Bloomberg Businessweek April 19, 2021 pp30-32 |Economics|”Peak Pallet” “Prices for a warehouse staple are at a record, buoyed by the boom in e-commerce” “The Bottom Line Soaring demand for the humble wooden pallet looks set to take prices as high as $15 this spring, which why some companies are contemplating a shift to plastic”
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Source: idlabelinc.com
Summary by 2244
Demand, these days, is high even for the wooden pallet that creates the foundation for moving and storing many a product. Surprisingly, prices are rising on that demand, the increasingly scarce supply of cheap lumber, low-wage labor and “even rising nail costs.” The “Monthly change in the U.S. producer price of wood pallets and pallet containers” increased more than 15% from April 2016 to 2020 but has surged an additional 15% in the last few months.
“Such strains would seem to provide an opening for plastic pallets, which are lighter, built to last longer, and easier to sanitize, and which pose fewer hazards, such as splinters and protruding nails.” They are also better suited for “robotics and artificial intelligence in warehouses…[as they]…don’t warp, crack, or splinter and can be outfitted with tracking technology…”. Problem, plastic pallets are so costly, about 3X wood, such that pallets would no longer be viewed as “throwaway.” According to Brent McClendon (National Wooden Pallet & Container Association), “Companies will look to build a better mousetrap [but] they keep coming back to wood.”
Costco is checking out plastic pallets but CFO Richard Galanti said “We wouldn’t have any comments.” CHEP, a leasing company providing wooden and plastic pallets, is working with Costco. CHEP’s parent company Brambles CEO Graham Chipchase did comment “’Because plastic pallets are so much more expensive than wooden ones, we feel if this is a solution for Costco, we don’t think it’s likely to spread across the whole system quickly because of the price premium.” Marshall White (Virginia Tech professor emeritus) estimates that plastic pallets would increase in share from as much as 6% now to 10% “over the long term.”