Globalization relies on pallets

Tom Vanderbilt exposes the hidden workhorse of globalization: the humble pallet.

And yet pallets are arguably as integral to globalization as containers. For an invisible object, they are everywhere: There are said to be billions circulating through global supply chain (2 billion in the United States alone). Some 80 percent of all U.S. commerce is carried on pallets. So widespread is their use that they account for, according to one estimate, more than 46 percent of total U.S. hardwood lumber production.

Companies like Ikea have literally designed products around pallets: Its “Bang” mug, notes Colin White in his book Strategic Management, has had three redesigns, each done not for aesthetics but to ensure that more mugs would fit on a pallet (not to mention in a customer’s cupboard). After the changes, it was possible to fit 2,204 mugs on a pallet, rather than the original 864, which created a 60 percent reduction in shipping costs. There is a whole science of “pallet cube optimization,” a kind of Tetris for packaging; and an associated engineering, filled with analyses of “pallet overhang” (stacking cartons so they hang over the edge of the pallet, resulting in losses of carton strength) and efforts to reduce “pallet gaps” (too much spacing between deckboards). The “pallet loading problem,”—or the question of how to fit the most boxes onto a single pallet—is a common operations research thought exercise…

As USDA Forest Service researchers Gilbert P. Dempsey and David G. Martens noted in a conference paper, two factors led to the real rise of the pallet. The first was the 1937 invention of gas-powered forklift trucks, which “allowed goods to be moved, stacked, and stored with extraordinary speed and versatility.”

The second factor in the rise of the pallet was World War II. Logistics—the “Big ‘L’,” as one history puts it—is the secret story behind any successful military campaign, and pallets played a large role in the extraordinary supply efforts in the world’s first truly global war. As one historian, quoted by Rick Le Blanc in Pallet Enterprise, notes, “the use of the forklift trucks and pallets was the most significant and revolutionary storage development of the war.” Tens of millions of pallets were employed—particularly in the Pacific campaigns, with their elongated supply lines. Looking to improve turnaround times for materials handling, a Navy Supply Corps officer named Norman Cahners—who would go on to found the publishing giant of the same name—invented the “four-way pallet.” This relatively minor refinement, which featured notches cut in the side so that forklifts could pick up pallets from any direction, doubled material-handling productivity per man. If there’s a Silver Star for optimization, it belongs to Cahners.

I will attest to the importance of pallets from my two summers spent working in a book publisher’s warehouse. The second summer, much of my work day consisted of loading boxes onto pallets, driving the forklift with the pallet to an unloading area, and then unloading the boxes so that workers along the line could start the books moving down the line to what would become packed boxes. Without pallets, I have trouble imagining how so many boxes of books could have been moved.

This did raise some other questions for me:

1. How much money can be made manufacturing pallets? Clearly the world needs a lot of pallets…

2. How many pallets become unusable each year and what happens to these pallets?

3. Do people like products that are specifically designed for better packing on a pallet, like Costco’s rectangular milk containers?

h/t Instapundit

Exploited workers: why Apple and other companies will not move manufacturing jobs back to the US

The New York Times has a long piece examining why Apple, even with the pleas of President Obama, will not likely move manufacturing jobs back to the United States. It sounds like it has a lot to do with what Apple can ask of workers in China. Here are a few examples:

Apple executives say that going overseas, at this point, is their only option. One former executive described how the company relied upon a Chinese factory to revamp iPhone manufacturing just weeks before the device was due on shelves. Apple had redesigned the iPhone’s screen at the last minute, forcing an assembly line overhaul. New screens began arriving at the plant near midnight.

A foreman immediately roused 8,000 workers inside the company’s dormitories, according to the executive. Each employee was given a biscuit and a cup of tea, guided to a workstation and within half an hour started a 12-hour shift fitting glass screens into beveled frames. Within 96 hours, the plant was producing over 10,000 iPhones a day…

The facility has 230,000 employees, many working six days a week, often spending up to 12 hours a day at the plant. Over a quarter of Foxconn’s work force lives in company barracks and many workers earn less than $17 a day. When one Apple executive arrived during a shift change, his car was stuck in a river of employees streaming past. “The scale is unimaginable,” he said…

In mid-2007, after a month of experimentation, Apple’s engineers finally perfected a method for cutting strengthened glass so it could be used in the iPhone’s screen. The first truckloads of cut glass arrived at Foxconn City in the dead of night, according to the former Apple executive. That’s when managers woke thousands of workers, who crawled into their uniforms — white and black shirts for men, red for women — and quickly lined up to assemble, by hand, the phones. Within three months, Apple had sold one million iPhones. Since then, Foxconn has assembled over 200 million more.

This sounds ripe for a Marxist explanation: Apple has its products overseas because it can ask things of workers (possibly interpreted as “exploiting” these workers) that would be very difficult to ask of workers in the United States. American workers would not be happy about multiple things: non-predictable work hours, living in company dormitories, relatively low pay compared to wages in the first-world, consistent twelve hour days.

When I first read these descriptions, it immediately reminded of manufacturing in the United States in the late 1800s and early 1900s. This was a period marked by labor unrest, the rise of unions, and a change in a lot of laws about what companies could ask of employees. We’ve had company towns; think of Pullman on the south side of Chicago. We’ve had bad working conditions; think the Triangle Shirtwaist Factory fire. We’ve had low wages; now we have a minimum wage (that some would argue is still not enough and should be replaced by a living wage). With the protests of workers plus a growing prosperity, work conditions changed. Is China close to a similar period or does a different governmental approach and different culture make is less feasible? As Marx suggested, will the basics of capitalism help turn these workers against the system, pushing companies to look for workers in other countries?

The article hints at this but I think it could be put more clearly: there are not easy answers to this issue. If manufacturing jobs will not return to the US except in certain circumstances (see the recent battle over Boeing plants being located in right-to-work states), we need a clear discussion of this rather than politicians saying nice things.

Searching for skilled factory workers

The New York Times reports on a problem for some factories: finding workers that have enough skills to operate more complicated machinery. An anecdote from a company outside Cleveland illustrates the issue:

All candidates at Ben Venue must pass a basic skills test showing they can read and understand math at a ninth-grade level. A significant portion of recent applicants failed, and the company has been disappointed by the quality of graduates from local training programs. It is now struggling to fill 100 positions.

“You would think in tough economic times that you would have your pick of people,” said Thomas J. Murphy, chief executive of Ben Venue.

Many factory jobs today aren’t just manual labor jobs. An education is not just for office jobs; it is helpful or required for most sectors of the economy.