Analyzing the shipping pallet market is a difficult task, and drawing firm conclusions about future trends is harder still. The pallet market is divided into two separate worlds: that of large pallet pools which offer multi-use pallets on an international scale, and the more fragmented world of single-use stringer pallets. Making things even more complicated, many stringer pallets are shipped internationally and must comply with international agreements, but are still discarded after a single use.
Furthermore, while these market segments overlap in the supply chain and at retailers, the way they react to market forces differs. Effective pallet management strategies are also different for each type of pallet even though they cross paths regularly, and an analysis must account for these various market segments and their interactions. Our shipping pallet market analysis looks at three major trends across the pallet industry.
1. A Single-Use Pallet Market Analysis Reveals a Fragmented Market
Single-use stringer pallets are the largest segment of the pallet market by sheer volume. Over 90 percent of the pallet market is wood and around 50 percent of that market is limited-use stringer pallets, with relatively little change year-over-year. Single-use pallets have advantages in ease of construction, availability, and price. A stringer pallet is built of inexpensive lumber and nails and can be put together by a carpenter in just a few minutes. Custom stringer pallets are also easily built to specifications as needed, and these features make them the shipping platform of choice for many small businesses and startups.
Stringer pallets are a highly competitive and mature market with a plethora of suppliers seeking to make a profit.
However, for these reasons, the stringer pallet market is fragmented. If you live in a mid-sized city in the U.S., for instance, you can reasonably expect it to have a company that specializes in building and selling stringer pallets. You can also reasonably expect that company to have a homegrown rival in the same industry, to be in competition with a pallet builder in the next town, and to worry about competition from a pallet recycler. Stringer pallets are a highly competitive and mature market with a plethora of suppliers seeking to make a profit. This fragmentation has led to competition and quality control issues that have actually hurt the market for stringer pallets, as we’ll discuss below.
2. Inconsistent Quality of Wood Pallets Limits Opportunities for Growth
The low purchase price of stringer pallets creates pressure to save on the costs of pallet construction and repairs. This has led to the use of cheaper, less durable woods when possible, reducing the durability and reliability of stringer pallets—which wasn’t great to start with—and has led to the repair and deployment of pallets that should be retired. More and more often, pallet manufacturers are remanufacturing or reconditioning used stringer pallets, which makes these pallets more variable and less standard in weight, size, and strength.
Retailers are now souring on pooled block pallets as the pallets in these pools have worsened in quality.
The poor condition of stringer pallets in circulation is part of the reason many retailers, including large ones like Costco and Wal-Mart, have asked vendors to use pooled wood block pallets instead. However, retailers are now souring on pooled block pallets as well, as the pallets in these pools have worsened in quality–due to use and multiple repairs–without being replaced by a sufficient quantity of new pallets.
Despite issues with pooled wood block pallets, use of these over stringer pallets has continued to rise as companies seek sturdier pallets that are compatible with automated systems and as retailers push vendors to use higher-quality pallets. However, stringer pallets are still set to remain the choice for smaller companies shipping limited units one-way or locally.
3. Tightening Regulations Create Greater Demand for Plastic Pallets
The issues with pooled wood block pallets discussed above have led to other changes in the market, and an analysis of the pooled pallet segment reveals that plastic pallets are a growing segment of the market. Reusable, recyclable plastic pallets have a number of advantages over wood block pallets. They are lighter, more durable, more consistent in their dimensions, and more hygienic. While a wood pallet can absorb chemicals or harbor microbes, plastic is easily rinsed and sanitized. Wood, unlike plastic, also has a tendency to splinter and break, which means that any contamination a wood pallet carries can be spread throughout transportation vehicles, warehouses, and production centers through splinters and other debris. The splinters, nails, and other fragments that wood pallets leave behind can count as foreign object contamination on their own, even in the absence of microbes and harmful chemicals.
Plastic pallets are an ideal food-grade pallet that can help food producers meet and even exceed Food Safety Modernization Act standards.
Plastic pallets are both more durable and easier to keep clean than wood, and this latter benefit in particular is a major motivation for manufacturers of food and pharmaceuticals to adopt a plastic shipping platform. Plastic pallets are an ideal food-grade pallet that can help food producers meet and even exceed Food Safety Modernization Act standards for the sanitary transport of human and animal food. Given that the average cost of a food recall is about $10 million dollars and the Food and Drug Administration may leverage additional penalties as well, a powerful incentive exists for food producers and carriers to meet or exceed FSMA standards, and this is likely to allow plastic pallets to become an even larger percentage of the reusable pallet market.
In the future, compliance with the Drug Supply Chain Security Act (DSCSA), whose rules are still under discussion, may create a similar demand among pharmaceutical companies since plastic pallets with unitized construction are far friendlier to tracking via Radio Frequency Identifier (RFID) or other means than wood pallets. Due to their durability, hygiene, and compatibility with RFID tracking and warehouse automation, plastic pallets are well positioned to become the reusable shipping platform of choice in the future.
The iGPS pallet pool is the intelligently equipped plastic rental pallet of the future. To transform your supply chain with a shipping pallet that is ahead of the market trends, give our team a call at 1-800-884-0225, email a specialist at [email protected], or visit our contact page.