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Best News Stories of 2010
Date Posted: 12/1/2010
State and Federal Pallet Bans Point to Increased Government Scrutiny
By Chaille Brindley
What started out as a public relations and marketing battle has spilled over into the arena of state and federal politics, as various pallet bans gain momentum across the country. The two key focuses are food safety and environmental and toxicity concerns associated with Deca-bromine (Deca), a controversial fire retardant used by Intelligent Global Pooling Systems (iGPS) in its second generation pallet.
The main take home lesson is that the specter of pallet bans is now something that the industry will likely deal with for the foreseeable future. Here’s a breakdown of the major legislation in play.
• Despite the fact that the three manufacturers have agreed to phase out the chemical, Congresswoman Chellie Pingree introduced a federal bill late last year to ban Deca by 2013 and require companies to use safer alternatives.
• In Maine, Speaker of the House Hannah Pingree pushed for changes to the state’s existing Deca ban to include pallets. Chemical and plastics interests, led by iGPS, worked with Speaker Pingree to temper the legislation and the final bill that was passed provided exemptions. Otherwise, it prohibits the manufacture, sale, distribution for sale and use in the state starting January 1, 2012, exempts pallets made before the deadline, and set requirements on future chemical alternatives.
• A Deca ban in Maryland signed into law on May 4th closely follows the language in the voluntary phase out agreement between the U.S. Environmental Protection Agency (EPA) and major chemical companies. However, it bans Deca in pallets used to ship unpackaged fruits and vegetables beginning on December 31, 2012, one year sooner than the timeline in the rest of the bill.
• Wood pallet opponents pushed for the introduction of Assembly Bill 2607 in the California Legislature. It called for the Department of Food and Agriculture to “conduct a study of the health and safety issues of wood pallets used for shipping pallets and the risk they may pose to the state’s food supply.” This bill could have provided “justification” for lawmakers to put stiff requirements on wood pallets used in the state’s massive food industry.
• Claiming concern over food safety, Missouri State Representative Walt Bivins introduced House Bill 2382 that put severe limitations on pallets used to transport food products in the state. The bill was quickly pulled after wood products interests pointed out problems associated with the bill.
• The New York General Assembly has been active on both the food safety and Deca fronts. Earlier this year, Delegate William Boyland introduced Assembly Bill A09173 to require pallets used for food or other perishable items to be “made of impermeable materials.” In essence, this bill would outlaw the use of wood pallets in the state. The state Senate is also considering Bill 1119, a general ban on Deca for certain commercial products which provides allowance for used and recycled products.
By Chaille M. Brindley
I’ll let you in on a little secret. I know I risk being ostracized by others in my profession. But journalists like to scare the public. If you want to improve ratings, find a crisis in search of a real problem and publicize the heck out of it.
I was reminded of this media trap when reviewing coverage of the potential link between pallets and cross contamination in the U.S. food supply. A number of news accounts connected dots that really don’t connect upon further analysis.
A major recall by the makers of TYLENOL® sparked concern in the pallet industry after the manufacturer suggested a possible connection with a chemical used to treat wood pallets. McNeil Consumer Healthcare claimed that the reported musty odor on the package was caused by trace amounts of a chemical. McNeil stated, “The source of 2,4,6 tribromoanisole is believed to be the breakdown of a chemical used to treat wooden pallets that transport and store packaging materials.”
The chemical mentioned by McNeil appears to be a fungicide known as 2,4,6-tribromophenol, which can break down under certain conditions and become 2,4,6 tribromoanisole, which caused the smell that was associated with nausea, stomach pain, vomiting and diarrhea.
News of the recall was picked up on many Web sites and blogs, which unnecessarily has raised public concern about wood pallets. Some pallet suppliers serving the pharmaceutical industry said that some users want documentation indicating that wood packaging was not treated with any chemical that can break down to form 2,4,6-tribromoanisole.
While it is possible that food could be contaminated by pallets late in the process, in most cases any real danger of contamination comes at the growing, production or packaging stages. Pallets are secondary packaging. Major poolers, such as CHEP, explicitly state in contracts with shippers that pallets are not meant for direct food contact. If there is any real risk of contamination, it means that the primary packaging has failed to do one of its primary duties, which is to protect the integrity of the item being shipped and sold.
