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					                                        Pallets

Overview
Pallets are widely used throughout industry, primarily for shipping of products. Many
companies dispose of used pallets without regard to their condition. The purpose of this
report is to introduce the concept of pallet recycling.

When trying to identify savings on pallets, we seek to:
1) Find ways to reuse pallets
2) Locate buyers of used pallets
3) Prevent chipping of pallets
4) Switch from wooden to reusable plastic or metal pallets

Pallet Management
This waste reduction fact sheet is provided to encourage businesses and industries to
participate in waste elimination and recovery/recycling activities. Source reduction
coupled with recovery, reuse, and recycling of wastes prevents pollution and can reduce,
and in some cases, eliminate treatment and/or disposal costs. A viable, successful waste
reduction program can generate cost savings and possibly revenues, promote a positive
public image for the company, benefit the community, and help protect the environment.

Used pallets can present a serious disposal problem for industrial businesses. Without a
working waste reduction or recycling program, a company must dispose of accumulating
pallets, often at significant expense. Managers and owners who have problems with
pallets should consider the following techniques.

Survey the Situation
•Examine the current use of pallets to determine why they become a waste.
•Take note of the sizes, the types, and the number of pallets being purchased/hauled off
and their use requirements.
•Note the costs that your company incurs to purchase, handle, and dispose of the pallets.
After gathering this information, examine the following options for reducing the number
of pallets that your company must manage:

Investigate Waste Elimination/Reduction Options
•Require your suppliers to take back their pallets.
•Ask customers to return pallets to you for reuse.
•Investigate a no-pallet material handling system such as slipsheets or durable racks.
•Change pallet size or quality specifications to promote reuse and recycling.
•Use plastic lumber-type pallets made from post-consumer recycled plastic.
•Switch to reusable plastic pallets.

Consider Pallet Management Strategies
Standardize Pallet Sizes
•To reduce the number of pallets that your company is handling, consider standardizing
the size of incoming and outgoing pallets. Work with vendors to supply incoming
materials on pallets that your company can use to ship out its final products. A change in
pallet size may require some modifications to racking, storage facilities, or product
orientation, but the savings may be well worth it. In addition to handling and disposal
costs for each pallet not reused, companies can pay up to $8.50 or more for each new
full-sized pallet.
•If standard-size pallets such as a 48 in. x 40 in. four-way are used, the markets and value
for used pallets will improve as labor for sorting is reduced and the quantity of standard-
sized pallets available is increased. Standardization facilitates recycling.

Exchange Pallets
•One way to handle excess pallets is through exchanges between businesses. These
arrangements can be set up by the businesses themselves or facilitated by local
government recycling coordinators and groups such as a Chamber of Commerce. The
agreements to exchange pallets keep used pallets out of the solid waste stream and reduce
costs for new materials. Exchanges work especially well when participating businesses
do not require top quality pallets.
•Intra-county exchange programs can be expanded into larger regional waste exchanges
to increase the material pool. .
•Another good exchange possibility is a sister facility that can exchange pallets with your
plant.

Repair Pallets
By purchasing high quality, rebuildable pallets instead of cheaper models, companies that
use pallets regularly may realize savings of up to $3 to $4 per pallet by repairing them in-
house.

Recycle Pallets
Many companies pick up, repair and resell pallets. These companies may pay $1 or more
for each pallet, depending on pick up and the condition of the pallets.

Donate Pallets
•Industries can give wooden pallets away to facilities that chip pallets for use as fuel,
mulch, compost, or animal bedding if the pallets are not treated or contaminated with
hazardous or toxic residuals. Also, several county solid waste management facilities and
some private facilities have the capability to grind and process pallets to remove nails and
fasteners.
•Companies with a small numbers of pallets can give away clean scrap pallets to
employees for firewood, and, during the winter, to the public to fuel wood stoves. A
small classified ad in the local paper can generate considerable demand.

Wood / Plastic Pallet Comparisons
Data from (Plastic pallet manufacturer Don Corbette, Kadon Corporation, 2920 Kreitzer
Road, Dayton OH-45439. PH: 937-299-0088)
                        Repaired Wood Pallet         New Wood Pallet          Plastic Pallet
   Delivery Cycles                3                        10                    50-100
   Max Loading                800 lbs.                  1000 lbs.
   Cost                        $4 - $5                  $8 - $10               $25 - $70



1.) The first way is to use no increased replacement cost, by purchasing the same dollar
amount of replacement plastic or metal pallets as current wood pallet purchases. This
will result in a reduction in the number of pallets on hand because the replacement plastic
pallets are more expensive; fewer can be purchased for the same dollar amount. The
number of pallets on hand will decrease until the lifespan of the newest pallets has been
reached. (i.e. If wooden pallets have a life of 5 years, the minimum pallets on hand
occurs at 5 years from the start of the replacement program.) Thus, this approach may
only work if the plant has more than it needs.

