Mind Your Pallets: Shortfalls Cause Supply Chain Snags
Of all the shortages, pallet shortfalls cut to the core of the supply chain.
Last fall, Florida’s Polk County Sheriff's office reported that it had arrested two men accused of stealing approximately $704,487-worth of wooden pallets and trailers. It’s an example of just how tight today’s pallet market has become. During the current shortage, pallet prices have risen 400 percent according to the United Fresh Produce Association.
What’s to blame? Experts point the finger at the lumber and labor shortages slowing pallet production. Manufacturers and retailers are holding onto pallets longer, too, as storage and safety stock. The growth of eCommerce has added to the demand for pallets as well.
There is no way around using the ubiquitous pallet, but shippers do have options when dealing with high prices and short supply.
Shippers Have Choices
In addition to purchasing new pallets, recycled pallets are an option that can be cheaper and more readily available. Partnering with a repair, recycle and reuse (3R) program is a model where manufacturers recover their used pallets and return them to the 3R partner that then provides repaired and refurbished ones. (Standard pallets can be used 1-2 times before needing repair.)
Shippers can also secure pallets by renting from one of the big national rental companies (PECO, CHEP and iGPS). In addition to ensuring supply, renting removes recovery from manufacturers’ to-do list. With today’s high trucking costs and capacity in such high demand, not having to find and transport your pallets home is a big benefit.
Recovery is the big challenge in each of these strategies. With the rental program, if your customer isn’t a participating vendor, you either have to retrieve it yourself or absorb the cost (FYI rental company block-style pallets are much more expensive than standard white wood stringer ones.) With a purchasing model, it’s hard to know when customers are done with them; when enough have accumulated to warrant a pick-up run; and which pallets are actually yours.
Where Technology Fits In
Technology likely holds the answer to retrieval challenges. Radio Frequency Identification (RFID) tags are being used to track pallets in settings with a limited range. Internet of Things (IoT) sensors have the potential for tracking pallets in transit and throughout the supply chain.
Technology doesn’t have a fast fix for the high price and scarcity of wood pallets for now. Precision scanning and optimization in sawmills may actually end up increasing lumber prices by raising the wood grade, according to the Pallet Enterprises blog. As for wood pallet production, manufacturing is mostly done by small, local companies that are unlikely to make major investments in automation.
This Begs the Question, What About Plastic?
Plastic pallets are on the way. Costco announced they will be requiring plastic pallets for North American deliveries. It’s a big move, but when the program is implemented, the 80 million pallets that pass through Costco each year will only be a drop in the bucket of the 2 billion pallets in US circulation.
It will take a lot more than that to displace wood as the status quo. Until then, wood pallets will remain a hot commodity.