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Thinking Ahead–Letter from Chaille: Is the Industry Facing a Tipping Point?
Are we facing some critical tipping points as the industry matures, global supply shifts, customer demands change and consolidation leads to increased competition?
By Chaille M. Brindley
Date Posted: 10/1/2005
I don’t normally recommend books, especially business books. Most business books, even bestsellers, have one or two good ideas in them. The rest seems like common sense filler. But The Tipping Point by Malcolm Gladwell captivated my attention from beginning to end. It focuses on epidemics and how fads and trends begin.
The Tipping Point shows how small changes can tip something over the edge causing monumental change given the right set of circumstances.
For example, the crime rate in New York City tipped in the mid 1990’s, when the murder rate suddenly plummeted. While there were a number of factors that led to the drop, it wasn’t as simple as just adding more police officers or changes in the age of the population.
According to The Tipping Point, a major factor was the strategy employed by Republican Mayor Rudolph Giuliani. He used something know as the "Broken Windows" strategy, which concluded that small things could create a general sense of lawlessness that would encourage violent crime.
Giuliani focused on fixing problems when they were small and manageable. He enacted ‘zero tolerance’ policies and focused on ‘quality of life’ crimes, such as subway fare evasion, public drinkers, and loitering. It worked as crime rates dropped significantly during the decade.
Malcolm challenges the popular notion that change is gradual. He said that change frequently happens quickly and unexpectedly and this should not surprise people. Change takes place gradually until a critical mass is reached and then suddenly major change takes place at a fast rate of speed. Think of it as intellectual wildfire.
Listening to the theories in The Tipping Point, I can’t help but wonder about the pallet industry. Are we facing some critical tipping points as the industry matures, global supply shifts, customer demands change and consolidation leads to increased competition?
Packaging users have been "infected" with the pallet rental bug, and they are starting to respond and morph in many cases. Many customers like the concept of rental because they don’t really want to own pallets. They like the standardization offered by a pool with set specifications. They like their pallets to look nice because they are freshly painted. Oh, and they like the perceived advantages of rental pricing compared to the cost of a new wood pallet.
Used pallet cores are becoming harder to come by and the pool of used white wood pallets continues to get older each day. Some users have to buy new pallets because the supply of available used ones is getting dangerously low in many parts of the country. This is infusing some new pallets into the general exchange pool. But it still has a long way to go before reaching the heyday times of the 1990s.
Raw material price increases and the high cost of fuel is driving pallet costs up and up. And with each price increase, existing suppliers are getting antsy worrying about losing valued customers.
If you want to learn more about the trends in the lumber market and obtain a resource that you can use to educate your customers about the recent and historical fluctuations, consider participating in the upcoming audio conference. Find out more by visiting www.lumberanswers.com or reading the notice on page 78.
Have most of the companies that are going to switch to rental already done so? Or are there still many more new converts just waiting to be assimilated? What is the tipping point as far as major industry consolidation, rental versus purchase of new or used pallets, or block versus stringer pallet designs? And which way will these issues tip? These questions are still hotly debated. But whoever seems to figure out the answer may be the ones who benefit the most from the rising tide as the industry reaches the tipping point.