Variable   Description
  c1       Cost of wood pallets ($ /pallet)
  c2       Cost of replacement pallets (metal or plastic, $ /pallet)
  c3       Disposal cost of pallets ($ /pallet)
  r1       Current Replacement rate of wood pallets (pallets /yr)
  r2       Replacement rate of metal/plastic pallets (pallets /yr)
  L1       Lifespan of wood pallets (yr)
  L2       Lifespan of metal/plastic pallets (yr)
   N       Number of pallets actually needed for plant operations (pallets)

The replacement rate with new metal/plastic pallets depends on the cost of new pallets,
since, for this method, we use the same replacement cost as with wood pallets. Thus, rate
of purchase of new plastic/metal pallets, r2, is:

       r2 (pallets /yr) = r1 x c1/c2

The total cost of operation with wood pallets is:

       Oper. Cost ($ /yr) = (c1 x r1) + (c3 x r1)

Operating costs during the period of replacement is the same:

       Oper. Cost ($ /yr) = (c2 x r2) + (c3 x r1)

For a period of years after all wooden pallets have been replaced, the pallet operating cost
will be zero, because the new pallets have longer lifespan than wooden pallets. The
number of years with no operating costs will be:

       No. of years with no pallet purchases = L2 - L1.
When the first new pallets purchased reach their lifespan L2, replacement purchases will
again resume. Now, however, the pallet operating cost will not include disposal costs,
and disposal of plastic/wood pallets may actually represent a recycling revenue stream.
The new operating cost will be:

       Oper. Cost ($ /yr) = (c2 x r2)

If the number of pallets actually needed is N, the time it takes to replace all the pallets
will be:

       Replacement period (yr) = N / r1

This also is the lifespan of the wooden pallets, L1. It makes sense, since the newest
wooden pallets, the ones just purchased at the start of the replacement program, will last
for L1 years.

To make this work, the plant must be able to operate with N pallets. We defined N as the
minimum number of pallets the plant needs. Therefore, the plant must start out with a
surplus of pallets equal to:

       Surplus pallets = (r1-r2) x L1

Conclusions: No implementation cost. Surplus needed. No disposal cost of new pallets.
After L1 years, the number of pallets in the plant is N (quantity actually needed).


Some Pallet Recyclers (2002)
Clark Wood Recycling Inc.
437 Millford Avenue
Marysville,OH 43040
PH: 937-644-4398

Kellems Excavating
10600 Springfeild Pike
Cincinnati, OH 45215
PH: 513-771-4880

Young Pallet
809 Evans St.
Cincinnati, OH
PH: 513-471-5765

National Pallet Company
10725 Evendale Dr.
Cincinnati, OH
PH: 513-769-0377

Sparton Supply Co. Inc.
942 Old State Poute 122
Lebanon, OH 45036
PH: 513-932-6954

R.V. Paper Co.
Franklin, OH
PH: 800-468-3276

National Pallet and Container
Riverside, OH
PH: 937-237-1643

Able Pallet Mfg. & Repair
1271 Harmon Avenue
Columbus, OH 43223
PH: 614-444-2115

Franklin O’Neill Pallets
1080 Ridge St
Columbus, OH 43207
PH: 614-487-9311

Marion Pallet Company
281 Copeland Avenue
Marion, OH 43302
PH: 614-382-5063

Sandusky Frania Pallets
114 S State Rt 590
Fremont OH 43420
PH: 419-334-8735

Allen Lima Pallet Company
1400 Metcalf St S
Lima OH 45801
PH: 419-229-5736


Example Recommendations
 AR 3604: Replace Wood Pallets with Plastic Pallets for Retail
 Customers
                               Annual Savings                    Project         Simple
                       Resource     CO2 (lb) Dollars              Cost          Payback
Wood pallets            5,184                  $44,116
Plastic pallets         -1,037                -$27,994
Repair                                         $22,838
Net                                            $38,960         $110,457        34 months

 Analysis
 Management estimates that about 15 loads of 576 pallets are purchased every year at a
 price of $8.51 each. In addition, about $38,063 per year are spent repairing wood pallets.
 About 60% of the product is shipped to retail customers and about 40% to distributors.
 Management reports that nearly 100% of the pallets used to ship product to retail
 customers are returned. According to plastic pallet manufacturer, plastic pallets last
 between 5 and 10 times as long as wood pallets with no repair. Management reports that
 they could buy plastic pallets for about $27 each.

