There is little doubt that our world is changing. Technology has made a lifestyle that would have been unimaginable a decade ago an everyday reality. Films and communications are available wherever we happen to find ourselves, and the furnishings, food, and devices that we fill our homes with are ordered online and delivered with just a click. All of this convenience is provided by a complex and responsive omnichannel supply chain. Outside our homes, though, the price of all this convenience is rising fuel costs, improperly disposed-of waste, and even unpredictable extreme weather.
There’s no simple or perfect solution to these issues, but businesses are waking up to the problems. They’re responding by making changes to their supply chains, including changes to the shipping pallets they use. Pallets are crucial in keeping our economy running, and long-term changes in the supply chain are reflected in shifts in the pallet industry. Recent pallet industry trends point to greater concern about waste in the supply chain and a desire to find ways to increase efficiency through reuse.
Problems with the Linear Business Model
The business model that has prevailed since the industrial revolution has been a linear or pipeline model of business. Companies harvest raw resources, process them, and sell them to other companies. Those companies process these materials into consumer products and sell them to customers. While this model of production has prevailed for centuries, it has inherent flaws:
- One-Way Flow: In a linear business model, production flow is in a single direction, with no transportation network established for returning used products or packaging. If reuse of a whole product or recycling of components or packaging is profitable, it still isn’t possible due to the lack of established retrieval channels.
- Single Channel: Linear business models tend to have only a single channel to consumers. While a producer can have multiple partnerships with different retailers, dealers, or resellers, direct connections with customers are rare. This makes the model inflexible and prone to disruption from forces outside of the business’ control. Issues with retail partners down the line can close off markets for reasons that have nothing to do with a producer or their products.
- Consumer Disconnect: The target market for many products ends up being not the consumer but the retail or dealer purchasing agents. The first step to getting a product sold, after all, is getting it on shelves. In many cases, producers may not be offering the products their end customers actually want, but instead a close-enough product that met corporate expectations.
Production of goods in modern industries depends on economies of scale to make goods affordable to the average consumer.
The net effect of these flaws in the linear business model is to magnify two problems that all businesses face:
- Overproduction: Production of goods in modern industries depends on economies of scale to make goods affordable to the average consumer. This encourages companies to produce their goods in the largest quantities possible in order to keep the price per unit down and make the most profit possible when the product is sold, leading to a higher than necessary consumption of resources to create goods that may never find a buyer.
- Surplus Inventories: While demand can be anticipated, it cannot be predicted with absolute certainty. When demand for a product lessens, companies are often left with a surplus of product which they must then store until they can find a buyer. This wastes warehouse space and the resources needed to maintain goods that are in storage.
These are some of the culprits behind the boom-bust cycle that haunts all markets. While all businesses face them, pipeline models of production are especially vulnerable. The disconnect between producers and consumers means that producers may not be aware that demand for their product is fading until after it has been produced, and economies of scale mean that manufacturers may end up with a great deal of unsold product. In the past, preventing these scenarios has focused on generating demand through various means rather than fine-tuning the product to consumer needs or production to meet demand.
Generating Demand Also Generates Waste
In order to minimize these problems, companies have become adept at creating demand in various ways. Taking full advantage of economies of scale, companies produce large quantities of products at a very low price but sell them at a significant markup. Technology and automotive corporations release devices with measurable improvements every year and follow a model in which first adopters pay the way for those that come later, when the price of the technology has dropped. Other products rely on being convenient and disposable to drive demand.
Businesses are finally waking up to the levels of waste involved in the wood pallet industry.
Single-use wood stringer pallets provide a surprisingly good example of this model. These inexpensive shipping platforms are produced in bulk to a standardized pattern and can make only about two trips through the supply chain before their useful life ends. Many do not even make it that far and become damaged during transportation, sometimes damaging the product they’re carrying. However, in spite of their shortcomings, single-use platforms are so inexpensive that it is often more economical to buy new pallets than to repair damaged ones or retrieve used ones. Stringer pallets are unreliable to the point that all retailers maintain a turn-around area, where products damaged during transport are staged for their return to vendors. The rejection and return of damaged products often comes with a financial penalty charged by the retailer, yet stringer pallets are still in high demand–a demand which is essentially driven entirely by disposability.
Another issue with this model is that it consumes massive quantities of lumber, with 43 percent of the U.S. hardwood harvest and 15 percent of the softwood harvest being used to make pallets. Businesses are finally waking up to the levels of waste involved in the wood pallet industry and starting to explore the way sturdy reusable pallets can help them change their linear model of business into a more sustainable circular model of business.
Pallet Industry Trends Are Moving Towards Reuse
Companies aren’t just concerned about waste in a sustainability context. The cost of continually procuring new pallets and the product damage and retailer rejection issues that stringer pallets cause are serious drawbacks. In order to solve the issues with single-use pallets, many companies have turned to pallet pooling programs to manage a supply of better quality reusable pallets for them.
Above all else, pooled pallets reduce wasted material.
These programs break free of the linear business model. Instead of using a single, one-directional pipeline, pallets are instead shared across multiple clients, ensuring that they are used as efficiently as possible. Companies using pallet pooling receive many advantages:
- Higher-Quality Pallets: Pooled pallets have to manage many trips over the course of their useful lives. They are therefore built to a more robust standard than stringer pallets and this additional durability reduces the chances of products being damaged during transportation.
- Pallets on Demand: Using a pallet pool allows companies greater flexibility by enabling them to order the number of pallets that meets their need at a given time rather than purchasing extra pallets for peak seasons, which, depending on region, pricing, and availability, may need to be purchased and stored months ahead of peak requirements.
- Reduced Costs: Companies that use pallet pooling services rather than maintaining an internal pallet pool require much less space for pallet storage, freeing warehouse space for product.
Above all else, though, pooled pallets reduce wasted material. The wood block pallets used by most pallet pools have a significantly longer lifespan than stringer pallets and are able to last for up to 20 trips through the supply chain. However, while they are part of a network that isn’t linear, they are not fully recyclable and thus fall short of a fully circular business model that reuses materials to the greatest extent possible.
Why Plastic Pallets Are the Most Important Part of the Circular Economy Trend
A shipping pallet market analysis reveals that plastic pallets are a fast-growing part of the pallet market. Their ability to be fully recycled creates a truly circular supply chain model that reduces waste by keeping the pallets in a closed loop system. In fact, a plastic pallet at the end of its life can be ground up and made directly into another plastic pallet for true cradle-to-cradle recyclability. Unlike single-use plastic items like grocery bags, plastic pallets are a significant asset within a pallet rental program and are tracked closely so that they can be reused many times before being reground into a new pallet.
Reusable, pooled plastic pallets are an environmentally friendly use of plastics that supports the desire for an efficient, waste-free, circular business model.
Plastic pallets support the trends of reuse, recycling, and sustainability in other ways, too. A plastic pallet will not harbor wood-eating pests and therefore won’t transport invasive species into new environments. For this reason, it’s also exempt from ISPM-15 pallet requirements, meaning that plastic pallets don’t need treatment with toxic, ozone-depleting methyl bromide. Reusable, pooled plastic pallets are truly an environmentally friendly use of plastics that supports the desire for an efficient, waste-free, circular business model. Their growing popularity is a pallet industry trend that signals greater awareness of the benefits of reusing everyday materials.
The iGPS pallet pool offers a durable plastic pallet with cradle-to-cradle recyclability that helps reduce waste in the supply chain. To switch to a reusable rental pallet that makes better use of resources, give our team a call at 1-800-884-0225, email a specialist at [email protected], or visit our contact page.
Image 2: Unsplash User: Bas Emmen