Solar panels are cool. Smart phones are sexy. Electric cars turn heads. Shipping pallets? Well, not so sexy or cool or eye-catching.
But the lowly pallet is an essential link in the global supply chain. One could say the global economy rides on its ubiquitous back.
By 2017 it’s estimated there will be nearly 10 billion shipping pallets in global circulation, half being newly purchased each year. Between now and then, the market is expected to grow by an average of 5 per cent annually and reach a value of $52 billion (U.S.), according to The Freedonia Group.
Needless to say, what those pallets are made of, how often they’re reused, and how they’re managed will become increasingly important in a low-carbon economy. That’s what attracted auto parts executive Richard MacDonald to the market.
In 2010, after 23 years working his way into senior roles at auto parts giant Magna International, MacDonald decided to take what he learned in the car manufacturing business and apply it to the art of skid making.
“We basically did automotive engineering on a pallet,” said MacDonald, one of three co-founders of Vaughan, Ont.-based Axios Mobile Assets, where he is president and chief executive. “
For example, Axios makes its pallets out of calcium carbonate – that is, common chalk – the same material that Magna uses to manufacture some of its composite car parts, such as fenders and hoods for Vipers and Corvettes. The non-toxic calcium carbonate is mixed with a soy-based resin and biofibres to create a kind of “eco-pallet” that Axios says is 30 to 40 per cent lighter than wood pallets.
Currently, slightly more than 90 per cent of all pallets produced today are made from wood, while about 4 per cent are manufactured from plastics and 1 per cent from metal, such as aluminum. Each has its own strengths and weaknesses.
How they stack up
Wood pallets may be the cheapest, but they don’t last very long, are susceptible to insects and rot, represent a fire hazard, can carry contaminants that pose a risk to health, and are difficult to clean. They absorb water when wet, adding weight – and cost – to shipping. Nails and splinters also have potential to harm workers, tear packaging and damage product.
There’s also an ongoing debate over the contribution of wood pallets to deforestation and climate change. The Union of Concerned Scientists, for example, cites the fact that 30 per cent of total hardwood produced in the United States each year is used to make wood pallets and containers that are typically used once and then discarded, often in landfills. It estimates that wood pallets represent up to 3 per cent of all waste that ends up in U.S. landfills.
However, groups like the Canadian Wood Pallet and Container Association counter by pointing out that pallets are largely made from otherwise unmarketable lumber that’s left over after trees are harvested for building materials, furniture and flooring. “Trees are rarely harvested with the sole purpose of making pallets,” the association says.
A single wood pallet is said to represent about 27 kilograms of carbon. What happens at the end of its short life determines its impact on the climate. Sending it to landfill is worse than recycling it into other wood products or even burning it for energy. One example: Viridian Wood Products of Portland, Oregon, reclaims and upcycles wood from shipping pallets and crates that have been discarded at local shipyards, turning them into high-value flooring, decking and panelling products.
Plastic pallets, on the other hand, are more expensive but have gained favour because, compared to wood, they’re pest resistant, lighter, longer-lasting, recyclable, and often made from recycled materials. They can also be cleaned and sanitized fairly easily, though because they are made from a fossil fuel they are a fire hazard. This is why the plastic used must often be embedded with fire retardant chemicals such as decabromodiphenyl ether, which has caused concerns about the potential for contamination in the food industry.
And metal pallets? They have most of the benefits of plastic with the added advantage of ruggedness. Problem is, they’re significantly more expensive and typically heavier, which leads to increased transportation costs, fuel consumption and associated emissions. This is why they are used mostly for the heaviest cargo and niche markets.
Striking the right balance
MacDonald believes his company’s calcium carbonate-based pallets strike the best balance between cost and benefit. Like plastic pallets, they tend to last 10 to 12 years compared to up to a few years for wood – assuming the wood pallets aren’t prematurely discarded. And they’re 30 to 40 per cent lighter than comparable wood pallets, which translates into lower cost and a reduction in transport-related emissions.
Bugs and water can’t penetrate them, they’re easy to thoroughly wash after each cycle of use, and they can be recycled. Where they part with plastic, however, is that they are inherently fire resistant, meaning no chemical additives are needed – appealing to food and produce shippers and buyers. “We’re less cost with higher value,” MacDonald said.
From a greenhouse-gas emissions perspective, however, what the pallets are made of is only part of the story. A core part of Axios’ business is a service called pallet pooling. In essence, it rents out its pallets as part of long-term contracts. Through such contracts, it manages and tracks the movement of the pallets, cleans them, and stores them when necessary.
Each of its pallets contain four radio-frequency identification (RFID) tags and a bar code that allows the company to track the pallets – and the goods loaded onto them – through every step in the supply-chain cycle. Sensors that measure temperature, shock, and even CO2 exposure and humidity can also be added to both the pallets and the trailers used to transport them. Handlers equipped with electronic wands simply scan each pallet as they’re unloaded and loaded.
“We’re the Internet of things as it relates to the $12 billion (U.S.) pallet market,” said MacDonald.
With this ability to so closely and accurately track pallets as they move through the supply chain, Axios says there’s room to drive logistical efficiencies. The software behind its pallet management service can also calculate what the reduction in GHG emissions would be relative to using wood pallets that aren’t tracked. This calculation takes into account such metrics as distance travelled and pallet weight, and translates them into a carbon credit value.
In its first pallet-pooling project earlier this year, Axios supplied 4,000 pallets to Trillium Farms of Ohio and Centrum Valley Farms in Iowa, which used the system to manage and track egg shipments destined for retailers such as Walmart. After four months, they calculated that the carbon-equivalent of 26.6 tonnes of GHGs had been offset, the equivalent of not burning nearly 29,000 pounds of coal.
“For retailers or vendors who use millions of pallets and transport their products millions of miles over the course of business each year, significant verified carbon reductions can be applied against a business’s carbon footprint and in some cases monetized,” the company said in a statement after releasing its findings.
Consider if this approach was applied to the billions of wood shipping pallets in circulation around the world. The U.S. egg industry, which transports 90 billion eggs annually, requires on its own more than a million pallets handling 15 to 20 shipment cycles a year. The carbon benefits would quickly add up.
Sylvain Charlebois, a business and economics professor who researches food safety and traceability systems at the University of Guelph, was briefed on the Axios pallet system earlier this fall and walked away impressed.
“It’s a great product and they have a sound strategy,” said Charlebois, adding that the approach makes good sense from a sustainability perspective. “That said, it will be a challenge for Axios to change entrenched habits in the industry, particularly in the food industry where traditions are king.”
But the interest is there. MacDonald said his company now has contracts in place to put 30,000 of its pallets into circulation, assuming he can overcome one substantial barrier. “We’re having trouble raising the capital to expand our pallet fleet,” he said, pointing out that over the next year up to 150,000 pallets will need to be manufactured to meet expected demand.
The problem? The $3 million Axios is looking for is a lot of money, and investors don’t get very excited about pallets, even those based on the same materials used to make Corvettes. Mention “pallet” in your pitch and venture capitalists yawn. Banks tune out, even if the payback on each pallet is under a year.
But they may well want to pay attention. As Charlebois said, more non-food retailers such as Walmart and Costco are doing well in the food space. “They are more inclined to embrace new technologies which may be consistent with their core competency, which is logistics,” he said.