From a shuttered main street to pallet equipment auctions, recent logistics trends have changed many lives, both inside and outside of the pallet industry. If we had not been hammered by the explosion of big box stores, third party logistics and offshoring, I believe that the landscape of our industry would look somewhat different today. The fallout of those changes continues to expand, and as it does, the urgencies of logistics continue to change. So, one might ask, what’s next?
I took the opportunity recently to survey lists of current challenges and opportunities for logistics put forth by various thought leaders. Here are some of those trends, and how I suspect they may change the pallet playing field.
Emerging Nations Need Pallets and Pallet Expertise
“Companies compete on cost and responsiveness, and this balance shifts dramatically when labor costs rise and the focus of demand changes,” was one observation. With rising labor prices in such locations as China, we see the continued reassessment of where to set up manufacturing to minimize labor cost, for example to other emerging nations such as Vietnam. Simultaneously, domestic demand continues to grow in these emerging countries, driving demand for modern logistics infrastructure. This translates into a growing demand for pallets and correspondingly for pallet expertise in these locations, as witnessed by the expansion of Loscam, CHEP, and to some extent EPAL, into Asian markets, along with other associated providers.
To Tag the Pallet, or Not to Tag
With global supply chains, the importance of accurately projecting demand, and coordinating it with supply continues to be of huge importance, as is flexibility. With respect to flexibility of managing inventory en route, tracking and monitoring technology will play an increasingly important role. Whether or not such technology will be increasingly imbedded in pallets or just attached or in the vicinity of unit loads, is yet to be determined.
Diesel Prices, Freight Capacity Will Put Pressure on Closed Loop
Logistics is still scrambling to deal with fuel prices and tight freight capacity, after many trucks being taken out of service during the recession. Increased pressure on freight costs could mean a couple of things. There will be increased pressure to optimize transportation through 3rd party load sharing or matching services in an effort to eliminate empty backhauls and other inefficiencies. Any time you throw more carriers into the mix, the opportunity for a closed loop pallet system becomes more daunting, hence the advantage is to rental or other one-way pallet schemes. And obviously the pallet takes up space (cube) and has weight, both of which are negatives that are usually balanced by the material handling efficiencies gained by pallets, quicker turnover of shipping doors, and so on. Look for pallet users to show a level of interest for unit load functionality with less of a pallet or a substitute base. For example we see Optiledge as an approach that works for certain types of loads.
FDA Will Ask Pallet Users to Show Their Pallets a Little Respect…Or Else
Bioterrorism, cargo theft, and food safety are key terms for experts, when they talk about the concern of risk management in logistics. Dr. Paul Singh, professor emeritus of Michigan State University, and Michael McCartney, principal of QLM Consulting, recently spoke at the United Fresh produce conference in Dallas about the Food Safety Act, and the power of the Food and Drug Administration to enforce food safety.
Depending upon how aggressive the enforcement, we should see an escalating emphasis on proper handling of pallets to keep them clean and dry, as well as more tracking technology to monitor not only the location of the load, but also tampering, load temperature, vibration and other information that could influence load condition. Whether this technology will be imbedded in the pallet or somewhere else in the vicinity, Singh and McCartney are suggesting a future where a trailer load of fresh produce will be a high tech mobile warehouse. How likely is FDA to show its teeth? McCartney says that it depends on the administration. Under the Democrats, it is more likely.
The Greenest Pallet of All
We all know that logistics is a dirty business. No, it really is a dirty business in terms of the carbon footprint of moving goods around the globe, and fraught with additional inefficiencies such as empty trailers on the road, painful delays, or product being shipped curiously from one continent to another for processing, and then shipped back. This is increasingly recognized as one of the biggest supply chain challenges. We have seen various attempts to help reduce carbon footprint through pallet selection, whether lightweight pallets, rental pallets, recyclable paper pallets, extremely durable alternative material pallets, and so on. The Irish, I seem to recall, have a thousand different terms for the color green. And it seems like we have a thousand different pallets saying they are the greenest. With pressure to improve supply chain sustainability forcing logistics decision makers to take action, we may see more customers surprisingly step outside the box, as IKEA did with paper pallets, to try something they perceive to be more environmentally friendly.
“Will paper pallets be an emerging trend for industry,” a printing industry association administrator asked me recently? Not likely, I told her, unless all of your member companies retrofit their racking to support them. To the extent that a specialty pallet needs specialized equipment for material handling, the potential of such programs will be limited – just like it was several years ago for The Home Depot with its ill-fated slip sheet program.
Coming to a Shore Near You
Another emerging trend is the rise of near shoring, bringing production back to the Americas to improve reliability and shorten time lines. This trend addresses the problems that companies are experiencing trying to forecast accurately. To the extent that this happens, we predictably would see more products palletized at the more localized production point versus at import warehouses.
So in summary, we have a supply chain that urgently will be looking for pallet supply in emerging markets, as well as for safer pallets, greener pallets, and possibly smarter pallets. As to which pallet can best resolve those challenges, however, the marketplace continues to vote predominantly for wood. Stay tuned.
