Furniture maker scraps traditional pallets for cost-saving, plastic shipping platform.
By Eric Kulisch
The ubiquitous wooden pallet has been a staple of the shipping industry since the advent of containerization almost 60 years ago, enabling companies to move stacks of goods at one time.
While some shippers have incorporated plastic pallets into their supply chains, the cheap wooden skid still dominates as the shipping platform of choice.
But “wood” and “pallet” together are dirty words in the vocabulary of Swedish retailer IKEA, which has made taking better care of the environment a guiding principle for doing business. This year, the seller of contemporary, ready-to-assemble, flat-pack furniture, will complete the phase out of wood pallets from its logistics network as part of its forest preservation efforts.
IKEA will be the only high-volume retailer in the world to transport and distribute merchandise without traditional pallets, according to the company.
In its place, IKEA and its suppliers are using recycled plastic loading ledges — low-profile, one-way shipping platforms that maximize transportation efficiency by reducing the amount of unused space in a truck or container — or paper pallets. Both alternatives are much lighter than wood and liberate the company from having to transport empty pallets back from its 287 stores to distribution centers and more than 1,000 suppliers around the world.
The furniture chain estimates that it will save 10 percent, or $193 million, on its transportation spend by eliminating the 10 million pallets previously used to move product through its supply chain, spokeswoman Mona Liss said.
The loading ledge was designed about 10 years ago by IKEA’s materials handling group to reduce the company’s dependence on the wooden pallet as a way of unitizing packages in a single shipment, said Jonathan North, general manager of the OptiLedge business unit at Inter IKEA Systems B.V. that is working to commercialize the ledge beyond IKEA to benefit manufacturers, logistics providers and retailers.
IKEA stores operate as franchises and Inter IKEA, in Delft, the Netherlands, is the franchisor of the IKEA concept. It owns the intellectual property for the loading ledge, which is being marketed as the OptiLedge.
One of IKEA’s key differentiators is that it takes a holistic view of furniture design. That means how furniture is packaged and shipped is factored into the design as much as affordability, functionality, and how it looks and fits in the home.
“We think of (the ledge) almost as part of the packaging. It’s priced and designed so you’re not all that worried about getting it back again,” Jeff Lamb, president of Unit Load Systems, which makes and sells the OptiLedge in the United States and China under license to IKEA, said.
The biggest difference is that the L-shaped OptiLedge is not a fixed size, and therefore eliminates overhang or under hang, he explained. It sits on the edge of the carton and conforms to the shape of whatever is being shipped as opposed to having to fit the load to a 40 inch-by-48 inch wood skid. Goods are strapped to the OptiLedge.
A pair of injection-molded ledges weighs less than two pounds, but will hold 2,700 pounds. Wood pallets, by comparison, are 60 pounds apiece. A truck can haul 1,500 pounds less weight for every 30 loading positions with a ledge. That equates to 3,000 pounds saved for 60 stacked cargo positions, or almost 4 percent of the allowable gross vehicle weight, which translates into more product capacity and fewer miles to deliver the same amount of freight.
In addition to reducing shipment weight, the ledge frees up space in a trailer or container.
The 45-millimeter ledge has a 10-centimeter advantage over a normal European pallet of about 150 mm. In terms of the U.S. standard system, that’s a little more than 4 inches of extra room — or eight inches if double-stacking loads — that IKEA uses to fit another layer of freight.
The ledges also nest together, allowing a supplier to fit more than 20,000 of them in a truck compared to 500 wooden pallets, North said. A large shipper facility that receives four trucks of pallets per day would only need a truckload of ledges about once a week.
The pallet alternative also provides benefits to ocean shippers by reducing the labor costs associated with unloading floor-loaded containers, North said.
Many manufacturers and consolidators in China load cartons by hand from the floor to the ceiling of a container because many importers don’t want to pay for the cost of a pallet and the resulting loss of cubic space. Unloading these containers in the United States, where labor rates are much higher, is more expensive and can take eight to 10 hours. Manual loading also makes cargo more susceptible to damage. The ledges allow unitized loading and unloading by equipment with negligible loss of cube.
“In all the studies we’ve done, you more than make up for that potential lost space by the ability to load and unload with a forklift,” North said.
“And in some cases it’s fair to say that using the OptiLedge has allowed some importers to bypass West Coast import DCs and move straight into a normal national distribution supply chain,” he added.
