The staff of the Pallet Enterprise spoke with a number of pallet companies and industry suppliers from around the country seeking their opinions on the future of the recycling business. Some of the most often repeated expectations include increased labor costs, a coming shortage of cores and the impact of new partnerships in the rental pallet sector. See what others in the industry had to say and how it compares with your experience.
What is the biggest change you expect to see in the pallet recycling market over the next five years?
“The biggest change I think I except to see in the pallet recycling market is the pallet design. I do think wood will remain to be the most cost effective material but the 9 block design may take over the stringer type.”
– Gary Williams, Owner
Bay State Pallet Co., Haverhill, Mass.
“There seems to be a real shortage of cores and used pallets out there. The used industry was so strong for so long that there wasn’t enough new being produced and its coming full circle now and I think it’s going to be tough for a number of years because there’s not enough cores out there.”
– Bryan Shafer, Owner
Timbercrafts of Utah, Salt Lake City
“The biggest change that I expect to see over the next five years is in the area of transportation. Fuel cost instability has caused significant fluctuations in the overall cost of transportation over recent months, and this trend is likely to continue. Furthermore, as we become more interconnected with pallet markets and core supplies in adjacent regions, transportation becomes a greater factor in our business operation. Together, these elements will focus a great deal of attention in the area of transportation over the next five years.”
– Buddy Burgess, Vice-presidnet
Pal-Serv, Dallas, Texas
“Hands down, it will be trying to find 9 block pallet cores. As the industry moves in and out of block pallet rental pools, those manufacturers who leave the rental pool will still want to use a block type platform. Pallet recyclers will have a great opportunity to sell high quality block pallets at the right price, but unfortunately most of them will not have the supply.”
– Alan Miceli, Owner
Innovative Data Systems, Sayville, NY
“The quality of the cores is degenerating. We’re seeing a more volatile availability than we have in the past. So at some point I think we’ll see cores becoming scarcer. Obviously as the economy comes back that will force more pallets into the market. The economy fuels the injection of pallets into the marketplace. So when the economy’s not cookin’ there’s less going into the market and we begin to move those pallets around a good bit more.”
– Howe Wallace, President & CEO
PalletOne
What one thing do you think pallet recyclers need to do today to be ready for the pallet market five years down the road?
“Think outside the box. The creative folks will be the survivors.”
– Don Baldwin, Managing Partner
General Pallet, Readington, New Jersey
“I think labor’s going to become more expensive. When you look at what’s happening to the labor market compared to the way that the industry has been heavily into manual handling of pallets, I think labor’s going to become tighter and tighter. So probably they should be moving into some automation that they haven’t done in the past.”
– Howe Wallace, President & CEO
PalletOne
“Total cost of goods and your operational costs are most likely going to increase. In order to continue to survive and protect the bottom line, sale prices and services must reflect real time market cost of materials, pallets services, and expenses.”
– Gus Gutierrez, CEO Pallet Consultants
“The thing that I think a pallet recycler needs to do today to be ready for the pallet market in five years is the same as always: Provide the highest level of service possible. Traditionally, this has meant making emergency deliveries on the weekend or after hours, visiting the customer’s location to help understand his needs, or otherwise meeting the customers needs. Over the next few years, I think that our customers will be asking for more pallet management information from us. We must build systems that manage this information for us and present it to our customers in a way that adds value to our product. This information provides transparency and accountability, and allows us to demonstrate superior value to pooled pallet suppliers and other competitors. This is the type of service that we must be able to offer in the future.”
– Buddy Burgess, Vice-president
Pal-Serv, Dallas, Texas
“I think the most important thing a recycler can do is align their company with a nation-wide pallet repair and return company, like The CORR Group, PalNet, PLUS or a similar company that is run by recyclers themselves. Brokers tend to seek the best price from a service provider with less emphasis on loyalty and commitment. They must partner with a company that understands their needs and capabilities. A company that is willing to let the recycler make a fair profit. Working with these national companies will enable the recycler to do what they do best- repair pallets. The stringer GMA market will continue to shrink. Recyclers will need to find a supply to repair. The larger nation-wide companies will secure the customers’ pallets and will need service providers to collect, repair and return them.”
