Blog

Oct 16, 2024

| Today’s Pallets: Leaders of the Stack

Market changes highlight the need for a strategic approach to pallet management. With innovative product and service option developments, pallet providers deliver on a wide range of customer demands.

Market changes highlight the need for a strategic approach to pallet management. With innovative product and service option developments, pallet providers deliver on a wide range of customer demands.

Today’s pallets have become the centerpiece of a crucial and rapidly expanding global market. Worldwide, pallet market size is expected to reach $110 billion by 2027 and was valued at $78 billion in 2020, according to the most recent report published by Statista, a global data and business intelligence platform.

Demand for pallets is growing thanks to the ecommerce explosion of recent years, which has forced retailers and manufacturers to expand their warehouses and increase stocks, driving up the need for pallets in distribution centers across the globe. Wood pallets remain the most common, accounting for about 90% of the market.

Interest in plastic pallets is on the rise, too, because of increasing costs for wood, wire, and nails as well as worker shortages and other factors that offset their higher sticker price.

“The volume of plastic pallets in the industry continues to grow as companies and end users look for a safe, sustainable, and consistent solution to move products throughout the supply chain,” says Alison Zitzke, senior product manager, ORBIS Corporation, which offers plastic pallets.

Zitzke points to food manufacturing, pharmaceutical, and retail as verticals where plastic pallets have been increasingly adopted. “These industries continue to expand, which makes the pallet market surrounding them grow as well,” she notes.

Another factor impacting pallet use is inflation, which has caused product quantities and pack sizing to change.

“Consumers are getting accustomed to, in some cases, spending more to receive less,” explains Jeff Pepperworth, president and CEO of iGPS Logistics, a plastic-based pallet provider. “We also see a stronger focus on efforts to reduce damaged products and reduce waste in the supply chain.”

Demand is also on the rise for pallets that are automation-friendly. Pepperworth notes that wood pallets absorb moisture, which causes both their size and weight to change, and can have protruding splinters, “which are more likely to cause problems or even jam up automated equipment,” he says.

Pooling pallets can offer advantages over purchasing for some shippers. “Renting from a pooling model is advantageous in comparison to the inventory and logistical headaches of owning pallets,” Pepperworth says. “Manufacturers that own their pallets must shoulder the responsibility of storing, shipping, retrieving, repairing, and disposing of them. These assets essentially become a separate supply chain that they must manage.”

Conversely, when manufacturers rent pallets from a pool, they have the pallets they need when they need them, and the volume of pallets can ebb and flow depending on the demands of the business.

Supply chain sustainability is another issue impacting customer choice of wood or plastic and pooled or purchased.

“Reusable pallets are designed for sustainability; they reduce waste in the supply chain, can be reused for a long service life and can be fully recycled at the end of life, to provide a truly circular packaging solution,” notes Zitzke.

When weighing all these factors, companies should seek to align their pallet strategies with their overarching supply chain strategy. Pallet choice needs to account for the return on investment over the entire lifecycle of the product and how it will be used. As with many such decisions, the less expensive near-term option may prove to be more costly over the long term.

Pepperworth illustrates how downstream savings can mitigate upfront costs. One iGPS client, for example, produces bottled water. “Water is very heavy, so truck weight is a constant concern,” he says.

“Because the iGPS pallet is lighter, they’re able to add more pallets on a single truck,” he adds. “As a result, they ship about 50 fewer truckloads per year, which saves time and money while keeping greenhouse emissions out of the atmosphere.

They also reported a 12% increase in cleaning-staff productivity because they no longer sweep up nails and splinters in their facilities,” Pepperworth says.

Plastic pallet pooling provider iGPS Logistics, based in Orlando, Florida, promotes its “iDepot” business model, a partnership with retailers across the country that Pepperworth says contributes to a more environmentally friendly and more optimized supply chain.

iGPS, a plastic pallet pooling provider, touts its iDepot business model for its environmental and cost benefits.