The real issue is storage and handling practices, not the pallet. If there is a problem with pallets at all, it results from the actions taken by food manufacturers and retailers. Why focus on pallets? It’s simple; pallets are an easy target.
It is amazing how the news media look at each new story as a trend or potential epidemic. The formula is simple. See isolated incident, look for trend, report incident as if it is a trend. Then later report a story declaring the exact opposite to be true.
This pattern sounds a lot like what happened to Toyota. The only good news for the pallet industry is at least the situation has not gotten to the point that we have become the punch line for Leno or Letterman. Once that happens, it’s all over.
By Chaille Brindley
After almost ten months of a polarizing legal battle, the National Wooden Pallet & Container Association (NWPCA) and the developers of the Best Load program have reached a settlement in federal court. Both sides made concessions and got at least some of what they wanted.
The dispute involved alleged copyright violations, misuse of business secrets, violation of lease agreements, and other charges connected with the development of a new unit load analysis tool called Best Load and similarities with the NWPCA’s Pallet Design System (PDS).
The settlement requires the developers of Best Load to delete the current pallet design component of Best Load and to start from scratch in developing a pallet design component. Additionally, it prohibits White and his colleagues from using certain NWPCA proprietary information (including any version of PDS) in developing a new pallet design component. White and his colleagues further agreed to destroy all copies of certain PDS data and never again challenge the NWPCA’s ownership of PDS.
The agreement further stipulates that the NWPCA can have an independent expert review the final Best Load source code to ensure that there is no misappropriation of NWPCA source code or trade secrets. White and his colleagues also issued a press release recognizing PDS as the industry standard while agreeing not to lobby the American National Standards Institute, directly or indirectly, to remove PDS as the industry standard.
In return, the NWPCA agreed to drop all of its legal challenges. After PalletOne paid a fine for violating its PDS license, the NWPCA further agreed to issue new licenses to PalletOne. This license even allows Mark White, as a PalletOne employee, to use a PalletOne license for authorized activities. No damages were awarded and both sides agreed to cover their own legal bills. As is fairly standard in many settlement agreements, neither party made any admission of guilt.
The sad part of the entire ordeal is that longstanding relationships involving the association, its members, Pallet One, and Mark White were put in jeopardy. Now it remains to be seen if these various players will work together toward common interests.
By Chaille Brindley
A few recent high profile cases involving mark fraud of ISPM-15 phytosanitary marks in the United States highlight the importance of defending your mark and looking out for anyone who may be using your mark illegally.
Recently, Michael Sayklay, a grocery wholesaler executive, pleaded guilty to falsifying heat-treatment certification stamps used on wood pallets. At the time of the incident, Sayklay worked as vice president of Economy Cash & Carry Inc, a Texas-based grocery wholesaler. According to the Department of Justice, Sayklay created a copy of a certification stamp used by Border Pallets of El Paso and affixed the false stamp to hundreds of untreated wood pallets that the wholesaler used to carry products back and forth over the U.S.-Mexican border.
The crime was discovered when Felipe Truax, president of Border Pallets, recognized their heat-treatment stamp on pallet cores they bought and decided to do some investigating on his own. After he saw a large number of the falsely stamped pallets stacked at Economy Cash & Carry, Truax called a lumber inspection bureau which later contacted the U.S. Department of Agriculture (USDA). A follow-up investigation by the USDA resulted in the seizure of fraudulently stamped pallets at the U.S.-Mexican border.
This story emphasizes the importance of protecting one’s ISPM-15 treatment marks. If you suspect mark fraud, the first step is to assemble your preliminary evidence and contact your inspection agency or the appropriate administrator of the program. If you suspect a company is illegally using a heat treatment mark, contact the Lumber Standard Committee at 301-972-1700 or firstname.lastname@example.org. If you suspect a company is illegally using a methyl bromide fumigation mark, contact the National Wooden Pallet & Container Association at 703-519-6104 or email@example.com.
