Growing Emphasis on Automation Processes and Use of New Technologies for Pallets

Key Trends That Will Drive the Global Pallet Market

Technavio’s latest report on the global pallet market provides an analysis of the most significant trends expected to impact the market outlook from 2016-2020. Technavio defines an emerging trend as a factor that has the potential to significantly impact the market and contribute to its growth or decline.

According to Technavio transportation and logistics research analysts, the top four emerging trends driving the global pallet market are:

pallet market Technavio– Greater emphasis on automation processes and use of new technologies
– Vertical integration by companies
– Growing preference for block pallets
– Rise in power of pallet pooling companies

Greater emphasis on automation processes and use of new technologies

Pallet manufacturers rely on automation to boost productivity and raise the capacity of their manufacturing plants. Loading and unloading pallets manually are time-consuming and expensive, whereas automated processes are economical and efficient. Pallet manufacturers are incorporating sophisticated logistic systems to improve their services. Ongweoweh is one of the first independent pallet companies to develop tracking software to provide customers with information regarding the pallet movement.

According to Sharan Raj, a lead analyst at Technavio for research on warehouse and storage, “Vendors are incorporating tracking technology in pallets, which is driven by the increased need for food safety as they travel through the product distribution system. This trend has also led to an increase in the use of plastic pallets due to the advantage of shipping on plastic pallets, where new tracking technologies can be easily planted on them as compared to other pallets.”

Vertical integration by companies

The demand for lumber used for manufacturing pallets is high in the construction and furniture industries. Sawmills are unable to meet the growing demand. As a result of the shortage of lumber in the market, pallet manufacturers find it difficult to complete their orders. Therefore, the supply of raw materials to pallet manufacturers has been adversely affected.

“Pallet manufacturers such as Arrington Lumber (Texas) and Pallet and Associated Pallet (Kentucky) are vertically integrating and investing in logging and sawmills. This integration enables them to offer high-quality pallets at an economical price. R&E Pallets added a Baker Products processing line to secure raw material supply and boost its production,” says Sharan.

Growing preference for block pallets

Large retailers are shifting to block pallets over stringer pallets. Consequently, manufacturers are expected to focus on manufacturing block pallets. Block pallets are expected to account for a significant proportion of the market by 2019. Costco and Walmart, two leading retailers in the US, announced their preference for block pallets. This trend is aiding the growth of large pallet poolers such as CHEP and PECO, which only deals in block pallets, and puts small, family-owned, or independent producers in pressure who manufacture stringer pallets.

Rise in power of pallet pooling companies

Pallet rental pools have a significant hold over the pallet market. Walmart and Costco have announced that they will accept pallets only from three large pooling companies. This result has had an industry-wide impact and intensified competition in the market. Small firms will have to adapt to the changing business environment and enhance their product specifications to meet the trends in the industry to compete in the market. CHEP alone held 58% of the market share in pallet pooling operations in North America in 2014.

Source: Technavio