You’ve Got Questions About the Pallet Shortage. We’ve Got Answers.
First it was the supply chain labor shortage. Then we saw a sharp increase in shipping rates. Now we’re seeing a shortage of pallets. When will it end? It’s a hard time for businesses everywhere right now, and it’s easy to feel frustrated. We’re here to help you through it. Here are our best insights right now:
Why Do Pallets Matter?
Pallets serve as a base upon which a large block of products can be stacked neatly and orderly, shrink wrapped, and then loaded onto their mode of transit in bulk. Pallets have been designed specifically to fit in trucks and shipping containers snugly to maximize space while still allowing room for pallet jacks and forklifts to carry and maneuver them through the warehouse. They allow for large quantities of products to be moved safely at once, creating efficient loading shipping services for businesses.
Without the use of pallets, individual products would need to be carried in smaller batches and manually stacked one by one from warehouse to truck to each stop in its supply chain journey until it reaches the final home of the customer. It would be like if grocery carts disappeared and you had to carry your groceries in bags all through the store, to your car, and then into your home–except at a scale of every package ever manufactured. The option of abandoning pallets is completely unsustainable.
Why is There a Pallet Shortage?
Simply put, there’s a shortage of materials to make pallets. If you’ve been to the hardware store lately, you may have noticed that lumber has increased in costs by 400% in the last year because of the high demand and smaller supply of wood available. The same is true for steel to make nails at an increase almost twice as high. On top of it all, pallets don’t have a natural, circular supply chain where they end up where they’re needed. Many businesses are starting to employ a radio tracking system to trace routes and misplaced pallets, but the technology is still new and will take time to catch up with demand.
When Will it Return to Normal?
This is the question that many experts are disagreeing on right now. Some believe that we can expect relief after the demanding holiday season and its more dense need for pallets. Others are expecting the prices of steel and wood to drop in the spring. Still, some think that logistics bottlenecks around the world created by the supply chain labor shortage won’t be alleviated until late summer of 2022. The reality is complicated, and we don’t know when pallets will be back to the price we’ve come to expect over the years, but we’re likely to see some level of reprieve at each of these moments down the line.
What Can Be Done to Minimize the Impact Now?
Refocus on Repairs — The best chance the industry has at utilizing the resources available for pallets to alleviate the shortage is by changing programs to refurbish existing pallets that may have been broken during previous use. Regular maintenance can increase the life of a pallet upwards of three times.
Double Down on Safety Protocols — Ensuring that all team members are up to date on safety system training can dramatically decrease the probability in accidents that cause pallet breakages. This includes special consideration of best practices for moving and storing pallets, such as avoiding pinwheeling, ensuring the correct entries are being used, and stacks of unused pallets reach no more than eight high.
Invest in Sustainable Supply Chains — Now is a great time to create a circular supply chain, which includes the return of pallets and other packaging opportunities back to the warehouse on empty trucks. This reduces waste in the supply chain both of pallets and other materials and can impact costs while making your logistics strategy more green.
Pool Your Resources — Even with all of these strategies in place, supply chains will still need the occasional influx of new pallets to stay afloat. This is when working with a 3PL creates better opportunities for small-to-mid-size businesses. By working with one central logistics provider, you’re able to use the negotiating power of many businesses like your own to bring down the price of pallets while buying in bulk.
To learn more about what MWCold is doing to reduce pallet pricing for clients, reach out to our team of supply chain experts.