By Clarence Leising & Dick Burns
Everybody should have a tool room. It should not be simply a place to drop off and retrieve some rarely used tools. It should be an integral part of your factory. It can be the key to control.
What do you put in a tool room, and what additional values can your tool room bring? Nailing tools, nails, saw blades, gloves, saw chains, and chain saws for starters. Others include spare parts for your lawnmower, nailing tool parts, machinery wear parts, and safety equipment – just about everything you need and use. The tool room needs to be large enough to store everything.
When I ran a pallet recycling plant, the key element of our tool room was to document everything dispensed. I needed to be able to compare apples with apples and know where all my tools, parts, and supplies could be found.
Keeping nail records allowed me to compare GMA builders, watch over-building and under-building, and prevent nail theft. If you have more than one band dismantler, you can compare blade usage. The same principle applies to blades for cutting new lumber.
Tracking blades can be as valuable as tracking nails. Blades require a lot of storage space. Varying species and different sawing conditions will require different blade types and specifications.
The tool room system is really pretty simple. All shipments go to the tool room, get logged in, and are then dispensed as needed. By storing and hanging your tools in an organized way, you will have early detection of lost or missing equipment. If you don’t use a tool room, some day when you clean-up, you’ll find half boxes of rusty nails and blades, nail guns lying around, and broken band run-over.
By Chaille Brindley
Announcing one of the biggest acquisitions to ever hit the pallet and reusable packaging markets, Brambles Ltd, the parent company of CHEP, has revealed its intention to buy IFCO Systems, a global leader in Reusable Plastic Containers (RPCs) and a major player in the U.S. pallet services/recycling market, subject to regulatory approval.
It appears that this blockbuster acquisition will create a new portfolio of companies with sales revenue of approximately US$5 billion, of which more than US$4 billion would come from pooling and pallet services. The Brambles group would have more than 16,000 employees, working in 49 countries across six continents under the CHEP, IFCO, Recall, LeanLogistics and Unitpool brands. It is unclear how the various organizations will be run or integrated if the merger goes through the approval process.
The major reason given by Brambles for the deal is product and geographic expansion. However, it signals a major ideological move for the logistics and pooling conglomerate. Its core business is pooling, specifically the CHEP rental model. And it is trying to acquire the largest player in the recycled pallet market – a major ideological competitor to its rental approach.
Beyond its RPC business, where it is the market leader in Europe and the only major operator in the U.S., IFCO has a very large network of pallet repair facilities in the U.S. market. IFCO also operates a number of dock sweep programs for major retailers, which could enhance the ability of CHEP to retrieve its assets and lower the acquisition costs of stray pallets and containers.
One interesting wrinkle will be how some of the retailers, especially Walmart, respond to the news. IFCO operates loads of dock sweeps around the country for major retailers. In fact, Walmart appointed IFCO as one of its limited total pallet management operators in 2008 after replacing CHEP. It appeared that Walmart did this to reduce its dependence and reliance on CHEP and to ensure some degree of competition in the market.
By Jim Gookin
Proper maintenance is a must if you want to get the most out of your equipment and avoid unnecessary downtime. Whether you want to start a new one or upgrade an existing preventative maintenance program, these steps will help maximize machine profits and make machine maintenance more cost effective.
Analyze Maintenance System
Begin by listing every piece of equipment and assign identification numbers to each. Determine the health status of each piece of equipment. Is it operating to specifications and expectations? Also, create a downtime log for each asset that is essential to overall business operation.
Review Your Systems
Review each system’s downtime and production logs. Ask your bookkeeper for a list of parts per asset that was ordered within the last twelve months. Inspect each system, list areas that need repair, and prioritize the repairs that need to be made.
Set a reasonable operational goal for average time for each asset. Using production records, determine which systems need the most attention judging by their relative actual performance as compared to your operational goal. Then develop a task list per piece of equipment.
Train Your People
Meet with each machine operator or team and demonstrate the correct procedures for daily lubrication and adjustments. If your operators are qualified, assign them maintenance tasks that can be accomplished with on-hand parts inventory.