An OptiLedge fact sheet says shippers can save $200 to $300 per 40-foot container by replacing wood pallets.
It has taken IKEA several years to bring its concept to full fruition because it had to adjust supply chain practices and find equipment to easily handle the new shipping platform. The conversion process was done one product at a time because a lot of automated equipment, such as packaging lines, didn’t fit the new configuration and had to be changed. North said incorporating new stock keeping units will be easier for IKEA in the future now that up-front modifications have been completed.
The furniture seller also had to change some of its forklifts. The OptiLedge comes in three different heights — 45 mm, 85 mm and 95 mm — and the low-profile version only worked with forklift trucks because the forks on pallet jacks were too big to fit in the opening. Several material handling manufacturers have since developed thin-fork equipment that allows the 45 mm ledge to be handled more easily, North said.
Racks in stores and DCs were outfitted too with special fixtures so shipments can be directly placed on shelves. IKEA spent 90 million euros ($118 million) on new forklifts, paper pallets and other upgrades, according to Liss.
North said the operational savings outweigh the initial capital investment.
The ledges themselves cost between $2 and $2.50 apiece in the United States, depending on the volume purchased, Lamb said.
The paper pallet is essentially a corrugated sheet with feet beneath it that lifts it off the floor. Many styles resemble a regular pallet. Paper pallets are susceptible to moisture intake, which reduces their strength, so users have to be careful when using them in the ocean environment. Ledges are used extensively in Europe and less so in other markets, where paper pallets are more dominant. The use of paper pallets is dictated by the availability of the ledges and cost in particular markets, which could change over time, North said.
Selling The Ledge.
Inter IKEA has a network of licensed distributors and resellers in India, Europe and Australia, in addition to the United States and China. North said he is exploring opportunities to introduce the ledge in Singapore, Malaysia, Scandinavia and Italy.
Companies that have tested the ledge include Walmart, Sam’s Club, Target, Home Depot, Costco and Lowes. Best Buy is the largest customer to date and has implemented the ledge for its ready-to-assemble furniture such as TV stands and shelves at its distribution centers, Lamb said.
Best Buy mentioned its use of the OptiLedge in its 2009 sustainability report. “In addition to replacing wooden pallets, OptiLedge allows us to ship our import containers of furniture directly to our distribution centers, resulting in less product damage and considerable transportation savings,” it said.
Any new products have to be pre-approved before they can be shipped to Best Buy on the OptiLedge, Courtney Moseman, manager of import and export logistics, said in an OptiLedge press release in January 2011.
Several industrial customers also use the device to some degree, Lamb added. The OptiLedge Website includes testimonials from Universal Casket, furniture maker Steelcase and Canadian Tire Corp.
When the ledges are finished being used they are collected for recycling, but they don’t enter the same stream as used water bottles or other plastic containers. They are made from a high-end polypropylene material that commands a premium price in the recycling market and generates revenue for the customer, North said.
The pallets can be ground down and made in more ledges if sold to a nearby plastic manufacturing plant, but more often get recycled into plastics used for coat hangers and other purposes, he said.
The elimination of reverse logistics — gathering pallets, and shipping, inspecting and repairing them — also reduces expense and benefits the environment by putting fewer trucks on the road.
Lamb said his company will pay 25 cents per device to pick up the used ledges from North American customers if they can collect a large enough load to make hiring a truck worthwhile.
Atlanta-based Unit Load Systems has manufacturing plants in Jacksonville, Texas, and Yangzhou, China, near Shanghai.
In addition to the OptiLedge, Steel Case is using another unique packaging product called the EcoCradel, a substitute for polystyrene and other synthetics, that is grown, not manufactured.
The EcoCradel is the invention of Ecovative, a start-up firm in Green Island, N.Y. The company uses mushroom roots and lets them bind with agricultural byproducts such as cottonseed hulls to form packaging components, according to Steel Case’s sustainability report. The process uses as little as one-tenth of the energy needed to make traditional synthetic packaging and it is completely compostable, decomposing within 30 to 45 days.
As an early-stage adopter, Steelcase says it helped commercialize the EcoCradle. The challenge was scaling up production to meet Steelcase’s industrial volume. The furniture maker uses the natural packaging for its ready-to-assemble case goods and testing is underway on additional Steelcase products and applications.