E-commerce Demand Forces Manufacturers to Abandon Pallets and Tackle Single-Parcel Delivery

18 November 2020

Here’s a sentence you probably never expected to read: We need to have a serious conversation about TVs and toilets.

Yes. TVs and toilets.

Ten years ago, buying a toilet or a TV usually meant a trip to a DIY or electronics store – the kind of place where you wander the aisles staring at different models, mentally weighing up the respective features like which one boasts a higher pixel ratio or promises of a quiet flush.

You would compare prices, make your pick, and then pull your car around to the back of the shop and have the bulky purchase loaded into the boot or back seat.

That’s how that kind of product likely would have would have made it to your home.

How Did Those Items Get to Stores in the First Place?   

Ten (or even just two) years ago the answer was simple: on a pallet. A giant cube of product came straight from the manufacturer and was then moved around on forklifts in distribution centres until it was needed at the retail store.  

The science of pallet shipment and distribution has been perfected over time. There have been multiple generations of technology and robotic systems built to maximise the efficiency of creating pallets and optimising the warehouses that house those pallets of products down to the square inch.

E-commerce Continues to Drive Change for Retailers and Manufacturers 

Now imagine that you go home tonight and discover that the toilet you bought 10 years ago is leaking or the TV you carefully selected a decade ago has finally died.  

How would you replace them? Would you get in the car and go to those big box stores? Or would you get out your phone, run a quick search, read some reviews, compare some pricing, and tap “order now” for next-day delivery?

Increasingly, consumers have a desire to order big and bulky items such as electronics, home appliances, and home improvement supplies online for doorstep delivery. And it’s not just consumers. According to a recent study by Salesforce, 58% of consumers and 80% of business buyers surveyed expect to make more purchases online in the post-pandemic era. 

The Journey From a Pallet to a Parcel 

If you do decide to order a TV or toilet online, imagine what happens when that order is received. Your item, for which you’ve requested next-day shipping, is where it always is: stacked and secured on a pallet in a distribution warehouse, or on a pallet that’s still sitting at the manufacturing site.

To get to your doorstep in one day, that item will need to be unpacked and decoupled from its pallet, moved around the facility to a packing station, and re-packed on its own. It needs to get out the door and onto a vehicle during the third shift in order to make it to your house for next-day delivery.

But the third shift in this hypothetical warehouse is running short tonight – as it is most nights. Labour shortages in manufacturing and fulfilment jobs are at an all-time high.

That means the worker who is sent to pick your TV or toilet off the pallet is new to the job, and was hired in a hurry without much training.

He or she doesn’t don’t know that the TV they're packing was only intended to make a safe journey as part of a pallet, or that now with its surfaces exposed, it’s at a high risk of getting damaged.

This worker won’t have six different packaging strategies or a wide range of materials with which to pad that fragile, heavy duty item.

In fact, this worker doesn’t even have the right amount of room for a proper packaging operation because E-commerce fulfilment requires more than three times the space of a traditional manufacturing or distribution warehouse.

More Touches, More Opportunities for Damage 

Back in the traditional manufacturer to distribution center to retail store model, your TV or toilet would probably have been handled an average of five times. In an E-commerce single parcel delivery supply chain, an item will be touched by various players across the fulfilment journey an average of 20 different times.

What are the odds that your new flat screen TV or toilet is going to arrive undamaged? What is the likelihood you end up happy when your next-day delivery arrives? Is it 95%? Is it 90%? Sealed Air data gathered from hundreds of customers around the globe reveals that large, heavy, fragile items like TVs and toilets are experiencing damage rates of more than 20%.

A Deceptively Simple Problem

What used to travel on a pallet now has to become parcel ready. 

But the reality is that because of acute labour shortages, rising shipping costs, and a shrinking inventory of warehouse space, this simple problem is turning into a quagmire of cost and waste for manufacturing and fulfilment operations across myriad industries including automotive parts, home appliances, consumer electronics, consumer packaged goods, and more.

To survive the pallet-to-parcel revolution, businesses need to think differently about how they:

Is your business ready to take on the pallet-to-parcel revolution?