Implement Your Plan
Set aside 5-10 minutes prior to each shift for basic lubrication and inspection and another 5-10 minutes for cleanup after each shift.
Organize your replacement parts, set minimum and reorder inventory levels and preventative maintenance schedules. Code all purchase orders by referencing the asset the parts or services are dedicated to. The data can then be collected to track costs, develop budgets, and give indicators about an asset that has reached the end of its life span.
By design, a preventative maintenance program should effectively reduce costly emergency repairs. Breakdowns will occur, but tasks are accomplished and parts are available because of planning and scheduling.
By Brad Kirkaldy, Noble Machine
Keeping your bandsaw running in top shape is fairly easy, but it takes some effort to ensure top performance. Keeping your saw in tune is a must in order to avoid losing money in the form of frequent blade changes, poor performance and premature equipment failure.
Here’s a seven-step process to bring a saw into fighting trim.
• With the saw blade removed, spin the wheels or pulleys by hand, checking for signs of bearing wear. Wheels should spin smoothly, without a trace of wobble or play.
• Check wheels for “round.” Rig a business card or similar reference object parallel with the tread within 1/4" from the edge of the wheel and spin the wheel, observing if the distance between the wheel and the card varies appreciably.
• Check wheels for proper balance. A vertically-mounted wheel should not be coming to rest at the same spot when spun.
• Check air pressure in tires. Your tires should be solidly firm with a crown along the center of the tread. Refer to product documentation for recommended pressure for your machine. A typical target pressure for your saw wheels is 50psi.
• Stretching a string or straightedge across two wheels, check for alignment. The wheels must be oriented on the same plane for the blade to track properly.
• Check blade tension. Refer to product docs or labels to determine recommended tension for your blade. Some machines are equipped with a tension meter; otherwise a tool that measures surface tension is a necessity. A properly tensioned saw will deflect no more than 1/4" when pushed with the palm of your hand.
• With guide bearings removed, make the final tweaks to the blade tracking using the adjusting set screws or similar hardware. A saw blade should track on the crown of the wheels as they spin.
By Clarence Leising & Dick Burns
There isn’t a lot of money playing the GMA game any more. So, why do we continue to focus on GMAs? Probably because we do not know a better way. Until now that is. Consider recons as the last frontier to make money out of pallets. A recon is a pallet made from all used parts and new nails.
I have found that recon pallets can be your most profitable business. It requires that your business model looks at incoming scrap, odd-sized, and over-sized pallets in a different way. They hold the potential to turn scrap into your most profitable business.
A recon pallet must be level, almost as good as new. No exceptions. They have to be level individually and have to stack nicely, just like new. How do you accomplish this?
You have to manage your scrap. A recycler cannot afford to buy new wood for pallet repairs and for building recons. Used and scrap lumber should not automatically be hogged. Dismantled pallets produce plenty of useable lumber. The trick is to sort it according to thickness so you can use it to build and repair pallets. You may have stayed away from thicker and longer pallets. With recons you don’t care. You can go after larger pallets if you can profit from them.
You need to choose pallets to tear up according to the number of boards and runners it will yield. You should be thinking “where can I use these boards?”
By Gabriel Curry
With all the other things occupying the energies and resources of management, many times safety does not receive the priority it deserves.
The most important ingredient in your safety program is the tone set by management. You will never get anyone on your safety bandwagon if you don’t make it clear to all that safety is equal in importance to making a profit. Sure, you can mandate safety procedures that everyone has to follow like trained monkeys, but fostering a safety “culture” makes enforcement a shared group effort rather than an antagonistic struggle.
As an example, a manager I know recites this chant to his crew often enough that they get it planted in their brains: Safety, Quality, Speed—in that order! It leaves no doubt in his workers’ minds how to execute their duties.
Other ways of promoting a safety culture are limited only by your imagination. You can institute an incentive program to hand out a reward to workers observed doing something in a safe manner. If you hand out a five dollar bill every time you see someone stoop down and remove a trip hazard from a workspace, the positive feedback will get your message across in a tangible way.
