pallet pooling service to major providers such as CHEP, PECO,iGPS, and 9Bloc. According to Dr. White, the trend makes sense. Pallet rental can be a poor fit for many smaller manufacturers.
“What we are seeing here is that these companies, which are not a fit for rental, recognize the benefits of managing pallets, and they look to other companies to help them manage their pallets,” he said. “Some of them may do it internally, but many look to third parties that can manage pallets for smaller industry segments.”
He emphasized that a lot of third party companies are making pallet management services available for manufacturers of a smaller scale or in non 48x40 pallet applications. “I’m happy to see this. It is good for our environment, and it continues to control the cost of consumer goods,” he continued.
Trends to watch #1: International freight
According to Dr. White, the leading trend to watch in terms of pallet implications is international trade. He notes that the U.S. usually exports roughly 12 million TEUs (twenty-foot equivalent units) annually. Roughly half of that volume is still floor loaded, while the rest is palletized. If the floor loaded portion was converted to palletized, it would require an extra 60 million pallets annually.
“Now, that’s not going to happen overnight,” he cautioned. “That is going to be an evolutionary process. But it will increase the demand.”
Dr. White noted that freight container rental has decreased by 45% between 2014 and 2017. While the use of pallets can reduce freight capacity by as much as 10%, there are significant labor-saving benefits to palletization. He noted that loading a 40-foot container can take six to eight labor hours, while palletized freight can be loaded in less than one labor hour.
“When you look at those costs, what does it mean?” he asked. “We are going to increase palletization going out of this country, (and) we may see palletization increase coming into this country.” With a trade deficit of 3:1, there is the potential for a huge influx of pallets. The main problem with that, he said, has to do with their overall poor quality. “I think what we see as we palletize more and more products for international shipments, we are going to see an impact on the pallet market that we should monitor very closely in the future.”
Trends to watch #2: E-commerce
Dr. White noted the rapid increase in e-commerce volumes. He said it will be difficult to tell what the impact will be, at this point in time. For now, the major difference is in the last mile of distribution, which is the last leg to the retail store, or in the case of e-commerce, the last from the fulfillment center to the online customer’s home. He noted that currently, the front end of the e-commerce supply chain is still highly palletized. It is possible, however, if improvements are made in parcel-direct shipments direct from the manufacturer, it could impact pallet usage related to shipping goods from the manufacturer to the fulfillment center, as well as for order picking.
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OCTOBER 2018