Pallets Keep Fresh Produce Moving

Pallet companies provide more than a product. They serve an automation and sustainability function.

Originally printed in the July 2023 issue of Produce Business.

The impact of the COVID-19 pandemic and its aftermath hit the pallet market, much as it did all other products and services, bringing unprecedented swings in availability and price.

“The difference,” says Zach Gilbert, chief commercial officer of PLA, Dallas, a wooden pallet producer, “was that pallets had previously been treated as a commodity and the pallet supply taken for granted.”

“When that was no longer the case, companies really felt the impact of unreliable providers on their operations, and discussions about pallets became less about getting the lowest price and more about stability and quality of supply.”

Today, he adds, companies seek out suppliers who do more than just provide a product or service at a decent price. They want suppliers that can help them with big picture priorities like automation and sustainability.

“Our customers want to know what we’re doing to make our business as efficient and environmentally friendly as possible, and how that can benefit their business,” Gilbert says. “Specific to sustainability, they want to be able to measure and report the benefits of the recycled pallets they’re using and/or recycling, in a way that aligns with their company values.”

Still, he says, with the scrutiny many companies have applied to their pallet use, wood continues to inspire confidence.

“We aren’t seeing any large-scale changes regarding new materials,” Gilbert says. “Mostly these are used for very specific purposes, where the higher cost and maintenance of these pallets can be justified. For most shippers, recycled wood pallets remain the most economical, widely available, and environmentally sustainable option.”

Wood remains the dominant material in the pallet sector, running at about a 95% market share, says Jason Ortega, vice president, public affairs at the National Wood Pallet and Container Association.

“Wood pallets remain central to the sector due to their flexibility, environmental sustainability, durability, cost-effectiveness and unit load capability. They can easily adapt to different product needs, are made from a renewable resource, and withstand transportation challenges, offer cost-efficiency, and handle heavy loads effectively and safely,” Ortega says.

FLEXIBILITY A KEY

Although the global supply chain jam impacted everyone in the pallet industry, Eric Sobanski, senior vice president of operations at PECO Pallet, Itaska, IL, says “PECO takes great pride in its performance throughout the pandemic and afterward, with no critical supply chain disruptions for our customers, despite large shifts in demand, changing inventory safety stocks, inflation, and variability in industries PECO services.”

“Our deep and meaningful supplier-partner relations allowed us to operate without any supply issues, with respect to critical input materials such as lumber, nails, paint, and services such as transportation.”

Jeff Pepperworth, president and CEO of iGPS Logistics, Orlando, FL, which produces and pools plastics, says the business has expanded dramatically, and “we added in-house manufacturing to keep up with demand.”

“We have also been working with our clients to help them adapt to changes. For example, we’ve made improvements to our technology portal to enable customers to more efficiently plan and forecast their pallet needs, and we have also been educating our customers on how best to use our pallets within automated systems to optimize their supply chains and have less reliance on human labor due to the labor shortage,” Pepperworth says.

“We also helped our manufacturing and retail partners build secondary and tertiary channels for raw materials and finished products, resulting in fewer stockouts at the retail level and more satisfied end consumers.”

INCREASED AUTOMATION

For three years, supply chain has been a major issue and one that businesses have had to rethink, says Jason Adlam, vice president, new business development, CHEP USA, Alpharetta, GA, which has both plastic and wooden pallet operations. In response, the company has had to make quick responses to ensure it’s meeting customer needs.

“Even as we’ve emerged into a space we’ve never been in before — the post-pandemic arena is completely different than any reports or trends we saw pre-2020 — we’ve continued to innovate and work as hard as possible to keep up with the changing demand,” he says. “And even still, having invested over $200 million into automation, which increased capacity to serve by over 20% year-over-year, we’re continuing to challenge norms and push forward on customer and retailer needs. What that meant to CHEP U.S. specifically in 2022 is shipping 300 million pallets of goods across the country.”

