallets, the European Pallet Association (EPAL) is introducing new sizes and pallet designs. According to EPAL, it operates the world's biggest pool with at least 500 million pallets. In 2006, 52 million new pallets were added to its system. The new designs are offered with the known brands EPAL and EUR. The EPAL exchange system is offered worldwide although its stronghold is the European market.
EUR is a standard that is owned and controlled by the UIC, the international union of railways. All EUR-pallets are manufactured and repaired to a tight specification that is monitored by a number of international organizations. By far the largest of these is EPAL which has been in operation since 1995. In North America, EUR-pallets are commonly referred to as "Europallets."
Harry F. Jacobi, EPAL's CEO, said that despite considerable growth, the European Pallet Pool and its 800 x 1200 mm design has encountered resistance in some markets. Jacobi explained, "In Great Britain, France and the Netherlands people favor the pallet 1000 x 1200 mm whereas the most popular pallet size in the United States is 1219 x 1016 mm (40 x 48 inch) and 1100 x 1100 mm in Asia."
EPAL has introduced three new pallet designs: 1200 x 1000 mm, 1000 x 1200 mm, and 800 x 600 mm. It is also making changes to some of its existing designs and is introducing a "forgery-proof quality seal" for its EUR box pallets.
EPAL stated that the reason for new pallet types in its pool is that the 1000 x 1200 mm design is the most popular pallet size used for global logistics. EPAL also plans to re-design its EUR box pallet. The 800 x 1 200 mm dimensions shall stay the same.
Reinhard Weisenburger, head of loading material service for BTS Kombiwaggon Logistics, explained the dilemma of foreign pallet specifications. He said, "German companies have a big problem with one-way pallets coming from the U.S. market because of environment regulations and clean up. It is very expensive to shred and dispose of such things. Germany and all of Europe have strong laws protecting the environment for the reuse of packaging material, especially pallets."
Reinhard is on the EPAL board and his company handles pallets for clients throughout Germany.
Challenges of International Logistics & Foreign Design Specs
From footprint dimension to pallet entry style to quality control and treatment requirements, the Europeans just have a different way of looking at a pallet than the Americans do.
Companies are increasingly taking a holistic look at packaging costs not just the initial purchase price, especially as goods are being produced in countries far from the point of consumption. But this is still an up-hill battle because many purchasing agents still look primarily at the initial price and not the total system cost. Attitudes are starting to change, especially as companies look for cost reductions and ways to save the environment. The rate of change depends on who your customer is. Unfortunately, many pallet users on this side of the Atlantic Ocean are not aware of the problems their decisions make on those receiving goods in Europe.
Reinhard said, "The 48x40 inch pallet design cannot be used in Europe because nobody will exchange them…If you are a big company who receives 5,000 pallets or 10,000 pallets with goods on it, then you have a problem disposing them. If it's 10,000 pallets, then you may have to pay 100,000 Euros for disposal."
Typically, it costs on average 2-3 Euros per pallet just to dispose of non-compliant pallets. This cost can skyrocket if the pallet is unusually large or an awkward dimension. Then you have to factor in the cost to repalletize the load onto two EUR-pallets. Shipments sent on 48 x 40 pallets have to be repacked at the harbor where labor is very expensive. Non-compliant packaging becomes a disposal hassle.
American companies might think that the Europeans would at least want to use the lumber, but the European producers are pretty picky about specifications. Foreign lumber would have to be heat treated before being used. Additionally, Europe is not set up with the recycling infrastructure that the United States has. There is no such thing as a large market of #2 grade used pallets in the European Union (EU) as has sprung up in the U.S. market.
Repacking can cause delays and sometimes even damage the actual product. Then insurance gets involved and the cost becomes even higher. Shipping on a commonly accepted pallet allows the shipment to easily go through the system of the receiving country.
Will the EUR-pallet Ever Really Take Off in North America?
While this all makes sense, the reason that U.S. companies don't overwhelmingly ship to Europe on official EUR-pallets is due to the initial cost. Purchasing agents and shippers are making a decision based on the cost in one part of the total equation. American pallet manufacturers have run into the same problem as they have encouraged customers to buy better pallets. In one breath, customers say they want better quality. Then they come back five minutes later and want a five percent price reduction, too.
Building EUR-pallets is easier said than done. You can't simply just build a block pallet and put a stamp on it. Specifications for official EUR-pallets cover everything from dimension to lumber to even the fasteners used. Look-alike pallets may go through the harbor okay. But these pallets will likely be spotted at a warehouse and kicked out of the system. Then they become just as big of a hassle as a standard 48x40 pallet.