“When a traditional wood pallet arrives at a retailer, it then typically needs to be sent to a separate depot to be inspected and repaired,” he says. “This adds one more transportation leg to the supply chain. Then, the pallet needs to be sent to a manufacturer to be used again, adding another transportation leg. This entire process wastefully consumes time, fuel, money, and other resources.”

Through its iDepot model, iGPS pallets are inspected directly on-site with the retailer, and then shipped to the next manufacturer for future use. “This keeps millions of truck miles off the roads each year,” Pepperworth notes. “The iDepot model not only optimizes the supply chain, but also creates a closed-loop ecosystem in which our pallets continue to be reused until they are ready to be recycled into new pallets.

“Sustainability has become a major watchword in the industry in recent years. But it has been a pillar of our core values since iGPS’ inception,” he adds.

Plastic pallets have many advantages over wood pallets, he says. They weigh less, and therefore use less fuel and contribute fewer greenhouse emissions during shipping. “It’s important to remember that this is not a one-time benefit. This is a benefit that is realized every day, with thousands of light truckloads crisscrossing the country,” Pepperworth says.

Also, plastic is safer and easier for workers to handle not only because of its lighter weight, but because its construction doesn’t involve nails or materials that shed splinters and debris.

Even though plastic is lighter than wood, it’s strong and highly durable. “An average plastic pallet can take about 100 trips before needing to be recycled, while the lifespan of the typical wood-block pallet is closer to 25 trips. These are actual estimates from the field, as opposed to just lab-tested numbers,” he says.

Other advantages to plastic include consistent, uniform construction that conforms with standard 48” by 40” Consumer Brand Association pallet specifications; smooth, consistent surfaces that don’t absorb moisture that harbors bacteria and other pathogens, making them easier to clean and sanitize; embedded RFID chips that assist with automated storage and retrieval systems in addition to improving tracking and inventory; and the ability to be recycled into new pallets, “which offers what we like to call ‘cradle-to-cradle’ sustainability,” Pepperworth says.

These advantages also translate into cost savings. Pepperworth points to a major fruit supplier in the Pacific Northwest that, during a typical month, had retailers reject as many as 20 wood-block pallets due to damage.

“They are charged a fee for every returned pallet. Since switching to iGPS plastic pallets, they see as few as zero returns per month. It’s the exception instead of the rule,” he says. “They also see less product waste since plastic pallets are more uniform and are less likely to damage fruit. At a time when companies are fighting inflation and more focused than ever on sustainability, reducing product loss is a vital business priority.”

Plastic pallet providers such as ORBIS tout the sustainability, customization, and durability of plastic pallets as advantages over wood pallets.

Oconomowoc, Wisconsin-based ORBIS Corporation, which provides reusable plastic pallets, totes, dunnage, and bulk systems, is “committed to providing the right pallet for the customer’s application,” says Zitzke. “We have the broadest range of pallets available to ensure that we have the best option, versus just picking from one or two.”

The company also offers a full suite of services that range from customizable financial options and on-site conversion support to training forklift drivers on proper handling techniques and educating customers on the benefits of reuse.

“We also provide Packaging Life-Cycle Assessments, where we compare and evaluate single-use and reusable pallet options to determine the environmental impact of switching to reusable packaging,” Zitzke adds. “We provide data on factors like solid waste, energy use, water use, and greenhouse gas emission savings.”

In addition, ORBIS helps customers determine their optimal float size and total cost of ownership using its engineering services team, and it offers full pallet management solutions through the ORBIS Reusable Packaging Management services team.

Customers choose plastic pallets for numerous benefits. For one, they combat vibration issues in trucks and in automated systems through many different types of anti-skid options including grommets, frictional elements, deck texture, and scuffing, Zitzke says.

Another advantage is that plastic pallets are display-ready, offering consumer-friendly looks in a multitude of colors for retail environments. “And ORBIS plastic pallets offer customization in material, colors, branding with molded logos or hot stamps/thermal transfer prints, barcoding, RFID, QR codes, and more,” she says.

