(Editor’s Note: The following report is the fifth in a continuing series of research surveys of the U.S. wood pallet industry supported in part by the U.S. Forest Service and the Illinois Wood Products Association. The survey was conducted by the authors, Jean C. Mangun and John E. Phelps. Both are on the faculty of the Southern Illinois University-Carbondale forestry department; Jean is an associate professor and John is a professor and department chair. Part one of their report appeared in the March issue of Pallet Enterprise; part two follows. A more detailed description of the sampling techniques and statistical methods is available from the authors, who may be reached at (618) 453-3341.)
Introduction
The wood pallet industry is one of the major forest products industries in the U.S., representing not only the largest single user of domestic hardwood lumber but also the major U.S. market for low-grade lumber.
New challenges are on the horizon, and it is essential that wood pallet manufacturers adapt to changing market conditions. Recycling has become a significant component of the wood pallet industry, and this activity is predicted to increase.
This study presents the results of a continuing effort to document the raw materials, products, and markets of the U.S. wood pallet industry. The study was based on a survey that was sent to a representative sample of U.S. pallet firms.
In the discussion of the findings, the 2000 data are generally presented first. Where applicable, a tabular comparison of distributions was made with the 1980, 1985, 1990, and 1995 survey findings. Tables that were presented in substantially the same format as those in previous SIUC survey reports were identified with an asterisk (*).
Part one included information on the sampling practices, the number and distribution of companies manufacturing and recycling pallets, and the number of pallets produced by each respondent. Part two examines pallet types and sizes, pallet markets and raw materials, wood residue, and other issues.
Pallet Design
The most frequently produced design of pallet was a flush stringer, double-faced non-reversible design. Seventy-two percent of responding firms (n = 130) reported manufacturing or reconditioning at least some of this design. This design type also was the most frequently manufactured pallet reported in previous SIUC surveys (1). The second most frequently produced design type was the single-faced, non-reversible design. Sixty-two percent of responding firms (n = 130) reported manufacturing or reconditioning at least some of this design in 2000. Pallet design type as a percentage of annual new pallet production (n = 123) was presented in Table 8.
The diversity of calendar year 2000 pallet production was illustrated in Figure 4. Fourteen percent of responding firms (n = 130) reported producing only one type of pallet. An additional 9% produced only custom or specialty pallets and skids. Over 50% of responding firms reported producing three or more different types of pallet designs.
Single Use or Expendable Pallets
When all responding firms (n = 128) were considered, the mean percentage of year 2000 pallet production that was of single use or expendable pallets was 52%. However, if the 23% of responding firms that reported “none” when asked what percentage of their production was single use or expendable pallets were removed from consideration, the mean increased to 67% of production being single-use or expendable.
The mean percentage of single use or expendable pallets produced in calendar year 2000 varied by Bureau of Census Region at a statistically significant level. The highest mean percentage of single use or expendable pallets in 2000 (77.9%) occurred in the East South Central Region and the lowest (32.1%) in the Mid-Atlantic Region (Table 2).
Size of Pallets
The most frequently produced size of pallet in 2000 remained the 48×40 module, the size used by the grocery industry (1). Sixty-two percent of responding firms (n = 132) reported manufacturing or reconditioning at least some of this size. The 10 most popular pallet sizes, of the 128 sizes reported in 2000, are listed in Table 9. From 1980 to 1995, the top 10 pallet sizes had remained the same, although the rank order had varied by survey year (1). For calendar year 2000, some changes in this rank order were found: two sizes are tied for third place (40×48 and 48×48), two sizes are tied for fifth place (48×42 and 40×40), two sizes drop out of the top 10 (42×48 and 36×48), and two new sizes move into the top 10 (48×45 and 48×36) (Table 9).