James Riegleman, product manager at Orbis Corp., Oconomowoc, WI, says the pandemic promoted reconsideration of pallets, and plastic made gains as companies revisited their short- and long-term needs.

“The heightened demand for plastic pallets definitely has derived from this supply chain shakeup during the pandemic. We have seen those ripple effects, with changes like increased automation due to labor shortages,” he says.

The reconsideration of everything associated with supply chain was pretty much inevitable, Riegleman notes.

“I think ORBIS has done a really good job at approaching this and partnering with customers in the market and trying to provide them with the best solutions to assist with making their operations as efficient as possible,” he says.

As to manufacturing, Gilbert says PLA is investing heavily in automation. “Over the past few years, we’ve deployed sophisticated technology to maximize yield efficiency and minimize waste. In addition to enabling precision cuts for specialized pallets, the system’s efficiency enhances production capacity, and really importantly, this additional output can be achieved with reduced injury risk, workplace accidents, and employee fatigue.”

MARKET INFLUENCES

In the produce case, companies are more interested than ever in the particulars of transport, and pallet producers want to help them do so, even if they will continue to argue cases.

“One of the biggest trends throughout the industry right now is the increased emphasis on tracking and information gathering,” Pepperworth says. “Companies want their assets to be smarter. Wood pallet manufacturers are trying to do a better job of integrating tracking technology so that they can understand where their pallets are going and where they are ending up. This is an area where we fortunately have an advantage. Our plastic pallets have incorporated RFID chips since the beginning.”

Riegleman says greater regulation of the food supply chain is a factor that will influence how ORBIS customers carry forward in their use of pallets.

“It’s up to us to, as pallet suppliers, to be on the forefront of that,” he says, “and innovate new product developments and meet with our customers and understand what the customer needs.”

Companies are trying to make decisions based on the best assessments they can make, but also on maintaining flexibility, which the pandemic has made a virtue.

“The supply chain is now trying to figure out how we navigated then and how we navigate now. Companies are trying to figure out how to be more efficient with their warehousing and try to better understand consumer habits, even though consumer habits have been fragmented over the last couple of years,” Riegleman says.

Manufacturing costs will stabilize to a degree, but are unlikely to fall to pre-COVID structures. “We’re doing our part to help mitigate pressure by becoming more efficient with our operations, more agile with our transportation, and more creative with our solutions,” he says. “Working together with our customers, we’re coming up with creative ways to help keep supply chain costs down.”

Pepperworth says iGPS, for its part, is “constantly evaluating our own mix of materials to ensure that our pallets can withstand not only the rigors of many trips through the supply chain, but also increasingly heavier loads.”

The company also works with customers, such as those that manufacture plastic bottles, “to give them options to divert their waste streams. This helps the supply chain and also helps the environment.”

The pallet industry has a long history of product evolution, says CHEP’s Adlam.

“Speaking specifically to CHEP, though, we continuously work to reduce our consumption of natural resources while providing the same high-quality, durable pallets to our customers,” he points out. “A recent method of this waste upcycling is pallet remanufacturing, or the process of taking pallets seemingly beyond repair and rebuilding them as new, durable pallets to reduce back-in-service time and improve customer satisfaction while addressing sustainability goals.”

One other new innovation is out of the CHEP Innovation Center: the CHEP double wall block. “It’s a pilot initiative in a few of our business’ regions, including North America, that could replace the current solid wood cube, what we call a block, on the corners of our pallets when too damaged,” Adam explains. “The double wall block is comprised of two c-shaped pieces of wood chips and upcycled plastic and one of the benefits is improved durability.”

At ORBIS, new product development is based on finding a balance of optimal performance while also keeping prices down.

Riegleman says a high-pressure ORBIS pallet, the Odyssey pallet, is made entirely from recycled content. “So, we’re still exceeding the performance of the pallet that we’ve had in previous years, but we’re doing it from a material side and innovation side that helps keep the cost down for customers, but doesn’t forfeit any of the performance we see in our other products.”