 Recommendation
 We recommend replacing the wood pallets used for retail customers with plastic pallets.

 Estimated Savings
 Assuming that the fraction of total pallets used to supply retail customers and distributors
 is equivalent to the fraction of product sold to retail customers and distributors, the
 number of wood pallets purchased for retail customers is about:

  15 loads 576 pallets
                       60%  5,184 pallets/yr
      yr      load

 The annual purchase cost of wood pallets for retail customers is about:

 5,184 pallets/yr x $8.51 /pallet = $44,116 /yr

 Conservatively assuming plastic pallets last five times longer than wood pallets, the
 annual replacement cost of plastic pallets for retail customers would be about:

 5,184 pallets/yr / 5 x $27 /pallet = $27,994 /yr

 According to the management damaged pallets are repaired at an annual cost of about
 $38,063. The annual repair cost savings from using plastic pallets for retail customers
 would be about:

 $38,063 /yr x 60% = $22,838 /yr

 The net annual savings from using plastic pallets for retail customers would be about:
$44,116 /yr - $27,994 /yr + 22,838 /yr = $38,960 /yr

Estimated Implementation Cost
Management estimates that there are about 91,000 cases of product in the warehouse.
Each pallet is 40" x 48 inches and was stacked with several rows of product. We
estimate that about 24 cases are placed on each pallet. If so, the number of pallets in the
warehouse is about:

91,000 cases / 24 cases/pallet = 3,792 pallets

According to management, the average cost for repairing a pallet is $2. The number of
pallets for retail customers repaired each year is about:

$38,063 /yr x 60% / $2 /pallet = 11,419 pallets/yr

Research done by a pallet manufacturer suggests that new wood pallets last about 10
delivery cycles and repaired pallets last about 3 delivery cycles before being broken. If
so the number of delivery cycles is about:

(5,184 pallets/yr x 10 cycles/pallet) + (11,419 pallets/yr x 3 cycles/pallet) = 86,097 cycles/yr

If the plant is operational 288 days per year, the number of pallets in use for delivery on
any given day is about:

86,097 cycles/yr / 288 days/yr = 299 cycles/day = 299 pallets/day

The total number of pallets in use for retail customers is about:

3,792 pallets + 299 pallets = 4,091 pallets

The purchase cost of plastic pallets for retail customers would be about:

4,091 pallets x $27 /pallet = $110,457

Estimated Simple Payback
$110,457 / $38,960 /yr x 12 months/yr = 34 months
AR 3254: Institute Returnable Plastic Pallet Program with Regular Clients
                                 Annual Savings                  Project      Simple
                      Resource       CO2 (lb)       Dollars       Cost       Payback
 Wood Pallets       3,500 pallets                   $20,125
 Plastic Pallets     -50 pallets                    -$2,500
 Price reduction                                    -$5,000
 Net                                                $12,625    $25,000      24 months

  Analysis and Recommendation
  Management estimates that about 7,000 pallets are purchased every year and that about
  98% of these are used to transport finished goods to regular clients. About 50% of the
  pallets are used to ship goods to a major warehouse in Cleveland. This presents a good
  opportunity to institute a returnable pallet program. There are many ways to structure
  such a program. One way would be for your company to purchase the plastic pallets, then
  charge customers an additional $50 per pallet for every plastic pallet shipped.        If
  customers returned the pallets, then they would be credited for the pallet charge. This
  would force customers to pay the shipping fees for returning the pallets and would
  encourage them to minimize this cost by waiting until they accumulate a full truckload of
  pallets. You could also slightly reduce your selling price to account for your reduced
  pallet costs. Thus, the net cost to the client would be the same or less than before and
  they would be happy to participate. In this way, both you and your customers would
  share the savings of using returnable pallets.
  Environmentally      Durable     Safe        Hygienic   Insect Free   2/4 Way      Zero
    Friendly                                                              Entry   Maintenance

Figure 5.1 Plastic pallets.

Management reports that they are investigating several such returnable pallet programs.
For the purpose of this recommendation, we will use program described above. This
would entail changing from wood to plastic pallets (Figure 4.1). Manufacturers report
that plastic pallets last at least ten times longer than wooden pallets. In addition, if a
plastic pallet becomes damaged it can be sent back to the manufacture and replaced for a
less than the original cost. Plastic pallets are lighter, recyclable and returnable. Reusing
them would reduce operating costs and natural resource consumption.

