IKEA is phasing out the use of wood pallets across its global operations. The leading international retailer is converting to the use of paper pallets and the Optiledge for a number of reasons, outlined later in this report.
The conversion project, known internally as Handling Material No Wood (HM NOW) began in Germany and Japan operations before moving to Europe, and North America. Conversion in Canada is underway, and is expected to be completed by the fall of 2012, according to Natalia Hahn, Sustainability Manager for IKEA Canada.
Such a move will involve the upgrading of IKEA’s racking storage systems throughout the company to support unit loads built on paper pallets and the Optiledge system. According to Ewe Shmidt, project manager for the IKEA pallet transition, 450,000 metal profiles (racking shelves) were installed in 160 stores in Europe by Week 25, leaving only 194.000 more metal profiles left before the rollout is completed in Europe.
In Canada, Natalia stated that she is already seeing the presence of paper pallets in IKEA distribution and retail operations. Exact timing of the impending U.S. transition was not immediately available.
“No other retailer in the world has committed to such a change,” IKEA told its employees in a 2010 document. “IKEA stores are the first global example of how to work with non-wooden pallets in a high-volume retail environment. This is both a challenging and an exciting opportunity — challenging because it means starting from scratch, and exciting because it means that IKEA retailers worldwide have the chance to be part of a unique adventure. Some of your colleagues in IKEA stores and distribution centres have already begun this journey of testing and developing new routines and solutions. IKEA IDEAS visited them in Japan and Germany to see how they are handling deliveries on non-wooden handling materials. Their lessons learned, tips, ideas, solutions and tools will help you while implementing the new handling materials in your own IKEA store.”
Rationale for Switch from Wood Pallets
IKEA explains that non-wooden handling materials such as paper pallets and plastic loading ledges are lightweight, recyclable alternatives to the traditional wooden pallet. The retailer cautions that they require more care during handling, but that they open up a lot of opportunities.
IKEA notes that while wood pallets have been integral to IKEA’s retail image for many years, they account for almost half of all the pine and spruce used wordwide by IKEA. By converting to paper pallets and loading ledges, the company will not only reduce wood consumption but achieve other savings.
Better Cube Efficiency in Transport
IKEA believes that it will achieve better fill rates in ocean containers and trucks because both loading ledges and paper pallets have a lower profile than the wood pallet, and as well, they can be easily customized to exactly fit the unit load, eliminating any product under hang on the base.
Other Benefits of Unitization
Unlike many global companies that floor load merchandise in containers, IKEA has a reputation as a unitization proponent. Such an approach improves flow through at distribution centers, clearing dock doors more quickly, while minimizing touches. The result is better dock and labor utilization, while decreasing the opportunity for damage. It’s move to loading ledge and paper pallet bases allows it to continue to enjoy the benefits of unitization while improving transportation efficiencies.
“IKEA decided years ago not to hand stuff containers,” explained Jeff Lamb, President of Unit Load Systems, LLC, the exclusive source for the OptiLedge® in Asia. With much of their business in high labor cost markets such as Scandinavia and Germany, there was an obvious interest in eliminating physical handling.
IKEA notes that the elimination of wood pallets will also bring cube reduction benefits in terms of storage space for wood pallets, and the hauling of empty pallets. The paper pallets and ledges are recycled in the IKEA system.
Sales Floor Focus
Because paper pallets and loading ledges conform to the footprint of the product, IKEA feels that the elimination of product under hang, as well as the lower height of the platform will keep customer focus on the display merchandise, rather than the pallet.