The Pallet Core Revenue Problem: Why Pallet Procurement Decisions Have Hidden Economics

Article 2: Part of the Beyond the Buyer series.

One important number is still too often missing from pallet procurement business cases, even though it appears regularly in distribution centre budgets: the revenue a receiver earns by selling used pallet cores after unloading inbound shipments.

At reported core values of roughly $2 to $3 per pallet in many U.S. markets in April 2026, the amount can become significant at a busy facility. As a simplified illustration, 50,000 saleable cores per month would have a gross market value of $100,000 to $150,000. Actual revenue would depend on the condition and ownership of the pallets, local agreements, regional prices, and how many inbound pallets are available for sale. Even with those qualifications, pallet core revenue can be a substantial operating consideration.

The issue becomes more complicated because pallet specification decisions can affect this revenue in several directions. A proprietary pallet program may eliminate a receiver’s access to cores. A downstream plastic pallet program may help preserve the condition and value of wood pallets used in the upstream flow. In other cases, a receiver may willingly give up core revenue because of the belief that the operational advantages of a higher-quality pallet program are worth more.

How the GMA Pallet Secondary Market Works

The 48-by-40-inch GMA-style stringer pallet has been the dominant unit-load platform in North American consumer goods distribution for decades. Its widespread acceptance supports a large secondary market for used pallets.

In a conventional flow, a manufacturer or shipper purchases new or reconditioned pallets, loads product onto them and sends them to a distribution centre or other receiver. After the product is unloaded, the empty pallet may remain with the receiver.

The receiver can then sell the residual empty pallet, commonly called a core, to a pallet recycler. The pallet may be inspected, repaired, graded and returned to the market. Depending on the commercial arrangement, the receiver earns revenue from the sale.

At many distribution centres, this is not an incidental activity. Empty pallets are accumulated, sorted and sold under established agreements, and the resulting income may be included in the facility’s operating budget.

The size of the recycled pallet sector shows the importance of this flow. Virginia Tech research found that the U.S. pallet industry produced approximately 280 million repaired and remanufactured pallets in 2021. The researchers also estimated that 78% of the cores received by pallet companies were repaired and sold, the highest proportion recorded during three decades of survey work.

The pallet secondary market is therefore not merely an informal outlet for unwanted wood. It is a substantial supply network that recovers useful assets, supplies lower-cost pallets and generates revenue for the companies that collect and sell cores.

When a Pallet Change Eliminates Core Revenue

The most obvious core-revenue problem occurs when a shipper replaces conventional GMA wood pallets with proprietary reusable pallets that must be returned to their owner.

Under the previous arrangement, the receiving distribution centre may have retained and sold the empty wood pallets. Under the proprietary program, the receiver must segregate, store and return the pallets instead. Its core revenue declines or disappears.

From the shipper’s perspective, the new program may offer important advantages. A durable pallet may provide greater consistency, fewer failures, improved hygiene, better automation compatibility or lower product damage. Tracking may reduce pallet losses and improve fleet utilization.

The receiver, however, may experience a different financial result. It loses a source of revenue and may also assume new responsibilities for pallet segregation and return. If those effects are not included in the business case, the shipper may believe that the change is entirely beneficial while the receiver sees it as an added cost.

This does not mean the proprietary program is a poor decision. It means the loss of core revenue belongs in the analysis.

A commercially successful program may need to compensate for the lost value through better operating performance, adjusted pricing, improved service terms or another arrangement that leaves the receiver no worse off overall.

Why Major Retailers May Still Prefer Pooled Pallets

Many large retailers have inbound pallet policies that require or favour pooled pallets from providers such as CHEP, PECO or iGPS. Those pallets remain the property of the pool operator, so the retailer generally cannot sell them as cores.

Retailers may nevertheless prefer them because consistent pallet quality can create operating savings elsewhere. Better-condition pallets may reduce load failures, product damage, conveyor interruptions, equipment repairs, handling exceptions and debris cleanup. They may also perform more reliably in automated storage and handling systems.

In these cases, the receiver has effectively decided that the operational advantages of the pooled program outweigh the value of the cores it gives up.

The comparison should therefore not be framed as pallet core revenue versus no economic benefit. It is core revenue compared with the combined value of greater pallet quality, operating consistency and reduced disruption.

Large retailers may have enough volume and analytical capability to make this comparison at the corporate level. At smaller and mid-sized operations, the financial effects may remain divided among separate budgets. The facility manager sees the core revenue, maintenance sees repair activity, operations sees handling interruptions, and procurement sees pallet cost. Without a deliberate effort to combine those results, no one sees the complete picture.

Downstream Plastic Pallets Can Improve Upstream Core Value

There is another side to the pallet core revenue story that receives much less attention. Some distribution centres receive goods on GMA wood pallets but use plastic pallets for downstream deliveries to stores. The inbound wood pallets are unloaded at the distribution centre, while the plastic pallets operate in the closed loop between the DC and retail locations.

This arrangement removes the wood pallets from a demanding part of the supply chain. Store-delivery loops may involve repeated forklift handling, order picking, trailer loading, unloading, backroom use and return transportation. When plastic pallets take over that work, the inbound GMA pallets can be sold or returned to the secondary market without completing those additional cycles.

As a result, the distribution centre may receive more value from its remaining wood pallet cores. More pallets may remain repairable, and a larger proportion may qualify for a higher grade when sold.

This benefit can be easy to miss because it appears in a different part of the budget from the plastic pallet investment. The company pays for the downstream pallet program, while the positive effect appears in the revenue received from the upstream wood pallet flow.