This tone stuff will only be effective if it is sincere. You can be saying all the right words and have safety posters all over your shop and it will all go to waste the first time you reprimand someone for putting safety first in a way that actually costs the company money.
Fostering your company’s safety culture is a long-term investment. Keep enforcing your rules, preaching your safety message, and your staff will respond. They will know that you are concerned for their welfare and will subtly adopt more safety conscious work habits.
By Dr. Ed Brindley
As lumber supplies continue to be a challenge in the pallet industry, it is always a good idea to keep in mind competition for one’s raw material source.
As most pallet manufacturers know, particularly those in the eastern 2/3s of the country, the railtie industry is the biggest competitor to the pallet industry for low-grade hardwood cants.
The railroad industry needs significant quantities of ties, and they have to plan ahead. Also, railroad specifications are more stringent than most pallet cants and a higher grade of log is required for crossties. For these reasons, railroads are willing to pay more for a green tie on a board footage basis. If it comes down to competition, the tie market will pay enough if necessary to outbid the pallet industry.
The Railway Tie Association’s (RTA) baseline forecast projects that the 2010 tie demand will suffer only mild softening from 2009. The final tally for 2009 is that 19.6 million new wood ties were purchased by all railroad market segments. The 2010 forecast will require 19.4 million ties, about a 1.2% decrease from 2009. The RTA published two other tie demand estimate scenarios, one that incorporates another downward recessionary leg and one a more positive scenario. Since nobody knows for sure what direction the economy will take, these three estimates cover the range of prospects that the RTA projects for the next three years. Regardless of which alternative is considered, all of them suggest that railties will continue to be a major competitor to the pallet industry for hardwood cants. As the economy improves, the demand for ties should pickup. More certainly, the demand for pallet cants is expected to improve. The pallet industry will continue to compete with crossties for raw material.
Right now pallet cant supplies are in the tightest market they have ever experienced. Many people expect the pallet demand to improve, but the future of hardwood cant supplies remains very uncertain.
By DeAnna Stephens Baker
The release of the long-awaited final rules for the Biomass Crop Assistance Program (BCAP) by the U.S. Department of Agriculture (USDA) has relieved some industry fears of continuing market distortions for low-grade lumber.
The pallet industry experienced mostly negative effects from the original BCAP Notice of Funding Availability (NOFA) because the subsidy made it harder to source low-grade lumber material in some areas of the country. Producers opted to send logs and lumber to be ground for biomass energy instead of used for pallets and other low grade applications. Upward price pressure and reduced availability forced pallet manufacturers to compete more for low-grade.
Many in the forest products industry were concerned about these distortions continuing if further restrictions were not put on eligible materials. The USDA seems to have listened to these concerns, releasing a final rule that has received a mostly favorable response from the overall forest products industry.
USDA addressed the market distortion issue by further limiting the definition of “eligible materials.” Under the final rule, material from all land not under a BCAP contract is not eligible if it would otherwise be used for higher-value products. In addition, it clarifies the definition of “higher-value product” as an existing market product that is comprised principally of an eligible material or materials which have an existing market as of the publishing of the rule. Although the new rules do not specifically name wooden pallets as a higher-value product, it makes sense that wooden packaging would be classified as such given its higher dollar value than other products mentioned.
Having eligible materials restricted to those not already used for higher-value products is a notable victory for the pallet industry and other low-grade lumber users that will provide a more level playing field as BCAP payments resume.
By Rick LeBlanc
Companies are starting to get serious about reusable container and pallet loss, particularly as it relates to outright theft. For pallet recyclers and pallet users alike, this turn of events is really a double-edged sword.
It speaks to the opportunity for asset recovery for leaky proprietary systems, but it also foreshadows the risk of new legal challenges for unlawful possession of proprietary containers or pallets in recycling yards. The problem is that many pallet users and their investigators really don’t understand how pallet recycling works.
So here is the hitch. Companies value the benefits that reusable plastic pallets and containers bring to the table, but loss is a common problem, either through theft, as users like to key on, or due to lack of management. Clearly, there is a business opportunity to help businesses hang onto their reusable pallets and containers. This is territory that many pallet companies have already broached with customers, but as losses escalate and become publicized, there may be greater interest in correcting the problem.
