It is definitely not the season to be jolly if your supply chain grinds to a halt for lack of pallets. If the order picking crews are scrambling to find pallets to build orders, then shipments can quickly get delayed and complicate the delivery schedule. Here are four essential tips for making sure that customers are happy and workers stay safe throughout the holiday season.
Based on previous experience and projections, make sure to have the pallets on hand needed to fulfill orders. This year (2020) presents a unique challenge in projecting demand, so it makes sense to be nimble in terms of finetuning pallet requirements. Clear communication and an ongoing dialogue with your pallet suppliers are critical.
A best practice tip is to have the supplier hold an inventory of ready-to-ship pallets, so they will available when you need them. Do not be left in a position where you run out of pallets and must start cold calling pallet vendors for an emergency delivery.
Peak season volumes and seasonal employee support go hand and hand. By taking the time to train new team members in safe manual pallet handling and the efficient forklift handling of pallets, you can reduce the risk of injury and damage to products and pallets alike.
Remember other seasonal team members who make pallet-related decisions, such as new delivery drivers and temps hired to sort pallets. Do they have the necessary knowledge to ensure that damaged pallets are consistently removed from use and that drivers fulfill their responsibility regarding empty pallet return or other duties related to pallet management?
When logistics systems reach peak and delivery driver capacity is stretched to the limit, one shortcut that companies take is to delay bringing back distribution residuals such as cardboard, reusable trays, and, of course, empty pallets. With trucks focused on keeping up with outbound shipments, retail locations are faced with stockpiling pallet accumulations either in the back room or in the parking lot.
Unwanted buildups of pallets can impede store operations and result in those pallets not being returned to the warehouse, where they might be urgently needed. Also, consider that the unprotected outdoor storage of pallets and reusable packaging at retail dramatically increases the risk of pallet theft.
It can be a scenario of all hands on deck for retail distribution during the holiday season. With labor urgently needed for filling and delivering orders, roles such as pallet sorting are often viewed as secondary. Unsorted stacks of pallets can back up in warehouse corners or fill up trailers desperately needed for outbound shipments.
The other alternative, the introduction of unsorted pallets into your system, can result in other inefficiencies. And as mentioned above, driver and road equipment limitations can impede your reverse logistics process.
Retailers can avoid this seasonal strain by working with their pallet company partners to provide pickup of pallets and other distribution residuals. The result is pallet and residual processing capacity that does not strain your labor availability and provides ‘ready to go’ pallets as needed for the distribution center.
When it comes to the holiday season and pallets, it can be a time of extremes – too few for order picking or too many to return and sort. Attention to planning, training, and pallet supplier coordination can make a big difference.
Companies recognize the importance of wood pallets and the imperative for working safely around them. With 80% of U.S. commerce transported under pallets, their role is crucial in warehouse and supply chain operations. While each workplace will have a unique risk profile that will ultimately inform its approach to working safely with pallets, it is essential to consider worker interactions with pallets in health & safety programs. In this post, we look at safe work practices regarding the handling of wood pallets and working in their proximity.
The Ontario Province Workplace Safety & Prevention Services (WSPS) recommends that companies incorporate a pallet safety program, including pallet inspection, removing damaged pallets from use, and properly handling and storing pallets. Consider the best practices listed below when incorporating pallet safety into your organization’s health & safety approach:
Ultimately, wood pallets are a crucial component in the safe and efficient function of warehouses and supply chains. Take time to understand the hazards and exercise best practices. Make wood pallet safety a part of your health & safety conversation.
In explaining why wood pallet prices vary, let us look at gas prices as a comparison. Consumers reluctantly accept the upward and downward shifts in prices paid at the gas pump. People understand that gas prices are largely dependent upon the price of crude oil, and so changes in the cost of crude are quickly reflected in the retail price of gasoline. Wood pallets are similar in that much of their cost is also related to another commodity – timber.
Consider that as much as 65% of the cost of a new pallet is directly related to the wood and fasteners used to build it. And given that pallet industry margins are generally very low, it is hard to avoid passing along cost increases. As such, pallet prices are extremely sensitive to the cost of material inputs. Other factors can influence wood pallet prices, including supply and demand, weather, government policies, and more.
National pallet buyers quickly come to understand that pallet prices vary across North America. Chances are that the price you pay for a new wooden 48×40 pallet will be different in Arkansas than in East Texas. Variables such as lumber, labor, and real estate availability all play a role.
A quick scan of a recent pallet market report revealed more than an 8% spread in pricing across the country for a new 48×40 wood pallet. Given that material costs are such an important component of wood pallet prices, it stands to reason that geographic regions enjoying access to cheaper wood will be able to produce pallets at a lower cost than in other areas. Regions with proximity to local timber supply can avoid significant transportation costs.
As for recycled wood pallets of good usable quality (sometimes known, a recent market report showed that they varied almost 25% from the lowest pricing in New England to the highest in the Pacific Northwest. Unlike new pallets, however, the cost of new lumber is not a primary determinant of price.
The regional availability of recycled wood pallets and the demand for them, shape the market. In strong produce industry markets (read: fruits and vegetables), demand for recycled pallets may be very high. The supply of recycled pallets, however, is in large part generated from the consumption of consumer goods.
In larger metropolitan markets, more recycled pallets are generated. In markets where demand is very high, but where population and pallet generation are low, the price can be expected to be higher. On the flip side, a populous region that creates a lot of recycled pallets, but without a strong local demand, can be expected to experience lower pricing.
Predictable wet seasons and extreme events can impact timber and pallet prices. Seasonal wet weather, or events such as hurricanes, floods, or forest fires, can limit access to timberlands, imposing significant challenges to loggers.
Pallets are made from low-grade or industrial lumber, which is a byproduct of grade lumber production by sawmills. Mills make more money from grade lumber than industrial, so they try to recover as much grade as they can. New softwood mills, featuring technologies such as computer laser scanning, offer significantly improved grade yield. Even though overall production is increasing in the U.S. South, total industrial lumber generation is declining, thus adversely affecting pallet lumber supply, resulting in higher priced material.
Increased competition for industrial lumber from other sectors such as rail ties or flooring can also result in higher prices. There can also be complementary effects. Stronger demand for grade lumber and increased production can lead to the generation of more industrial lumber, and thus favorable pricing. Conversely, reduced consumption can lead to less industrial lumber in the market, as was the case after Chinese hardwood tariffs contributed to hardwood production curtailments in the Eastern United States.
2020 provides great examples of how government policies and exogenous shocks can impact lumber supply, and ultimately, wood pallet prices. The UK’s decision to leave the EU demonstrates the influence that policy can have on the pallet market. Departure from the EU will mean that all wood pallets moving between the two markets will be required to be ISPM 15 compliant. Many companies have cautiously chosen to build product and material inventories prior to the effective date, thus resulting in increased short-term demand and higher pallet prices in the face of tight lumber supply internationally.
In North America, as industries such as construction ground to a halt during the early months of the COVID-19 pandemic, many mills curtailed production. By summer, however, construction returned, and the new housing market boomed. Due to the mill closures, lumber availability was tight, resulting in historic high lumber prices in the months that followed, until the supply could catch up.
In the final analysis, a new wood pallet, as a timber-based product, is subject to price fluctuation. The good news is that despite price movements, wood remains the most cost-effective and sustainable material available for pallet construction.