Modern’s 2017 Pallet Survey and Webcast Highlights

Modern Materials Handling recently released the welcome results of its 2017 reader pallet survey, along with the accompanying annual webcast, featuring remarks from Dr. Mark White (click here to watch the presentation replay.) As an annual survey, it is one of the few consistent windows we have into the U.S. pallet market. (We also just posted the results of an Australian pallet survey, which can be accessed at this link.)

The survey results can be challenging to interpret, as they include responses from the industrial sector as well as from the consumer goods supply chain. While the latter segment gravitates towards 48×40″ footprint and rental, the industrial sector is much more diverse in terms of pallet usage and has not developed a significant rental presence. Also keep in mind that participant responses do not correlate to the percentage of pallets being used, only the percentage of respondents who use at least some of that pallet type. For example, a respondent could acknowledge using wood pallets, plastic pallets, and wood composite pallets, but we have no information about what proportion of each.

From my perspective, the results didn’t offer anything major in the way of shifts, although a few of the slides could possibly indicate subtle tide changes for pallet selection in the future. There were also a few obvious points worth mentioning. For instance, there seems to be an incremental improvement in customer perception of used wood pallet quality, as well as fewer pallet users indicating they are experiencing availability problems (22% versus 31% in 2016), as shown in the graph below.

Source: Peerless Research Group

Another trend noted the growing use of smaller sized pallets. Half pallets (24 x 20-inch) were used by 11% of respondents in 2017, compared to 5% in both 2016 and 2015. Half pallets are increasingly valued for their value at retail as well as other benefits. One important driver for half pallets over the past few years has been their promotion by CHEP.

Non-wood pallets also showed small increases, which Dr. White said was predictable, given export ISPM 15 requirements for solid wood pallets, as well as other factors such as food safety. For example, 45% reported using plastic pallets this year, up from 38% (2016) and 40% (2015). Wood composite pallets were used by 18% of those people surveyed, up from 15% in each of the previous two years. Metal pallet users included 10% of respondents, versus 5% (2016) and 9% (2015), while corrugated pallet users were at 8% (3% in 2016 and 6% in 2015).

What’s Behind “Other?”

A few of the slides show growth in the “other” category and could portend to more interesting shifts in pallet usage.

For example, the last slide in Dr. White’s presentation shows the percentage of respondents shipping to well-known national retailers such as Walmart, Costco, Target and Home Depot, etc. With just a few exceptions, notably Sears, the percentage of respondents shipping to each of these retailers, seems to be subtly down in 2017.  The list, he notes, includes only bricks & mortar retailers. The “other” line for national retailers, however, shows solid double-digit growth in 2017, which he suggests could be due to the increasing importance of e-commerce providers such as Amazon.

The other significant takeaway identified by Dr. White is also in the “other” category. It pertains to the response to the question, As a result of any problems with used wood pallets, what options have you considered? “Other” jumps from 25% (2016) to 30% in 2017, Dr. White offers that it might indicate a growing interest in third party management providers. As opposed to pallet rental providers, which typically own the pallets and rent them to pallet users on a per-trip or per-day basis, third party pallet management providers typically offer management support for pallet user owned pallets. They provide services such as pallet design and procurement, quality control, inventory control and management, pickup, sorting and repair, as well as relocation.  (Read The Super Power of Corporate Pallet Program Management.) This observation is supported by a slide that appears in the Modern Materials Handling print article, which shows The Pallet Alliance (16%), 9Bloc (16%) and Ongweoweh (11%) as pallet management options being considered by readers.

Can Providers Keep Pace Through Existing Products or Is a Different Mousetrap Needed?

There are a number of factors in play that have the possibility to tip the scales in terms of pallet selection, but we’ll just have to wait and see. Drivers of change may nudge pallet users towards a new mousetrap in terms of alternative products and solutions, or existing solution providers may manage to adapt their existing pallet and service offerings to some degree, as needed, in order to keep pace with customer needs. Attention to measures such as better design and quality assurance, sensors, more efficient logistics, etc., might make the difference in terms of keeping customers happy with performance and cost. The success of providers in adapting current offerings, where the need exists, will impact the rate of loss to innovative alternative solutions.