Distribution Channels and Sales
The most frequent distribution channel for U.S. wood pallet firms during calendar year 2000 was direct to user. All firms (100 %) that responded to the questions on distribution channels and sales (n = 135) used this method at least part of the time. When asked what percent of their pallets were distributed through other channels in 2000, 43.7 % of firms reported also using a broker; 7.4 % also used a wholesaler; 2.2 % also used a third-party renter; and 0.7 % also leased to user. The various combinations of year 2000 sales and distribution channels are illustrated in Figure 5.
Markets
Participating firms were asked to indicate, as a percentage of their total unit sales, the industries that bought their pallets during calendar year 2000. The following industries were reported as having purchased wood pallets which on average amounted to more than 10% of respondents’ (n = 123) total unit sales in calendar year 2000:
Miscellaneous Manufactured Products (23.0%)
Food (13.3%)
Steel/Metal Primary Products (10.2%)
A more detailed customer breakdown as a percentage of total unit sales nationwide and by individual Census region has been presented in Table 10. When asked if their year 2000 customer breakdown represented a change since 1995, 54% of pallet producing firms replied “no,” 30% replied “yes,” and 16% replied “don’t know.”
Market Area
The mean distance U.S. wood pallet firms sold the majority ($ or > 85 %) of their pallets in 2000 was within an 82 mile selling radius from the plant. The median number was 55 miles with a range of 0.25 to 613 miles. Only 5% of responding firms (n = 129) reported a selling radius greater than 200 miles. Less than 3% of all responding firms (n = 153) reported having production facilities in more than one state.
When compared on the basis of mean distance, no significant differences were found among the nine Bureau of Census Regions. Likewise, no significant differences were found among Census regions when compared on the basis of distance categories. Year 2000 data have been recoded into categories that allow qualified comparison with distributions from previous SIUC survey reports (Table 11).
Additional Products Manufactured
Forty-six percent of all responding firms (n = 153) produced at least one other product in addition to pallets during calendar year 2000; 29% of respondents produced two or more additional products. Approximately 50 different wooden products, which were manufactured in addition to uses of pallet residue, were identified by respondents. Although the modal additional product response was “crates” (49%), additional non-residue products included: boxes (30%), cut stock (14%), lumber (grade, green, or hardwood) (14%), stakes (surveyor or tree) (8%), bins and miscellaneous containers (1%), and precut pallet parts (1%).
Raw Materials
The 2001 survey found that 69.5% of respondents (n = 118) had purchased some or all of their new wood raw material as lumber during calendar year 2000. Approximately 43% of responding firms reported purchasing more than one form of wood as pallet raw material. Stumpage; logs, f.o.b. mill; cants; and “other” were the alternative forms of wood raw materials reported on the 2001 questionnaire. Approximately 24% of responding firms identified some or all of their new wood raw material as “other.” Eighty percent of the “other” subgroup further specified this material as being either recycled materials, cut stock, precut pallet parts, plywood or OSB. Fourteen percent of the “other” subgroup made additional note that since all of their wood was recycled materials, this question was not worded properly to address their firm’s practices.
Previous SIUC pallet surveys had found raw material purchase practices in the U.S. wood pallet industry to be relatively stable between 1985 and 1995 (1). Year 2000 data have been recoded into categories that allow qualified comparison with distributions of purchasing firms from previous SIUC survey reports (Table 12). A more detailed new raw material breakdown as the mean amount purchased nationwide and by Census Region during calendar year 2000 has been presented in Table 13.
Percent Hardwood
Eighty-six percent of U.S. pallet firms used at least some hardwoods in their pallets during 1995 (1). The 2001 survey specifically asked respondents “what percent of the new wood material was hardwood.” Responding firms (n = 121) reported a mean of 67% of new material used as hardwood. The mean percentage of new material that was hardwood varied by Census region at a statistically significant level for the 2000 data. The highest mean percentage of hardwood in 2000 (87.3 %) was used in the New England Region and the lowest was used (2.8 %) in the Pacific Region (Table 2).
