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EPAL Looks to Global Expansion, And Addresses
Challenges |
By Chaille Brindley
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As the world becomes
smaller, the packaging decisions of one country
easily can become a headache for 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.
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Goods that are shipped
from outside of Europe frequently have to be
re-palletized and the non-compliant packaging
must be disposed of at the expense of the
receiver. This could provide some new business
opportunities for enterprising pallet companies
in the United States. It all depends on how
successful the Europeans are in extending their
pool and quality concepts to other markets.
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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.
Last year 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 (48 x 40 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 1200 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.
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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.
Reinhard came over to the United States to
discuss Europe’s concerns with leading U.S.
pallet producers. 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 re-palletize 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.
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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 dimensions 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.
Stan Bowes, president of EPAL, commented about
how easy it would be for American companies to
test the EPAL concept. He said, “It is
remarkably simple. A manufacturer or repairer
simply has to prove its ability to comply with
the specification, by presenting for inspection
100 pallets they have produced or repaired.
These will be inspected by an independent
company. They are not expected to be perfect:
they are not items of furniture. Provided the
flaws found in the inspection do not exceed the
allowed number, the pallets would pass the
inspection, and the company would be recommended
for a license.”
There are three basic licensee types for the
United States – manufacture, repair and
trade/broker.
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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 that doesn’t mean American
producers should give up if the market seems
viable.
Stan said that on his recent
tours of American pallet operations he has seen
many plants that are capable of producing or
repairing EUR-pallets. This is especially true
of automated facilities with machines capable of
producing block pallets.
One major
problem is that many U.S. pallet companies today
do not understand what the EUR specifications
require. From the type of nail to very tight
board thicknesses, to exact branding
requirements, official EUR-pallets go way beyond
just a common footprint.
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.
Making or repairing EUR-pallets can be a
challenge. From strict specifications to
sourcing lumber cut to tight, metric dimensions,
it takes a lot of work to comply. The process
requires specific types of nails and lumber. All
EUR-pallets destined for Europe have to be heat
treated.
Recyclers are typically surprised to
discover that EUR-pallets are re-used, however
all repairs to EUR-pallets must be done with new
lumber not recycled components. EPAL requires
this to ensure the quality of every repaired
pallet. American recyclers would probably view
this as waste since they have become adept at
getting the most out of every board.
Going beyond just basic branding, each
EUR-pallet has security features meant to reduce
counterfeiting. This includes a quality control
staple or marking nail that uniquely identifies
the producer and/or the repairing company.
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Will the EUR-pallet
become a major player in the emerging Chinese
market?
Setting its sights on the
hotbed of global manufacturing, EPAL has
targeted China as a new frontier. It has opened
an office in China and held talks with Chinese
leaders about how to increase the flow of
official EUR-pallets to China.
Reinhard
explained, “We are talking to management about
the advantages you can get by using EUR-pallets
in China and worldwide…My vision is to see a
pallet packed in the US and sent to China; there
it is unloaded and repacked to go to Europe
where it is unloaded and repacked to go back to
the US. The pallets would be re-used each time
on a worldwide market.
While Asia has
informally adopted 1100 x 1100 mm as its primary
size, China is still trying to decide what
footprint size it will embrace. As the largest
nation in the region, it has a lot of weight in
the market. China’s logistical infrastructure,
except for the few largest cities, is just
beginning to develop although it is doing so at
a rapid pace. Currently, you can find a wide
variety of sizes in China including the 1100 x
1100 mm. EPAL is eyeing the Chinese market as a
place where it could carry its quality standard
and concepts.
Harry claimed that export
companies in China are very interested in pallet
exchange with Europe. EPAL exhibited at the 10th
China Logistics Expo in Guangzhou earlier this
year. EPAL’s presence shows that it is working
to expand its influence, which could spell
problems for the 48x40 design if major markets
begin to rally behind a different footprint
size. While this is far from becoming a reality,
the U.S. pallet industry must make its mark in
these emerging markets or face the consequences.
Two Chinese companies are now licensed to make
EUR-pallets. Could this become a trend? The lack
of automation could make this difficult although
you can produce EUR-pallets by hand.
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Does Size Matter?
One of the biggest problems standing in the way
of harmonized standards is that each region
believes it has the best solution and has spent
billions in logistical infrastructure that can’t
be changed overnight.
Reinhard said,
“European producers think their product is the
best; Americans think the same of their pallet.
It has been hard for European producers to
manufacture pallets with the U.S. specs of
inches; and vice versa.”
EPAL has decided
to create more pallet sizes to accommodate some
of the differences around the globe. More than
any one footprint, EPAL is trying to advance its
ideas about quality to other markets.
Stan said, “If demand is there for a particular
size, EPAL is open to adding it.”
One day
this might even include the 48 x 40 (GMA) pallet
although Stan was quick to point out that EPAL’s
main interest in the U.S. market at this point
is to develop a network of licensed
manufacturers and repairers for supplying
official EUR-pallets to Europe. EPAL has no
intention at this time to launch a pool here in
the United States although the organization
could provide the framework for American
companies that would want to lead such a charge.
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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.
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.
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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.
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What Can We Learn
from EPAL?
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
pool in the world and successfully gone
head-to-head with private rental companies,
especially CHEP.
EPAL had a major ally in
the European railroads. It doesn’t look like the
U.S. market has any such player unless some
large companies were to throw their weight
behind the development of a quality standardized
pool. The good news here is that the railroad
industry may not be as critical a factor as some
would think because less than 5% of EUR-pallet
loads ever see a railroad.
Reinhard said,
“Look at the German market; we have CHEP. We
have competition; we like this competition; but
we are stronger.”
Stan explained the
benefits of an open pool system. He said that
the 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.
The EUR-pallet is known as
a quality pallet with a highly regulated
specification. The Europeans have a lot that
they could show us about building a quality
standard and policing it. The question is, are
we ready to listen and champion the quality
cause here at home?
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