Charlotte, NC, August 30, 2041. Blame it on 2021. Twenty years ago, in an economy hammered by COVID-19, widespread material shortages – including lumber – and powerful consumer buyer behavior shifts, pallet supply couldn’t keep up. Everyone was scrambling for pallets, but they were in short supply. Ironically, there were other options available, but the lack of AI-powered supply chain optimization solutions prevented a seamless transition.
As prices spiked upward in 2021, some pallet buyers made the mistake of leaving existing suppliers to “price shop,” only to find out that pallet prices were high everywhere, and availability was tenuous. Many returned to existing pallet partners to find out that there was no longer inventory available, even at significantly higher prices.
The essence of a pallet crisis: product to ship and scrambling to find pallets
As manufacturers were faced with the specter of orders to ship and no pallets to put them on, the everyday shipping platform found itself elevated from an intensely scrutinized procurement line item to a strategic corporate talking point. From national television coverage to major publications, commentary regarding the pallet shortage was everywhere.
And at the time, it seemed like there weren’t a lot of promising options. People were shocked by talk that a $7 recycled pallet might soon sell for $20 during the peak of the California ag season. It is hard to look back now and not chuckle. The importance of pallets had been widely underappreciated.
Who would have guessed it? The crisis of 2021, now two decades in the rearview mirror, sparked a new way of thinking about pallets, one that resulted in billions of dollars in supply chain savings, and more sustainable, resilient supply chains. That innovation was Pallet Optimizer(™), a highly advanced, AI-powered system that ensures “pallet availability every time”, financial savings, and environmental benefits.
Rudimentary supply chains of 2021 supported pallet monocultures
“Supply chains were very rudimentary and inflexible back in 2021,” explained Ashe Deckboard, co-founder and CEO of Luna-based Pallet Optimizer. “A lot of companies had a single or limited amount of pallets they relied on,” she elaborated.
“Some folks specified recycled No. 1, while other folks used new. Alternatively, some companies required a hardwood spec, while others used pine. The idea of switching freely from one platform was a non-starter. There were too many perceived barriers. Would automation function okay, and what about customers with prescribed inbound pallet requirements? How would they react?”
Even back in 2021, before current solutions such as the 20G CyberPal(™) there was a variety of pallets available that could have been deployed. For example, Litco’s engineered presswood pallet offered a dry, stiff alternative, available in several sizes and load ratings. The export-friendly, ISPM-15 exempt presswood pallet was nestable to save on inbound freight and storage requirements. Paper pallets were also widely available to deploy for lighter loads or for top pallet positions in dry transport. Even non-rackable plastic pallets could have been deployed for customers with wire shelving in their racking systems. There were also metal pallets, prized for cleanroom applications, and highly engineered pallets made from composite material.
There was no reasonable way to reach out to each receiver and discuss alternative pallets, however. Coordinating such a range of options was too complicated, given the technology limitations of 2021. It would have been inconceivable to phone customers and find out what type of pallet changes they would be able to accommodate to keep freight moving during the height of the crisis.
Ensuring pallet supply resilience through big data and AI
Those concerns are now a thing of the past, thanks to Pallet Optimizer. The company recently announced its latest V10 upgrade. Take the case of Twinkle Puff Organic Pastries, the leading snack food, and frozen baking batter producer. Twinkle Puff used to rely totally on a combination of rental pallets and No. 1 recycled, specified according to customer. Now the company ships on as many as 15 different platforms, depending upon pallet availability, pricing, and application details. The decision regarding which pallet to use is highly dynamic, depending upon the most recent market intelligence, and is approved automatically by its ship-to locations.
Pallet Optimizer amasses and collates an astounding depth and breadth of information regarding lumber pricing, freight rates, consumer demand, housing starts, forest insect infestations, announced or anticipated tariffs, port bottlenecks, recycling mandates, extreme weather events, and more. As such, Pallet Optimizer is able to identify impending pricing and availability shifts for new and recycled pallets. Through automated procurement, it can adjust order quantities accordingly, avoiding any potential pallet supply disruptions.
With new data constantly being reviewed, reports of product damage and costs associated with a particular pallet or customer are considered and updated into the pallet decision process.
One exciting aspect of the system for rental or white wood pallet suppliers is that they can engage in machine-to-machine communication to better regulate and optimize pallet supply in various regions of the U.S. network.
Say, for example, pallet suppliers recognize their projected regional inventory will not be great enough to meet the demand for the upcoming West Coast harvest season. After automatically assessing the pallet supply shortfall, the pallet vendor’s Pallet Optimizer can communicate with that of Twinkle Puff, offering a price incentive to ship on their particular pallet rather than other alternatives for shipments to West Coast customers, enabling them to build regional inventory without the need to deadhead empty pallets. The request for alternative pallet choice is in turn dispatched to the end receiver, which automatically approves or rejects the request.
Likewise, Litco’s presswood pallets or corrugated options might make sense for other particular opportunities, thus easing the pressure on wood pallet availability. In the case of light corrugated platforms, Pallet Optimizer can calculate if their deployment can help increase load capacity and confirm the financial benefits of using that platform. That information is communicated electronically to the end customer, which is offered a share of the savings for the inconvenience of handling multiple pallet types. At the same time, the end customer’s Pallet Optimizer module can calculate the available storage rack positions with support shelving in the facility, to determine whether or not to accept the otherwise non-rackable pallets.
Embrace the ease of pallet switching
Shippers can easily manage 10 or more pallet alternatives through their storage efficient pallet AS/RS systems, also offered by Pallet Optimizer. As each order pick list is generated, information is sent to the AS/RS to retrieve the required pallet for the shipment. At one time, it was hoped that additive manufacturing/3D printing would provide a convenient alternative, but cost and speed still are still barriers to adoption.
Handling pallets at the retail distribution center is equally easy. Inbound 3D imaging of pallets underload confirms agreed upon pallet selection and verifies as to condition. When pallets are emptied, Pallet Optimizer’s AI-enabled micro-sorting line can easily separate as many as 20 different pallet solutions for return or recycling.
In today’s supply chain of 2041, pallet selection is dynamic, based on an optimization algorithm that considers a wealth of current and projected conditions. Gone are the days of 2021 and earlier, where pallet selection was looked at as just one or a few pallets that would provide the best solution for all shipments. We now understand all too well that such a simplistic approach was no longer tenable in increasingly complex and turbulent supply chains, and in fact, was the primary cause of the 2021 crisis.
It is time to stop thinking about just one pallet. While flexible, dynamic decision-making is too daunting to be done manually, the AI-powered collaborative solution offered by Pallet Optimizer can deliver the perfect pallet selection for each pallet shipped, providing bountiful benefits to all supply chain participants.
Editor’s note. While Pallet Optimizer is still just science fiction, dynamic pallet selection is a pivotal opportunity, and First Alliance Logistics Management (FALM) is here to help. We offer a diverse range of creative pallet offerings that can help your supply chain remain resilient and cost-effective in the face of unprecedented change. To find out more, visit www.falm.com.