26 WESTERN PALLET
2022 has been an interesting year for the pallet industry. As always, Chaille Brindley, the VP of Operations for Industrial Reporting Inc. and publisher of The Pallet Enterprise magazine, has provided the stories and reporting on the issues that are affecting the industry now and into the future.
On the October 20 WPA webinar, Brindley discussed the critical trends and best practices for industry participants to consider going forward. Here are some of the talking pointts.
Pallet Pricing
“One of the question I'm sure a lot of people were getting is ‘I'm seeing online all these stories about lumber dropping. What aren’t my pallet prices dropping?’” Brindley commented. He noted that softwood decreases have been more related to grade material than to low grade. Additionally, pallet manufacturers are still working through higher priced inventory.
Meanwhile, increases in virtually every other input of pallet production, from labor to energy, to equipment to business insurance, continue to remain costly. In the case of machinery, delays in sourcing parts and materials have increased manufacturer costs. Likewise, plant insurance has become very expensive. While there used to be eight or nine insurance carriers, he noted, now there are only two or three providing insurance to pallet companies. Some companies have seen their insurance premiums double when moving to a new carrier.
Pallet Demand
As pallet demand eases, Brindley said, some pallet producers say they are glad to catch their breath. He noted comments from Graham Chipchase, CEO of Brambles, saying that with high inventory levels, it is expected that retailers will attempt to incentivize sales to decrease inventory during the Christmas season. This will bring more empty pallets back into the system - both for white wood and rental pallets.
“Retailers may start to deleverage to get rid of inventory,” he said. “It's not odd historically, for used pallets to flood back into the market after the Christmas season, starting in December, working all the way to the first quarter that next year. We haven’t really seen that the last couple of years because with a lack of pallets, retailers, distribution centers, companies were holding on to them.”
With the anticipated availability of more cores, prices for used pallets may drop, which in turn might impact new pallet demand if some customers revert back to recycled pallets from new ones. “We'll just have to see what happens with them,” he said. “And I can't predict or know fully what's going to happen with that.”
Impact of supply chain automation and technology
Brindley noted that one of the big industry discussions has been related to supply chain automation and its potential impacts for pallet selection. “The fact is is that every single supply chain is different, and what they need as far as automation is different,” he said. “Some automated systems may require more higher quality pallets whereas others do not.”
Priorities are changing and companies are increasingly willing to make supply chain and technology investments. Pallet Enterprise interviewed Bob Trebilcock, editorial director of Supply Chain Journal. Ecommerce has been a leading driver of automation investment. For example, Bob noted, have gone from handling 1,000 pallets per day to handling 200,000 individual items. And he noted that while cost is a “Top 5” consideration, it is no longer “Number 1” as the importance of residency and flexibility have percolated to the top of the list for supply chain decision makers.
Regarding pallet plant automation, Brindley commented on a recent feature regarding Oxford Pallet, which had built a new structure and invested in equipment, including a new vision sorting system. When asked about his biggest mistake in the project, owner Henk Vrugteveen commented that the thing he would do differently would be to be less conservative, and to build the new plant even bigger.
“I think one of the things that we need to do is not only build for the next two years, but for next five or 10 years,” he said, so they can take advantage of the changing supply chain.
Industry consolidation
Pallet industry consolidation has been ongoing, and continuing to bring change to the industry. It is a time where you need to be thinking strategically about relationships,” Brindley said.
“Now, I don't think that every company is listening and needs to run for the hills or sell out,” he continued. “I think there's going to be plenty of room for a lot of people.”
Brindley emphasized the importance for every company to be in a position to attractive to a potential sales partner if they desire to sell the company in the future. The leadership team, workforce, accounting and processes should be in good order. Have you purchased the right equipment and the right debt ratio, he asked rhetorically.
Industry Trends from Pallet Enterprise Magazine