“Additionally, the Odyssey family of pallets offers custom options with solid or open deck, lip or no lip, and four different reinforcement configurations to ensure that the pallet is built exactly for the application needed,” Zitzke adds.

On the sustainability side, all ORBIS pallets are fully reusable and support the circular economy. “Their reusability—400 trips versus 11—drives environmental benefits,” she says. Additionally, many ORBIS pallets are made from up to 100% recycled content and are fully recyclable at the end of their useful life.

Business concerns are of course critical as well, and ORBIS offers GPS/RFID/Smart Pallets that help track and trace shipments and are available “for customers who have concerns about managing loss throughout their network,” Zitke says.

As just one real-world example, she notes a customer that was utilizing a pooled block pallet: “Because of the poor quality of this wood pallet, they had to use two pallets at a time in their racking environment in order to ensure a safe working environment where pallets wouldn’t fall through the racks, a consistent operation that wouldn’t result in damage to their boxed product from nails and splinters in the wood, and a reusable, long-term solution.”

The customer switched to ORBIS Odyssey pallets with steel reinforcements and molded-in frictional elements and was able to streamline operations, increase uptime in their system, reduce product damage, and ensure operator safety.

“ORBIS is committed to our customers and providing them the best service over the life of the pallet, as well as having high-quality, sustainable products at fair prices,” Zitzke says.

Wood pallet provider Kamps operates updated plants like this one in Coatseville, Pennsylvania. The company offers customers an innovative pallet-management platform that builds a closed-loop ecosystem around every stage of the pallet’s lifecycle.

Kamps, with headquarters in Grand Rapids, Michigan, sells and recycles wood pallets from more than 400 locations nationwide.

“We are one of the largest national pallet companies in the United States. As a customer-centric pallet distributor, Kamps offers innovative services that add measurable value to your supply chain, eliminate interruptions, and provide peace of mind,” says Hasanovic. “We achieve this by following a consultative philosophy that begins with listening to our customers’ needs, and ends with utilizing our vast resources to deliver the highest-value custom program that spans the entire lifecycle of a pallet.”

Kamps does not operate on a pooled or rental business model, believing that owning pallets “creates an advantage for businesses as customers retain ownership of their valuable assets,” says Hasanovic.

By retaining ownership of the pallets, and strategically using a lifecycle management service to lower costs, companies can “maximize pallet re-sell value and enhance the resiliency of their supply chain,” he says.

In 2023, Kamps debuted its innovative pallet management platform for national supply chains. Comprehensive Pallet Life-Cycle Services™ (CPLS) is “Kamps’ answer to the largest pain points of national supply chains,” Hasanovic says. “CPLS differs from other pallet management platforms in the industry as it features an industry-leading whitewood pallet pool retention rate. The platform builds a closed-loop ecosystem around every stage of the pallet’s lifecycle.”

The Kamps CPLS can help lower costs in multiple ways. “The largest cost reductions arise from decreased costs to repair a pallet or purchase a used pallet from Kamps compared to a new,” he says. “Other avenues are more indirect and include efficient time utilization of staff and improved warehouse space utilization. Kamps customers that have utilized a CPLS program report up to $2 million in savings annually.”

If there is an overflow of used pallets, Kamps will purchase the pallets with value from the customer at competitive rates. These rates are affected by market supply, demand, and market resale conditions, but “due to Kamps’ size and network, Kamps customers experience greater stability,” he says.

The program also enhances sustainability practices by decreasing the number of trees harvested, lowering carbon emissions, and avoiding landfills. “These three metrics are quantified and verified data is available to customers quarterly,” Hasanovic says.

CPLS also helps companies lower supply chain risks, he adds. Traditionally, supply chain leaders experienced a new buying journey every time a load of pallets was purchased. This exposed supply chains to risk in supply shortages and extended lead times. “With Kamps CPLS, customers are usually insulated from this risk as their pallets do not leave their ecosystem unless they have reached end-of-life, where they become a sustainable byproduct,” he says.

