Pallet timber is rising at its fastest rate and showing no signs of slowing. According to the latest European reports, the index price of pallet timber alone grew cumulatively more than 20% over the last three quarters of 2020[1]. This phenomenon is happening across the globe. A report from the US government reflects the pallet category in the Producer Price Index has risen for 13 straight months, jumping 31% this year.[2] A wooden pallet typically costs between 7.5 and 10 euros; however, it is expected to approach 12.5 euros this year[3]. That is an extreme price increase, which has significant implications for supply chains.
These excessive prices have been driven by several factors, including a shortage of raw materials and increased demand. The closure and reduced operations of many sawmills at the beginning of the global pandemic, coupled with government policy in limiting logging areas, for example, in Indonesia[4], has led to a shortage of raw materials. Additionally, there has been an increased demand for materials as pallet manufacturers compete for wood with other industries, such as home construction, which is currently booming[5].
There are estimated to be five billion pallets in use worldwide, 90% of which are wooden, and the remaining 10% comprise plastic, metal, or cardboard. With such a high percentage of wooden pallets, the issue of high prices is compounded[6]. In addition, lead times are long, and container transport is not readily available everywhere. All this makes owning and shipping pallets incredibly challenging.
So, what effect does this high price have on your supply chain? How can you reduce the impact of rising wood pallet prices and create a more predictable cost base? Given the volatility of the current market conditions, using wooden pallets can be very costly. Indeed, pooling reusable plastic pallets are a more attractive option.
The value of reusable plastic pallets
Sourcing reusable plastic pallets is an obvious way to protect yourself against the instability of wood prices. Outside of the cost-benefit of sourcing plastic pallets in an unstable wood market, reusable plastic pallets present several key benefits over wood pallets. For one thing, they are stronger than wood pallets, better built, and therefore last longer. All this means you can minimize sourcing issues and improve overall efficiency. Some plastic pallets providers reuse pallet material at the end of the asset’s life cycle to create more reusable pallets. This process is both more sustainable and beneficial to their material sourcing process.
Working with a pooler
When the costs of wooden pallets are rising, it is worth evaluating how pallets are sourced. Pooling plastic pallets enables you to benefit from the high-quality product to transport goods through your supply chain without worrying about maintenance or liability. By pooling, you eliminate the high investments regarding purchase and administration of the product. Ultimately, pooling plastic pallets enables manufacturers and retailers to maximize efficiency and minimize costs in their supply chains. Implementing a pooling model reduces the risk of more price increases; therefore, you can better budget and control costs.
At Tosca, we can help you to shield yourself from the effect of the current market volatility. As the largest pooler of reusable plastic pallets in Europe, we have millions of reusable plastic assets and an extensive network of over 55 service centres worldwide. Our financial scalability, R&D, and manufacturing capabilities allow us to grow our business to match your needs, safeguarding you from market volatility like the industry is facing now. So, you have a higher-performing supply chain to meet your efficiency goals.
For more information on Tosca’s reusable plastic pallets, visit www.toscaltd.com.
Author: Adrian Dale, Tosca
[1] TIMCON: Brexit impacts packaging and pallet prices (packagingnews.co.uk)
[2] https://www.bloomberg.com/news/newsletters/2021-07-15/supply-chain-latest-prices-for-wooden-shipping-pallets-are-soaring
[3] https://www.bloomberg.com/news/articles/2021-04-09/the-forgotten-shipping-pallet-is-staging-a-pandemic-era-rally
[4] A green-based manufacturing system to solve pallet shortage problems – ScienceDirect
[5] Industry group warns pallet prices up 400% amid shortage | Supply Chain Dive
[6] https://www.bloomberg.com/news/articles/2021-04-09/the-forgotten-shipping-pallet-is-staging-a-pandemic-era-rally