Pallet costs are at levels that have not been seen in years. Here’s why.
It was tough not to cheer when the second-quarter U.S. GDP development clocked in at 4.1 percent, the best speed in almost 4 years. Company spending is up. Consumer costs are up. What’s not to love about that?
I hate to break your bubble, but the cost of working is likewise up. When it comes to lumber, costs are not just increasing; they’re through the roofing system. According to the Bloomberg Commodity Index, lumber costs have actually risen 66 percent over the last 12 months. That hurts!
Why are lumber rates soaring while the cost of other products is fairly steady? Analysts attribute it to the ideal storm of a strong U.S. economy creating a need for new houses, transportation issues in Canada that have left lumber sitting at mills all set to deliver, and U.S. tariffs on Canadian timber products. Caught up in this maelstrom are wooden pallet producers and their customers.
Pallet Prices are Through The Roof!
Hard and softwood lumber is the structure of the wood pallet market. Over half the cost of a pallet remains in the wood and another 5 to 10 percent remains in the fasteners. The rest of the expense is in labor, approximately 35 to 40 percent. With many Americans back in the labor force, competitors for employees is up. Pallet producers are now paying greater incomes to maintain workers who all of a sudden have more employment alternatives.
The result? If you’re reading this, you’re experiencing it: pallet rates at levels that have not been this high in years.
Even with the higher prices, demand for pallets remains strong. However, that does not imply pallet users aren’t whining. If rates on products aren’t equaling the cost of pallets, margins are definitely taking a hit.
If you hesitate to swallow margin disintegration related to necessities like pallets, I have actually got a suggestion for you: change your new pallets for recycled pallets. (May I suggest Pasadena Skid & Pallet?) The reason? You’ll cut your cost per pallet in half without sacrificing performance.
You heard me right. Make the switch to recycled pallets and you’ll get an instantaneous two-for-one offer. That’ll conserve your margins!
While I wish to say this is our little secret, Pasadena Skid & Pallet is seeing a considerable need for our recycled pallets. We are the largest source of recycled pallets and while our costs have increased in addition to the rest of the market, our boosts have actually been a portion of that of recycled pallets.
Bloomberg Intelligence analysts anticipate lumber prices– and for that reason new pallet prices – to continue to rise. If you wish to avoid boosts, or better yet, minimize your present pallet investment, consider switching from new to recycled pallets.
Besides conserving money and potentially improving your pallet efficiency like any modification, it’s best to go into something with your eyes wide open and all the truths in front of you.
Why You Should Make The Switch
Why would anybody want to purchase brand new pallets? Could it be that “brand-new wood” smell?
Seriously though, when a company has specifically used new pallets, it can be tough making the switch to recycled pallets. But with lumber prices soaring, increasingly more businesses are considering it, albeit with some appointments.
There is really little difference in the integrity and performance of a brand-new and recycled pallet.
A recycled pallet is more difficult and lighter in weight due to the fact that its elements have less wetness.
Less weight = lower freight
It’s not essential to use new pallets for export outside the United States. There are recycled pallet alternatives.
Numerous businesses in the food and pharmaceutical market use recycled pallets and take pleasure in considerable expense savings. (Recycled pallets are half of the expense of new).
These points, and especially the last one, suffice to get a more major discussion started. I want you to have a clear understanding of pallet requirements.
The reason? If your company has actually utilized the exact same specification of pallets for several years, it’s easy to take things for granted. You’ve always done it that way, right? Prior to changing to recycled pallets, here are 10 things to consider.
- How much do pallets impact your overall product expenses in contrast to your competitors? Will less expensive recycled pallets offer you a competitive edge?
- Will your consumers accept an alternate pallet? Do they have specific requirements brand-new pallets will please?
- Does your item have particular pallet element configuration requirements?
- What is your item weight and what packaging/transportation configurations do you use?
- Does your manufacturing environment have any automation, conveyors, palletizers, stretch wrap mechanism, and so on with tolerances able to accept an alternate pallet. If so, those tolerances might determine a particular grade of a recycled pallet.
- With product under load; what type of racking and/or stacking system is utilized? This also can dictate a specific pallet spec.
- Is it possible to reduce pallet SKU’s and attain much better efficiencies? In other words, can you combine the number of different pallets utilized in your operation? This will simplify stock management and general operations.
- Are internal business stakeholders open up to recycled pallets? For some businesses, a switch like this can be a considerable cultural shift even with today’s generally favorable view of recycling and sustainability.
- What are the marketplace’s volatility and schedule of brand-new or recycled pallets? Supply security is crucial, particularly for larger local and national companies.
- Last but not least, do you have a recycled pallet supplier you depend on advise and provide your company?
I’ll confess, there’s a lot to think about, however much better to resolve this list and complete your due diligence prior to making any substantive changes regarding pallets. Armed with this understanding, you can decide based upon far more than just conserving a lot of money (though that’s pretty great!) and most likely improve your pallet efficiency at the same time.