– Alan Miceli, Owner
Innovative Data Systems, Sayville, NY
Rank which factors you think will be the biggest drivers in the pallet recycler industry in five years and explain why you selected the order that you did. a.) Core supply, b.) Personnel, c.) Technology/equipment developments, d.) Government regulations, e.) Market consolidation/partnerships, f.) Financing/cash flow, g.) Impact of pooled pallets/pallet rental, h.) Quality standards, i.) Other
“1.) Cash flow is the company life. If you don’t have it your competitors will know and it’s possible they may even take advantage of you. Bottom line, cash flow is an important factor in order to survive. Watch your books closely, plan ahead, and budget yourself. 2.) Core supply for a company that focuses on recycling will be the most significant impact as far as raw materials are concerned. The availability of materials are shrinking and this will cause the core price to increase. 3.) I think personnel can make or break your company. Surround yourself with good people and your business will grow. With the wrong personnel your business can develop a bad reputation, poor quality, and if not branded properly it could eventually shrink and may even die. 4.) Market consolidation, mergers and acquisitions are definitely going to come into play in the next five years.”
– Gus Gutierrez, CEO Pallet Consultants
“1.) Core supply: Core supplies are tightening all over and will continue to do so because of Costco and others. Pricing in the current A and B markets will probably not be sustainable as competition for remaining cores intensifies and costs continue to rise. 2.) Impact of pooled pallets/pallet rental: The inroads being established by the rental companies are huge. Even though it’s more costly than it appears, pallet buyers are being drawn to the convenient and
‘detached’ approach of renting the pallets. It’s ‘cleaner’ for the customer to rent, but in many cases, the final costs are higher. And the blue, red and black pallet folks are ruthless in bullying and smearing the regular pallet industry, and have the resources to wage wars of attrition against smaller players to further their agendas. 3.) Market consolidation/partnerships: The merger of CHEP and IFCO is going to have an impact on the market in many areas. On the other side, there is increasing cooperation between small operators also. 4.) Government regulations: We have a bill pending in New Jersey, that would place totally ludicrous regulations on the sale and use of wooden pallets. The legislation is being promoted by folks who know little about business, much less the pallet industry. If passed, it will decimate some companies as compliance would be totally unrealistic.”
– Don Baldwin, Managing Partner
General Pallet, Readington, New Jersey
“1.) Core supply: Manufacturers will want block pallets, recyclers will have a tough time finding them. 2.) Impact of pooled pallets/pallet rental: Rental Pools will continue to capture market share until the recycler can provide an alternative block pallet. 3.) Market consolidation/partnerships: Partnering with a national company will give the recycler the ability to supply its customers with a type of block pallet pool. 4.) Quality standards: This will always be important regardless of the platform style. 5.) Technology/equipment developments: Equipment and software systems like Pallet-Track ® will provide more accountability to customers and nation-wide partners. Those who have real data instead of guesswork will always be more desirable as a partner and vendor.”
– Alan Miceli, Owner
Innovative Data Systems, Sayville, NY
“1.) Market consolidation/partnerships: As our customers continue to consolidate, our industry must evolve to provide solutions that cover multiple locations or dimensions of business. Creative partnerships may be a part of this evolution. 2.) Transportation Cost: Increases in fuel cost have forced us to re-analyze our business model in recent months, and it is likely that this will continue to be a significant factor in our industry. 3.) Personnel: The demand for professionals within our industry will continue to increase, as we broaden our exposure to our customer base. 4.) Technology developments: Information Technology will continue to become a more significant part of our business. Our ability to analyze information and to communicate with our customers across any medium will define our ability to do business.”
– Buddy Burgess, Vice-president
Pal-Serv, Dallas, Texas