Reinhard said, "In the states some companies right now collect EUR-pallets and sell them to companies in the states that need these pallets. This is a small business for now, but it will grow. We would like to have several companies in the United States produce EUR-pallets and to open an export chain worldwide."
Currently, there is only one company authorized to repair EUR-pallets in the United States. But EPAL would like to see that number grow because it wants fewer poor quality, knock-off pallets going into its main European pool.
EPAL is trying to increase acceptance and demand for its pallets in a number of ways. First, it is trying to educate packaging users in Europe and North America about the total system costs of non-compliant packaging. Secondly, it is adding new sizes and re-vamping its program to make it easier for U.S. pallet companies to participate.
The Issues and Hurdles of Making EUR-pallets in the United States
The EUR standards are much more stringent than anything most pallet companies in the United States are used to following. But there are U.S. producers that are capable of making certified EUR-pallets if they become certified and the demand grows to support it. at doesn't mean American producers should give up if the market seems viable.
One major problem is that many U.S. pallet companies today do not understand what the EUR specifications require. Pallet users that want to get official EUR-pallets must work with companies that have expertise in EUR-pallets.
Some U.S. pallet companies will try to pass off look-alike pallets or EUR-pallets that have not been repaired to the specification. Many customers don't know the difference. But the end user in Europe likely does, especially if non-compliant packaging gets spotted and requires re-palletization.
Steve Klinkefus, president of Compliance Packaging Intl., Columbus, Ohio, said, "Many people don't understand the exact nature of the specification and what a high quality product the EUR-pallet is."
Compliance Packaging Intl. has been licensed for a number of years to repair EUR-pallets and recently became the first company licensed to manufacture EUR-pallets in the United States. Misunderstandings cause problems for both pallet companies and customers. Some pallet companies sell used EUR-pallets below market because they just don't know any better. Other times, pallet users think they are getting an official EUR-pallet when in reality they are getting a poor substitute.
Basic EUR Standard
The EUR standard calls for a nine block pallet design. EUR-pallets require a very tight spec including marking, lumber quality and species, size, repair standards, certification, etc. Official EUR pallets must be made or repaired by a licensed company according to the standard. Abuse or unauthorized imitation of the protected trade marks could cause legal problems for all of those involved. EUR-pallets coming from outside of the European Union must be treated for phytosanitary risk in compliance with ISPM-15.
EPAL was founded to work with the European Railways to maintain a European-wide quality assurance and inspection standard for the EUR pallet. The EPAL system is a cross-sector open pallet exchange pool. The EUR-pallet is known as a quality pallet with a highly regulated specification.
Global Expansion, Working Toward One Global Standard for Intl Trade
EPAL would like to expand into more markets, including the United States and Asia. While these areas already receive some EPAL pallets thanks to international trade, the number of EPAL pallets in those markets is still quite small.
Beyond sales growth, getting more EPAL pallets into these markets would increase the likelihood that goods shipped to Europe would move on EPAL pallets instead of a design that is not commonly accepted in the region. Loads shipped to Europe on foreign pallet designs may have be to re-palletized onto a EUR pallet. This can be expensive and cause unnecessary delays.
EPAL would love to see its designs and standard become the defacto standard for international transit. Currently, each part of the world has its own standards. These have been dictated by regional infrastructure and business practices.
As more multinational corporations look to streamline logistics and packaging networks, there could develop momentum behind one or two major designs. This has yet to materialize given the fragmentation of the pallet industry and the vastly different needs of each unit load.
The good news for the North American industry is that scientific research has shown that the 48 x 40 inches and the 1100 x 1100 mm designs tend to provide better cube utilization in cargo containers and other transportation devices. Although EPAL's primary pallet design (800 x 1200 mm block pallet) may be the largest pool in the world, it may not be the best actual design in terms of materials handling efficiency.
The U.S. market has a lot it can learn from the success of the Europeans in establishing a quality exchange pool. In less than fifteen years, EPAL has built the largest pallet pool in the world and successfully gone head-to-head with private rental companies. The same thing could happen in the United States if both pallet users and suppliers agreed to work together under one regulated system.
Stan Bowes, the president of EPAL, explained the benefits of an open pool system. He said that most practical advantage is that the concept of open-pool systems is inherently cheaper than closed pools. The end-user is free to source pallets where the best commercial advantage can be achieved. They can take their business to another provider if they are not satisfied with the quality or service. According to Stan, studies have shown that competition in open pools make them typically 30% cheaper than a closed system.
Globalization has forever changed the supply chain. Decision made in the United States impact the real-world challenges faced by foreign divisions, customers and business partners. It is time that pallet users consider the hidden cost in simply buying the cheapest pallet. Find out more about EPAL or EUR-pallets by visiting http://www.epal-pallets.org.
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