Already a Bloomberg.com user?
Sign in with the same account.
For five decades, wood has reigned as the material of choice for the humble shipping pallet, used for moving everything from Wheaties to washing machines. Now, Swedish retailer Ikea is replacing wooden pallets with a paper variant that’s lighter, thinner, and—the company says—cheaper to use. “We don’t know if the paper pallet will be the ultimate solution, but it’s better than wood,” says Jeanette Skjelmose, sustainability chief at Ikea’s supply-chain unit.
Ikea, which uses 10 million pallets to ship goods from suppliers to its 287 stores in 26 countries, will ditch wood worldwide by January, cutting transport costs by 10 percent. The new corrugated cardboard design can support loads of 750 kilograms (1,650 pounds), the same as timber, Skjelmose says. At two inches high, the paper pallets are one-third the height of wooden ones, and they’re 90 percent lighter, at 5.5 pounds. The svelte profile means Ikea can cram more goods into each shipment. The pallets, assembled onsite by most of Ikea’s 1,200 global suppliers, will be used only once before being recycled.
The company expects to cut its transport bills by €140 million ($193 million) a year, although it will likely spend €90 million annually on paper and new forklifts to handle the slimmer pallets. “We hope this will be a start in making transportation systems smarter and freight as compact as possible,” Skjelmose says.
The single-use paper version represents a challenge to the current system for supplying pallets, which are often rented from management companies that make them and move them around the world as needed. Australia’s Brambles, the industry leader, services 54 countries with 400 million pallets, all edged in blue to distinguish them from those owned by rivals. Brambles has little interest in paper pallets, says spokesman James Hall. “They’re not durable enough, not capable of withstanding heavy loads or extremes of weather,” Hall says.
Skjelmose says Ikea’s pallets are as durable as the wooden alternative if stacked properly. “It doesn’t get much heavier than that,” she says, pointing to a four-foot stack of hundreds of porcelain plates resting on a paper pallet at the Ikea store in Helsingborg, Sweden. And she says she’s not concerned about weather since Ikea’s pallets rarely sit outside for any length of time.
Paper isn’t the only pretender to the pallet throne. For its 120 cargo planes, Air France-KLM Group next year plans to introduce pallets made of a composite called Herculight that the airline says is 35 percent lighter than the aluminum models it currently employs. “We’ll use less fuel, and it’ll be possible for us to carry more freight,” says Gijsbert Woelders, vice-president of worldwide operations for KLM Cargo.
Steel has also been tried, and Ikea itself uses some plastic pallets, though neither represents any real threat to wood, says Jeff McBee, pallet analyst at Industrial Reporting. McBee predicts paper will also end up as a niche player in pallets. “This obviously looks good to Ikea on paper, but I’d like to see what they say a year from now,” he says. “I’m not necessarily skeptical, but [the cost savings] may be closer to a wash than they suspect.”
The bottom line: Ikea expects to cut $193 million a year from transport bills by replacing wooden pallets with paper ones used just once and then recycled.