All eyes are on Washington as 2025 starts. President-elect Trump seems to be writing a new playbook for the federal government. But it remains to be seen how much the “Swamp” will allow changes to be made. It is one thing to make campaign pledges. It is another thing to bring wholesale changes to a town that is known for its bureaucracy.
There is a growing sense of optimism though that the new administration will seek to unleash U.S. business interests to focus on growth and boosting the domestic economy. Two of Trump’s recent press conferences have begun with foreign investors pledging to invest hundreds of millions into domestic technology facilities and the creation of thousands of jobs. Trump is optimistic about growing the U.S. manufacturing base as well.
Here are our projections for industry trends and challenges in 2025.
Labor Woes Get Worse
While the cost of labor has not skyrocketed at the rate it did during the pandemic, finding skilled workers who can contribute continues to be a challenge for many pallet companies. The situation is likely to get worse with the Trump administration looking to really seal up the border and deport millions of illegal aliens. Some have speculated that the Trump administration could crack down on businesses and conduct raids or seek to require greater use of the E-Verify system to screen job applicants.
While many of the larger pallet companies have instituted programs to verify work authorization, many of the smaller to mid-sized companies have not taken this step. Tougher workplace enforcement could be an issue that comes back to the forefront in 2025.
What does this mean for pallet companies? Smart pallet company leaders will continue to work to optimize their plants to use labor efficiently and eliminate bottlenecks. Automation projects that were put on the back burner may need to be pushed ahead to take up the slack.
Pallet Users Kick Automation Into Overdrive
Years ago consultants talked about the day and age when warehouses would be completely dark, run by robots and no humans working the floor. While you won’t see that level of automation in the next generation of supply chains, what is happening is the deployment of technology to make humans more effective, reduce the physical strain on them and improve process flow and data capture capabilities. Good data will be key for artificial intelligence and other next generation technologies to be successful. Automated systems are just better at capturing data than manual processes.
Retailers are pushing ahead with the trend of turning retail shops into mini-DCs while automating warehouses to improve flow to meet the expectations of very demanding customers. This shouldn’t result in less pallet usage but more because you must have pallets for retail as well as larger DC operations. What may change are the quality specifications. Our editorial team has been saying for a while that the white-wood industry needs to develop some consensus quality standards that are patrolled by a third party to prevent spec deterioration and cheating.
We don’t believe this will be for every pallet shipment but just for those heading to very automated systems. Think of it as a premium pallet with a true grade and system backing it up. It may only account for 5-10% of the total U.S. pool. But that would still create an alternative to traditional rental systems. Why do we think this should be on the radar screen for the white-wood industry? Increased automation is leading to a greater focus on quality at least for some applications.
For example, European warehouse and materials handling supplier, WDX, has introduced an automated truck loading and unloading system that eliminates the need for forklifts. This system called the Q-Loader reduces the number of docks by five times compared to a standard approach. You can see an example video at https://tinyurl.com/ffnwtbbc.
The Q-Loader uses a forklift slide system to pick up and move an entire truckload at once. WDX claims this system can unload an entire trailer in two minutes. Each pallet moves down a conveyor and is turned to facilitate transfer to a robotic drive vehicle that takes the pallet load to the right place in the fulfillment center or Automated Storage & Retrieval Systems (ASRS). This type of automation may reduce product damage while reducing labor costs.
Watching the system run, a few things are clear. Proper loading is important for the forklift slide to efficiently grab all the pallets at once. Pallet quality is important because damaged pallets can easily throw a monkey wrench in millions of dollars of automated handling equipment. While these approaches are just beginning to catch on, efficiency, speed and accuracy are critical for warehouse technology of the future. Higher levels of automation in warehouses in the near future will lead to greater concerns about pallet quality. As a result, the value of B-grade pallets is dropping while recyclers place an emphasis on A-grade and Premiums.
Everyone Wants Vision
Another reason that we believe pallet quality is the next big challenge for the industry is the growing interest from pallet users in pallet inspection and vision systems. Some major retailers and distributors are buying these systems to inspect pallets. They are using the systems to improve the retention of high-quality pallets as well as develop better data on what is being sent to pallet recyclers. Our team believes this technology will grow in its utilization by both pallet users and suppliers. Artificial intelligence can improve the sortation and data analysis capabilities compared to human operators. One outcome of this technology will be greater information in the hands of the retailer or the recycler who uses it. This could also reduce the number of quality cores on the market as emitters push out more junk and do a better job of culling pallets.
International Trade Dynamics Changing
From military conflicts to tax code changes to proposed trade tariffs and even lessons learned from the pandemic, major corporations are evaluating their sourcing policies. This uncertainty could lead more companies to look for domestic or closer-to-home sources for a wide variety of goods and supplies. Some of the tariff talk may just be a negotiation ploy. But President Trump did enact tough tariffs against China the last time he was in office. The boomerang effect of these tariffs did have negative repercussions for the U.S. hardwood sector. This time Trump is also talking about issuing tariffs against Mexico and Canada if they don’t fix border security problems.
Dismantle the Future
Most pallet recyclers will tell you that the industry has had too many junk pallets in the market over the past year or so. While this over-capacity has been reduced somewhat thanks to efforts to dismantle and reuse wood for pallets and other options, more needs to be done. Given the competitive landscape of the pallet market, using recycled lumber is a great way to cut costs. If you are not using a pallet dismantler to take apart pallets, this could be a great purchase in 2025. There are a lot of options on the market. See our convenient guide on page 48.
Workforce Culture Will Divide the Winners from the Losers
Pallet pricing is likely to remain very competitive through 2025. The companies that perform the best will be those with the right management and culture to ensure that they can respond to whatever the market and their customers throw at them. One of the worst things you can do is have problem employees destroy your culture and sense of worker pride. Don’t miss the article on page 44 to see ideas on how you can improve team unity this year.
While there is a lot of uncertainty about 2025, our team believes these are potential trends and challenges that smart pallet companies will be monitoring.