When both effects occur within the same organization, this is best understood as an internal attribution problem. The company receives the benefit, but its accounting and operational systems may never connect the improvement in core revenue to the pallet program decision that helped produce it.

I encountered this effect when calculating the economics of downstream plastic pallet conversion for distribution operations. The analysis included the incremental increase in wood pallet core revenue as one of the benefits of removing GMA pallets from the DC-to-store loop.

Why Pallet Grade Matters

Used GMA pallets do not all have the same value. Core prices depend partly on condition, repair history and the grade assigned in the local market. A pallet with sound components and limited repairs will generally be worth more than one with broken boards, damaged stringers, loose fasteners or repeated repairs.

Pallet condition reflects the wear accumulated through handling and use. Some routes and operating environments are relatively controlled, while others expose pallets to more forklift touches, load changes, trailer movements and backroom handling. The greater the wear, the more likely the pallet is to require repair or fall into a lower-value grade.

A pallet program does not cause the handling environment itself. It can, however, determine which type of pallet is exposed to that environment and for how long. Removing GMA pallets from a demanding downstream loop can therefore change the condition in which they reach the secondary market. This is why pallet decisions can affect more than the number of cores available for sale. They may also affect the grade mix and average price of those cores.

The Same Decision Can Create Winners and Losers

The pallet core example demonstrates why a business case should examine more than the organization making the original purchase.

Suppose a shipper introduces a proprietary reusable pallet. The shipper may benefit from greater durability, lower product damage and improved tracking. The receiving distribution centre may lose core revenue and take on additional return-handling work.

That is a cross-company effect. A decision made by one party changes the economics of another party that did not control the decision.

Now consider a distribution centre that introduces plastic pallets for its own store-delivery loop. The same company may benefit from more consistent downstream handling and from the higher value of the wood pallet cores that no longer make that trip.

That is primarily an internal attribution issue. The value remains within the company, but it may be divided between the department operating the plastic pallet program and the department recording core revenue.

Both cases involve hidden economics, but they may require different responses. A cross-company effect may require negotiation, compensation or a revised commercial arrangement. An internal attribution problem requires better measurement and coordination among departments.

What This Means for Pallet Decisions

For shippers considering a proprietary pallet program, the analysis should identify what currently happens to the empty pallets at the receiving location. If the receiver sells them, the loss of core revenue should be acknowledged. The shipper should also examine whether the new program creates enough operating value for the receiver to offset that loss.

Vendors proposing plastic, composite or pooled pallets should avoid presenting only the advantages that support the sale. A credible proposal should identify where existing value may be disrupted and where additional value may be created. In downstream distribution applications, the potential improvement in the condition of upstream wood cores may deserve attention.

Buyers should examine pallet core revenue throughout the network rather than applying one assumption to every facility. Some locations may retain and sell pallets, some may exchange them, and others may already operate under pooling or retrieval requirements. The effect of a pallet change will depend on the existing flow.

In each case, the goal is not to maximize the number of benefits included in the proposal. It is to identify the material economic effects and determine where they appear.

How MBAM Treats Pallet Core Revenue

The Multi-Stakeholder Benefit Attribution Model, or MBAM, provides a structured way to examine effects of this kind.

The framework begins by identifying the parties affected by a supply chain investment. In a pallet program, these may include the shipper, pallet provider, carrier, distribution centre, retailer, recycler and internal departments responsible for maintenance, claims or facilities.

Pallet core revenue is then treated as one of the economic streams that may change. The direction of that change is not assumed in advance.

A proprietary retrieval program may reduce the receiver’s revenue. A downstream plastic pallet program may improve the value of the receiver’s remaining GMA cores. A pooled pallet requirement may eliminate core revenue while producing operating savings that exceed it.

The analysis should capture all of these effects where they are relevant. It must also avoid counting a transfer as though it were entirely new system-wide value. Revenue gained by one party may correspond to a cost paid by another, while fewer repairs or less destroyed product represent actual resources saved.

This balanced treatment is important because MBAM is intended as an analytical framework, not an advocacy tool. If a proposed pallet program creates an important cost for a supply chain partner, the framework should reveal it rather than hide it.

A Better Pallet Business Case

Pallet core revenue is a useful illustration of a broader supply chain measurement problem. The visible price of a pallet is only one part of its economic effect.

A pallet decision can influence product damage, equipment repairs, housekeeping labour, asset losses, handling consistency and the value of the empty pallet at the end of a particular trip. Those effects may appear in several departments or companies, and some may move in opposite directions.

A stronger business case asks where the existing value comes from, how the proposed program will change it, and who will experience the result.

The answer may still support a proprietary, pooled or plastic pallet program. It may instead favour retaining conventional GMA pallets in a particular flow. In some cases, it may point toward a hybrid arrangement in which different pallets are used for different stages of distribution.

The purpose of the analysis is not to produce a predetermined answer. It is to ensure that pallet core revenue and the other less-visible consequences of pallet selection are included before the decision is made.

For the complete framework and supporting examples, visit the Beyond the Buyer resource hub or download Beyond the Buyer: A Multi-Stakeholder Framework for Evaluating the True Economic Impact of Supply Chain Innovation.

References

Hobbs, S., Horvath, L., and Gething, B. “Investigation of the Status of the Wooden Pallet Market During the COVID-19 Pandemic.” BioResources 20, no. 2 (2025): 3047–3074.

Recycle Record. “United States Mixed Species Recycled Pallets: Regional Market Report.” April 2026. Pallet Profile.