Economic and industry experts used to encourage people to look for the big trends if they wanted to stay ahead of the competition. Now it seems that the big thing is a lot of little changes that will slowly transform our markets. As a journalist, I see and write about a lot of things with an eye to the future. Some of it ends up coming true. Other things were just good ideas that I should have just kept to myself.
I believe the future is likely to be shaped more by a lot of small forces than a few major trends. Think of it in the terms of geology. A large rock or geological formation under ground can take years to produce. But it starts with a lot of little changes and forces. Some of these forces may not be noticeable at first unless you are really looking.
I have noticed a reaction cycle that tends to occur with all “emerging” trends, reforms or technologies. First, some scientist, business executive, expert or public policy leader alerts the world to a problem and/or solution.
The media then picks up on this thing/issue and runs with it. As a matter of fact, the media usually builds the thing up so big that it becomes a disappointment to most people. Then the media talks about how the bubble burst and the change did not emerge as promised. While this does occur on many instances, it can also be a poor explanation for what happens in other situations.
In many cases, change occurs more slowly than anticipated. Change is gradual until momentum reaches a tipping point, then change comes fast and hard.
Late adopters are left scrambling to react. They pulled back due to perceived media pressure right at the time when they should have pushed forward with the change. Smart executives and managers should keep this in mind when reading any story, including this column.
I believe the wood biomass for energy concept is a perfect example of my reaction cycle hypothesis. Trade publications, including this one, have talked up the research and possibilities. But it will likely take much longer to come to fruition than most would like.
Here are some of the minute and major trends that I believe companies in the pallet and lumber industries should keep an eye on over the next 10 years. I am not sure which ones will pan out and which ones are duds. That is your job to figure out.
• Increased level of technical competence required to deal with international regulations and global commerce.
• The pallet industry used to be an easy market to penetrate as a start-up. But it is getting increasingly difficult to go from being a pallet scavenger to a small recycler doing a few customers to a large, viable pallet operation. While it can still be done, it takes experience to know how to make little changes that impact efficiency.
• Selling more specialized products and services that require you to get closer to your customer.
• Tight labor markets causing companies to automate operations wherever possible. More prefab parts used to make final products.
• A lot of little products and services that add up to what one or two major products used to do in terms of sales.
• A strong housing market in the U.S. despite the sharp decreases over the past year or so. Long-term the fundamentals are good, especially the number of replacement homes that will be needed.
• Going paperless in billing and some other customer communications. Increasingly communications will be through electronic means, which will require even small companies to use databases where paper records used to be king.
• Longer supply chains for some products and much shorter ones for others.
• Move away from super distribution centers to more regional facilities.
• Dispatching, transportation and logistics services will become a more important part of the pallet and possibly the lumber industries.
• Manufacturing and process flexibility requires companies to design operations that can be easily transformed to do different things. Versatility will be a key factor in buying new equipment.
• Sustainability is more than just the latest corporate fad. It is here to stay. Forest products companies must improve processes and document that their approach is sustainable from a total life cycle perspective.
• Composites will further drive growth of plastic pallets by reducing costs although wood will remain the market leader for years to come.
As has been our custom in recent years, the January issue includes summaries of the best of articles and insights from 2007. It certainly wasn’t a boring year for sawmill and pallet companies.
The story of the year is the Emerald Ash Borer (EAB). This little pest, which is no bigger than a penny, could forever change the pallet industry. By this time next year, the industry could be well on the way to mandatory pest treatment for all pallets. There is no timetable yet for such a policy although it has been mentioned as a solution to invasive, wood-eating pests.
It is not clear if the federal government has the authority to institute such a requirement. You will want to stay tuned on this issue and may want to have your favorite heat treatment equipment supplier or fumigator on speed dial.
Other noticeable stories include the rise of sustainability as a hot topic for corporate customers, biomass and other technology developments, the continued impact of globalization and international markets, labor and immigration law challenges, etc.
Besides the typical 2007 highlights, this issue also includes an interview with Al Schuler, a forest economist with the U.S. Forest Service. This article will interest any person who wants to know what the major factors are that will likely shape the forest products industry over the next 10 years. Al reports on a mixture of both good and bad news. You’ll have to read the article on page 40 to see what he has to say.