With a half-century of experience, the company has vertically integrated business units with specialized expertise in every stage of a pallet’s lifecycle, such as sawmilling, new pallet manufacturing, custom pallet design, pallet recycling, and sustainable byproducts. The company also boasts industry-leading systems within their Information Technology and Continuous Improvement departments.

Its circular closed-loop system, “with guaranteed zero wood waste, ensures that pallets that no longer can be repaired are harvested for their usable components or cycled down to our Wood Resources Services team,” Hasanovic says.

After 40 years in operation, South Plainfield, New Jersey-based Bettaway Pallet Systems added a new business model. In October 2022, the company launched PalletTrader, an online pallet marketplace and order management platform that augments Bettaway’s traditional model, giving customers instant supplier choice and complete order visibility all in one platform.

“PalletTrader acts and performs as an on-demand pallet network. It brings businesses together, with complete control over all pallet procurement and order management in one centralized place,” says President John Vaccaro.

PalletTrader can be compared to a modern-day transportation management system. It streamlines the pricing and procurement process, then automates the order tender, tracking, and payment processes all into one system.

PalletTrader gives users the ability to transact on the open marketplace, or privately conduct business with existing partners. It can link multiple facilities, either owned or managed, and administrators can assign unlimited user permissions to those facilities, which standardizes fragmented order processes.

“We understand the needs of pallet buyers who may want to keep all or some of their incumbent supplier network yet desire a comparable technology that has become mainstream in other areas of their supply chain,” says Kevin Kull, SVP, sales and operations. “Best of all, it is at no additional cost.

“If a customer does not want to operate it themselves, PalletTrader offers a managed solution called PalletTrader+. We set it up, and operate and manage it on behalf of the customer—whether they want to own procurement, want us to do it, or want a blended/hybrid approach,” Kull says. “The user has complete access and visibility via a customized portal and can take it back in-house at any point.”

Bettaway remains focused on providing customized pallet solutions for larger enterprises with complex supply chains. “We’re not abandoning our traditional business model. We decided to build and invest our future in technology and digitalization, because we believe in that,” Vaccaro says.

The main reason, he says, is for cost control for all users. Digitalized solutions offer the promise of “low to no touch” and lower overhead cost.

“We take a very low-margin business and transform it to make the operating cost even that much lower,” he says.

In fact, Bettaway leverages PalletTrader itself. “As a company, Bettaway finds value and efficiency in leveraging PalletTrader to conduct business,” Vaccaro says. “The size and scope of our online pallet supplier network is the largest and most established in the country. It doesn’t exist anywhere else.”

PalletTrader continues to evolve its services to meet customer demand. In June, the company will release new functionality to automate pallet redemption and recovery, which will provide clients ultimate cost visibility.

“As an organization, visibility and transparency has always been a pillar of what we do. With PalletTrader, it was important for us to not only maintain that, but take it to a whole new and enhanced level,” Vaccaro notes.

Later in 2024, the team hopes to complete API connections to some leading ERPs and procurement tools, bringing even more automation for order requests and tracking.

With the pallet industry expected to grow 5% to 7% a year, Vaccaro expects the need for a centralized pallet network/system to grow as well. “The rental pallet market has its place, but it has also grown to maturity,” he says. “We still see a highly decentralized and fragmented pallet network for the non-rental segment of the market. We’ve chosen the path to be that unifying platform for all.”

Since its launch, PalletTrader has received numerous accolades, including the 2023 Top Tech Startup by Food Logistics, Supply & Demand Chain Executive. It also deployed more than 100 branded trailers across the United States.

“We are excited by where we are today and are enjoying the build. We are getting the brand out there for all to know,” says Vaccaro. “Our goal is that when someone says they need pallets, they immediately think of PalletTrader.”