Estimated Savings
Management reports that each pallet currently costs $5.75. If so, the cost of pallets
shipped to the Cleveland warehouse is about:

        7,000 pallets $5.75
50% x                x         $20,125 /year
            year       pallet

We estimate that about 50 plastic pallets would be needed each year to replace broken and
lost pallets. According to a pallet manufacturer, a regular plastic pallet costs about $50.
Thus, the annual cost of replacement pallets would be about:

50 pallets/year x $50 /pallet = $2,500 /year
If your selling price were reduced by $5,000 per year to encourage your customers to
participate, your net savings would be about

$20,125 /year - $2,500 /year - $5,000 /year = $12,625 /year

Estimated Implementation Cost
Management estimated that about 1,000 plastic pallets would be required to start a
reuseable pallet program. We estimate that 500 pallets would be required for the
Cleveland warehouse since it comprises about 50% of total sales. If so, the
implementation cost on plastic pallets would be about:

$50 /plastic pallet x 500 plastic pallets = $25,000

Estimated Simple Payback
              year    12 months
$25,000                        24 months
            $12,625      year
AR X: Buy Used Pallets Instead of Purchasing New Pallets
                              Present           Recommended          Annual Savings
Pallets                 1,600 pallets;$7,490 1,600 pallets;$1,600       $5,890

Implementation Cost:                                                     None
Simple Payback:                                                        Immediate

Analysis
Management reported that about 1,600 new pallets are bought each year.

Recommendation
We recommend buying used pallets from a company in Dayton rather than purchasing
new pallets.

Estimated Savings
According to management, each pallet costs about $4.68. The annual cost of buying new
pallets is about:

1,600 pallets/yr x $4.68 /pallet = $7,490 /yr

We know of a company in Dayton, Ohio who is willing to sell pallets in good condition
for $1.00 each. Management reported that they had an empty semi-truck driving back
from Dayton about six times per year. If about 265 pallets could be loaded into the truck
each trip, then all 1,600 pallets could be purchased from the Dayton Company. The cost
of used pallets would be about:

1,600 pallets/yr x $1.00 /pallet = $1,600 /yr

Total net savings would be about:

$7,490 /yr - $1,600 /yr = $5,890 /yr

Estimated Implementation cost
None

Estimated Simple Payback
Immediate
AR X: Recycle Pallets
                                Present.         Recommended.        Annual Savings
Chipping & Manpower        375 pallets;$3,430   375 pallets;$1,620       $1,810
Implementation Cost:                                                      None
Simple Payback:                                                        Immediate

Analysis
Management reported that about 400 pallets are accumulated each year from incoming
materials. About 25 pallets are reused and the rest are chipped. The cost of chipping the
pallets is about $3,430 per year. We found a company who would chip the pallets for
much less.

Recommendation
We recommend changing the chipping company to someone who will do the same job for
much less money.

Estimated Savings
According to management, pallets are chipped and hauled away twice per year. The cost
is $475 per truckload. In addition, it requires about 40 man-hours of labor for each
truckload. The labor cost is $31 per man-hour. The total annual cost is about:

[$475 /truck + (40 hours x $31 /hour)] x 2] = $3,430 /yr

We found a company who is willing to do the same job of chipping and disposing pallets
for $380 including transportation, manpower, equipment and disposal. They require a
minimum of 250 pallets to perform the job. Thus, if this operation were performed once
a year, the annual cost would be about:

$380 + (40 hours x $31 /hour) = $1,620 /yr

Total net savings would be about:

$3,430 - $1,620 = $1,810

Estimated Implementation Cost
None

Estimated Simple Payback
Immediate
AR X: Sell Pallets for Profit
                             Present          Recommended             Annual Savings
Revenue                       None               +$2,000                  $2,000
Implementation Cost:                                                        $0
Simple Payback:                                                         Immediate

Analysis
About 100,000 pallets are disposed of each year and at least 80% of them are still in good
condition. No disposal cost is incurred because the scrap metal vendor agreed to dispose
of the pallets free of charge as a part of the business contract. We located another
company who is paying over $4 per pallet for 2,000 pallets a year. They are interested in
purchasing good pallets from you at a price of about $1 per pallet. The company is
located about 150 miles away, but they make 6 trips a year to Dayton with a large flat bed
truck.

Recommendation
We recommend that you sell 2,000 pallets per year to the company identified here and
search for additional buyers for the other pallets.

Estimated Savings
You would gain $2,000 per year in revenue and reduce your waste streams.

Estimated Implementation Cost
None

Estimated Simple Payback
Immediate

				
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