The humble pallet. This seemingly innocuous fixture is a staple of warehouses, factories, and tractor-trailers worldwide. Far too often, business owners, warehouse workers, and even the end consumer mistreat and abuse these essential shipping tools. It is not uncommon to see barely-used wooden pallets scooped up from all corners of the warehouse and tossed onto a bonfire. If people knew the actual value of each pallet —both in terms of monetary and logistical value— they might think twice about how they treat their wooden pallets.
Today, Symbia Logistics turns its focus to the all-important pallet. We’ll explore its role in the supply chain, the rising cost of pallet manufacturing, and the push for a greener future through sustainable production methods.
The Important Role of the Pallet
Supply chains are built on the concept of movement. Moving raw materials to manufacturing centers, moving finished goods to their respective markets, and ultimately into the hands of the consumer. A supply chain is more like a river continually flowing from its source to its final destination. Pallets provide your supply chain with the kinetics necessary to keep the process moving smoothly.
According to Inbound Logistics, more than 1.8 billion pallets are currently in use every day across the US alone. Extrapolate that to the world stage, and pallets could very well outnumber people. Pallet use is so ubiquitous that more than 80% of all US consumer goods are transported via some form of pallet system¹.
Pallets aren’t built solely to move supplies and products upstream in your supply chain. They serve a number of other critical roles, including:
Accommodating load weight during transport
Protecting freight from rollovers and other impacts
Providing a point of contact for forklifts and other loading machines to attach
Economizing space during transport
Although pallets often pass through each step of the logistical process unnoticed, they serve as an integral part of nearly every business’s supply chain.
Supply Chains and the Rising Cost of Commodities
When a lot of minor problems collect all at once, it can be enough to bring the river’s flow screeching to a halt. So it is with our supply chain metaphor. Right now, the logistics industry is reeling from a series of supply chain disruptions spanning the last 15 months. While the topic of COVID-19 is old news at this point, its effects on global supply chains continue to cause worldwide disruptions. The most recent issue? Record high commodity costs over the last few months.
Pallets are primarily made from either:
Some sources, like the previously mentioned Inbound Logistics article, estimate that more than 90% of the world’s pallets are made from wood. In the US, pallet production is one of the lumber industry’s main drivers, with more than 40% of harvested hardwoods being fed back into their manufacture. Given the current economic climate, especially for commodities like wood, this presents a significant problem.
The cost of wood-based pallets rose dramatically at the end of April 2021, reaching more than a 400% increase at its peak. Before the commodity increase, the average wood pallet would retail for $9. According to Bloomberg, the price per pallet during the price inflation was as high as $15 in some instances.
It’s not just lumber prices that rose to cost-prohibitive heights; the price of hardware like nails and wires rods used in their construction has also risen exponentially. Exacerbating the problem is the fact that pallet manufacturers worldwide are still experiencing a COVID-related labor shortage, as well as the surging demand for commercial packaging as the world begins to reopen. In short, the demand for goods went from zero to sixty overnight. Still, the prohibitive cost of pallet production was preventing manufacturers from meeting that demand for nearly an entire business quarter.
Pallet Shortages and Their Effects on Your Supply Chain
When one leg of your supply chain feels a disruption, every link downstream feels a version of that disruption as well. Essential goods must flow to their respective markets regardless of the cost. Ultimately, the cost gets passed on to vendors, logistics professionals, and eventually the consumer.
Until the global supply chain straightens, the pallet shortage has the potential to affect everyone’s operations and bottom line. Goods will still flow from their source. The trick is dealing with the inflated prices that come as a result. If the cost of lumber continues to balloon, so will the cost of transport and costs of the goods themselves.
Some manufacturers have increased their plastic pallet production in the meantime, using automated manufacturing techniques to offset the lack of in-person labor. In the end, our problem with materials scarcity may very well be solved through sustainable pallet manufacturing processes down the road.
An Ecologically Friendly Business
Given the sheer amount of pallets in service —and the surging demand for more— it’s hard to think of the pallet industry as a sustainable, eco-friendly arena, yet the results might surprise you.
The industry’s situation is a “Six one way, half a dozen the other” dilemma. Sourcing wood for pallets is a more environmentally friendly practice than creating pallets from oil-based plastics —at least on the surface. The problem is in the life expectancy of each pallet.
Plastic pallet alternatives can make anywhere from 75 to 100 round trips before they must be removed from circulation. Some plastic pallets have even exceeded 200 loads during stress tests. Compare that to wooden pallets whose effective life is much more limited.
Another viable alternative is the honeycomb cardboard pallet. These environmentally-friendly, biodegradable pallets can handle a surprising amount of weight, yet their ecological footprint is much more environmentally conscious than other alternatives.
Another advantage of more modern pallets is their weight. Plastic pallets can weigh up to 37% less than wooden pallets, which directly translates to reduced fuel consumption during transport. Therefore, the position that logistics professionals find themselves in is paying a premium for wood-based pallets whose production bears less environmental impact or sacrifice environmental impact upfront for a more long-term sense of sustainability with newer plastic materials. In a sense, higher commodity prices catalyzed an even more sustainable alternative down the road, which is a synthesis between current options.
Symbia Logistics is an industry leader in 3PL, supply chain management, and logistics. We are proud to help our clients navigate the uncertain waters of the disrupted global supply chain. For more information on our services or to read more about industry news and trends, please follow Symbia Logistics today.