2011 Story of the Year: How Will the Costco Mandate Impact the Future of Stringer Pallets?
July 17, 2011
It certainly was a memorable year for the pallet and low-grade lumber industries. From mergers to controversial legislation to public relations battles to lawsuits and tight lumber markets as well as the depressed state of the forest products industry, there were many stories that could have been selected as the Story of the Year. But there was no story that rocked the pallet industry like the announcement by Costco Wholesale Corp. that it would stop accepting stringer pallets except in rare occasions by the end of 2010.
This is the first time that a major retailer took such a strong stand against stringer pallets in favor of block pallet. Costco suggested iGPS, PECO, and CHEP block pallets in North America as the primary options for Costco suppliers.
Costco stated in its new Structural Packaging Specifications, “Pallets not rented from iGPS, PECO, or CHEP must meet equivalent structural and performance standards, are not returned or exchanged, and must be pre-approved. We do not accept pallet exchange deliveries (we do not return or exchange pallets for the ones being delivered).”
While Costco does not prohibit white-wood block pallets, it has pushed suppliers toward rental options believing that the costs will be lower. For odd-sized loads, Costco’s specifications include a section entitled “Purpose-Built Pallets.” Costco approves purpose-built pallets only when it is not possible to transport or handle certain products safely and efficiently on pallets compliant with its general delivery requirements.
Leaders in the white-wood pallet industry have been working on a response by developing the Pallet Industry Management System (PIMS), a high quality block pallet pool managed by independent wood packaging companies collaborating through a national cooperative coalition. The initial thrust behind PIMS has come from a number of large pallet companies, especially members of the National Wooden Pallet & Container Association (NWPCA).
Getting an effective white-wood block pool is more critical now than ever. This is needed if the industry is going to answer the market challenges that lie ahead. PIMS may be a good solution if the economics of the system can be proven and customer support come on line.
Costco has been trying to make the switch to block pallets for a number of years. Some suppliers have indicated that Costco seems more determined than ever to make this effort work. A Costco spokesperson recently commented that Costco remains firm to its January 2011 deadline requiring loads be shipped on block pallets except for specialized/oversized products. Suppliers that ship on non-compliant pallets will face fines.
The warehouse retailer faces a more difficult situation in Canada where only a limited number of block pallets exist. The two dominant pool operators in Canada (CHEP and CPC) both offer stringer pallets. Costco may have to make some deadlines concessions in Canada, but the retailer has yet to say if it will do so.
Costco’s initiative may be only one lone retailer taking a stand, or it could be the beginning of a paradigm shift. A lot of this depends on how the Costco experiment goes and the perceived benefit to other retailers and product manufacturers. Is this the beginning of the end for stringer pallets in the grocery supply chain? Or is this the beginning of a great opportunity for the white-wood industry to finally develop a cooperative pool to answer the rental pallet companies?