At the same time, there is a danger that an increasing “theft” focus could lead to more legal action against recyclers. Proprietary pallet and packaging owners would then be watching recycler yards more closely. It may be worth taking a closer look at the proprietary items you are accumulating, and those from customers which you potentially could accumulate.
Logistics is a complicated business, but that doesn’t excuse packaging owners from their responsibilities. Likewise, pallet recyclers must be careful to run their businesses in an ethical, legal manner. This can be particularly difficult with stray assets because who owns what tends to be more a shade of gray than a black-and-white situation.
By Chaille Brindley
Although mold is nothing new for wooden pallets, a number of factors are coming together this year to form the perfect storm. The entire situation has been confounded this year by mass confusion and concern over using any chemical treatment option in a heightened regulatory environment.
Recent recalls by McNeil Consumer Healthcare, a division of Johnson & Johnson, has caused many pallet users to be squeamish about using chemical treatment for pallets. The fear in the marketplace is completely based on concern over liability and not wanting to make a mistake that results in the same public relations nightmare and regulatory scrutiny that McNeil has received.
“Our clients won’t look at anything, unless it has FDA approval,” said Randy Brown of Ongweoweh, a national pallet broker and management company. Brown indicated that some clients were not allowing the use of soap and bleach to sanitize pallets without having explicit government approval. Even though bleach and soap are routinely used in restaurants and food preparation areas with direct food contact for sanitation, shippers still want legal documentation for protection.
But it doesn’t appear that the Food and Drug Administration (FDA) is looking at regulating mold treatments for pallets. While the FDA does regulate food additives, its focus is on substances where “the intended use of which results or may reasonably be expected to result, directly or indirectly, in its becoming a component or otherwise affecting the characteristic of any food.”
In the end, each company is going to have to decide for itself what the best solutions are to the mold problem. Pallet suppliers will do what customers want. And at this point, pallet customers want mold free pallets without the use of chemicals. But that has created a nearly impossible situation because a pallet company may deliver mold-free pallets that become moldy three days later due to practices taken by the shipper.
By Rick LeBlanc
Successful pallet companies pay close attention to the “L” word at every level of their operations and strategy. This column is a logistics soup, random thoughts on logistics, the pallet business and how the two are joined when it comes to propelling pallet companies to the front of the pack.
Pallet competition doesn’t just come from other pallet companies. Third party logistics companies are moving into the market to provide dock sweeps, repair and retrieval activities. Improving your logistics capabilities and IQ is one way that you can fight back to extend into one aspect of the supply chain that keeps on growing. Specialized services, such as re-packaging, reverse logistics, third party warehousing, creating store-ready displays, etc., can all be fertile ground for business expansion.
Smart pallet companies will keep an eye on local and national business shifts. Locally and regionally, opening of new industrial parks and port improvements can change local lanes, and give pause to review facility location and business relationships. Nationally, logistics hotspots have shifted, with over 40% of North American manufacturing and distribution locations now within a 500 mile radius of Atlanta.
Logistics is more of a growth industry for some markets over others. The industry leading in the growth of warehousing square footage and distribution employment is the wholesale electronics industry, followed by grocery. Good customers may come from any number of booming or mature industries, but some industries are experiencing more of an uptick than others presenting greater opportunity.
In the final analysis, logistics matters, and figuring out how to shorten your learning curve towards fully understanding it can improve your business.
By Andrew Mosqueda
Any company can spout sustainability claims that will allow them to work with large companies. Examining those numbers in the context of real world practices is what the market should focus on. Operational realities can eliminate any benefit a company’s model could have on the environment.
A white wood dealer typically has a 150 mile delivery radius to maintain its return on capital investment. Every mile a pallet company travels to make delivery adds to the cost and environmental impact. Regional and small pallet companies provide pallets to local companies. The difference between the two is that national pallet providers must maintain accurate inventory in regions all over the country. Accurate forecasting is required. Even a somewhat small forecasting error can cause a logistics nightmare.