Average Pallet
The amount of wood used in manufacturing the average pallet was found (n = 101) to be 17.3 board feet per pallet nationwide. The mean amount of wood in the average pallet also varied by Bureau of Census Region at a statistically significant level for the 2000 data. The highest mean amount of wood per average pallet in 2000 (22.4 bd. ft.) occurred in the Pacific Region and the lowest (13.7 bd. ft.) in the East North Central Region (Table 2).
Use of Non-Wood Materials
Approximately 92% of responding firms (n = 132) reported all (100 %) of their pallet raw material was wood. However, of the 8% of responding firms that did incorporate materials other than wood into their pallets during 2000, 50% of this subgroup further reported that this amount represented an increase in non-wood use over 1995. Foam and plastic were most often specified as the non-wood materials so used. When asked if the percentage of non-wood pallets manufactured or reconditioned in year 2000 represented a change since 1995, 3.9% of respondents (n = 129) replied “increase,” 4.7% replied “decrease,” and 91.5% replied “no change.”
Pallet Fasteners
A variety of pallet fasteners were reported (n = 136) being used by the industry during calendar year 2000. Fasteners reported were: approximately 49% used nails only; 1.5% used staples only; 39% used both nails and staples; 9.5% used a combination of nails, staples, and other fasteners; and less than 1% used other methods entirely (e.g., adhesives, bolts, lags, screws, and corrugated fasteners).
Wood Residue/Waste
The mean percentage of wood raw material used in pallet production that became residue or waste was 7.5% of materials. Approximately 7% of responding firms (n = 104) not only reported 0% waste, but also further noted that this absence of residue was due to their use of precut pallet parts. Of those firms that did report generating residue or waste (n = 97), 24 different uses or products made from production residue were reported. The most frequently reported uses of pallet production residue during calendar year 2000 were:
landscape mulch (35%)
firewood (34%)
boiler fuel (25%)
animal bedding (24%)
chips (14%)
sawdust/shavings (10%)
playground surface (5%).
Operating Expenses
As in previous SIUC survey years, the major portion of total pallet manufacturing expenses remained the wood raw material (Fig. 6). Approximately 94% of responding firms identified wood as a contributing factor with over 40% of these reporting that wood represented 50% or more of total annual expenses. Of the 27% of responding firms (n = 113) who reported “other” expenses, 65% further specified freight, fuel, or other transportation-related cost.
Strategies to Offset Expenses
Eighty-two percent of all responding firms (n = 153) indicated that they had taken at least one step “to offset lumber shortages and higher prices.” The strategy most often reported (68%) was “raise pallet prices” (Fig. 7). The strategy with the largest magnitude change since the 1995 SIUC survey was “recycle pallets” (53%). In 1995, only 29% of firms reported recycling pallets to offset shortages and higher prices.
Summary
1. The most frequently produced type of pallet design was a flush stringer, double-faced non-reversible design. Seventy-two percent of firms reported manufacturing or reconditioning at least some of this design.
2. The most frequently produced size of pallet was the 48×40 module. Sixty-two percent of firms reported manufacturing or reconditioning at least some of this size.
3. The following industries were responsible for at least 10% of total unit pallet sales nationwide: Miscellaneous Manufactured Products (23.0%), Food (13.3%), and Steel/Metal Primary Products (10.2%).
4. The mean distance pallet firms sold most (> 85 %) of their products was within an 82 mile radius from their plant.
5. The mean length of pallet firm ownership was 24 years.
6. The major form of wood raw material used in the manufacturing of pallets was lumber. Sixty-nine percent of firms had purchased some or all of their new wood raw material as lumber during calendar year 2000.
7. Eighty-six percent of firms used at least some hardwood in their pallets.
8. The major portion of total pallet manufacturing expenses remained the wood.
9. Although the most frequently reported strategy for cutting expenses was to raise pallet prices (68 % of firms), the strategy that exhibited the greatest magnitude change from previous survey years was recycling pallets (53 %).
Literature Cited in Part Two
1.1996. The pallet industry in the United States 1980, 1985, 1990, and 1995. Dept. of Forestry Research Publication, Southern Illinois Univ., Carbondale, Ill. (July).