For example, CHEP claims to issue 300-350 million pallets in the U.S. annually. The pallets must be distributed throughout the country accurately to meet seasonal and year around demand. If their forecasting is off it could mean delivering outside the 150-mile delivery radius or moving pallets from one region to another.
Poor asset management will eliminate any environmental benefit a company claims. A rental pallet company can burn through thousands of gallons of fuel to provide inventory to an area short of pallets. The grow-at-all cost strategy Brambles has used in the past, and iGPS is currently using makes it almost impossible to accurately forecast needs in all regions.
My advice to retailers and distributors is to peel back the layers and look beyond the hype. If you are using a pallet rental solution, watch out for inaccurate forecasting or rush deliveries that may be reducing the environmental benefits of pooling. If you are working with a pallet recycler, find out about its waste stream and sustainable practices.
By Chaille Brindley
For years, leaders in the U.S. white wood pallet industry have discussed the development of an industry cooperative pallet pool that holds to high quality standards and is regularly monitored to ensure compliance. One of the most promising proposals in a long time is the Pallet Industry Management System (PIMS), an industry cooperative pool being championed by a number of major pallet companies, including major players in the National Wooden Pallet & Container Association (NWPCA).
The PIMS model is just in the concept stage at this point. But recent economic analysis commissioned by the NWPCA and the Pallet Foundation indicates that the model could save pallet users money in the long run.
Although there have been numerous attempts to discuss similar plans in the past, none have developed the traction that appears to be building for PIMS. However, this does not mean that the success of PIMS is a foregone conclusion.
Based on the results of the three-month study, the PIMS computer simulation projected a total pool size of 24 million pallets by year five and an average new pallet cost of $18 per unit. The model assumed 6-24 months of use before repair (averaging 18-21 months) and a fairly high 8-10 trips per pallet per year.
The current PIMS model calls for the customer to underwrite the cost of the system, which means that the pallet user would have to be willing to pay a fairly high trip cost up front. Over time, the cost would drop significantly, possibly down to the $8 range within nine months of launching the program.
Customers want quality and price. These two forces are frequently at odds with each other requiring trade offs. But that doesn’t have to be the case over the long term. One thing is clear from the analysis; there is a strong economic case to be made for a system similar to EPAL in the United States. The new pallet math seems to be Innovation+Investments over Time = Higher Profits for All.
By Jeff McBee
The current low-grade shortage is one of the more acute that the pallet industry has seen. Some contend that it not only rivals the trends and conditions from 1992-93, but surpasses that shortage.
The strongest tie between the two is the uncertainty in the market, in availability and in prices. The biggest difference is solutions on the horizon. In 1992/1993, the answer was for weather to cooperate and sawmill production to catch up with demand. The answers are not so clear-cut this time around.
Like 1992, the current shortage was felt first by the pallet industry. Soon after, other industrial hardwood users become aware of the brewing shortage and began to magnify the problem as industries with deeper pockets began to shore-up any potential material shortfalls.
About the time it seemed like things couldn’t get any uglier in the low-grade hardwood market, paper companies were suddenly placing bonuses on round-wood that were steep enough to even attract some grade logs.
The 8.8 earthquake in Chile disrupted three of the country’s largest pulp mills. Prices on low-grade hardwood predictably spiked registering some historically large increases. Pallet suppliers in many areas were forced to view price as a secondary concern to availability.
Cant prices jumped by as much as $65 per thousand in two weeks in some regions. Not only did low-grade hardwood notch some of its largest price increases, but pallet cant prices found historical highs with some hitting $460 per thousand bf delivered in the Gulf Region.
The extremely tight supplies contributed to the skyrocketing prices in two ways. The obvious factor came as upward price pressure on existing mill prices. Another equally intense factor came from buyers looking farther away from their normal region.
Will the current shortage last as long as the 1992/1993 shortage? Or is this shortage destined to be short-lived and correct with better weather? Has demand improved enough to encourage mills to run more? Will weather cooperate to facilitate that? There are certainly more questions than answers.