Having experienced a number of ups and down over the recent years, the pallet industry has been in flux with the move of the overall economy. Seeking to get a snapshot of the current state of the industry, researchers from Virginia Tech have conducted an industry survey. It aimed to foster increased understanding of the U.S. wooden pallet industry and its supply chain.
This survey was completed last summer and included a mail survey of about 1,500 wood pallet manufacturers and recyclers. About 13.5% of those surveyed responded with useable information. This provided a large enough sample size to make the researchers comfortable with the information database. The questionnaire had three sections: (1) general information, (2) importance and characteristic of imported and domestic wood pallets, and (3) supply chain management factors.
The following is a detailed explanation of the responses.
{Publisher’s Note: In some cases the information supplied to the survey questions did not match, as well as the researchers would have liked, when compared to previous industry surveys done by Virginia Tech, the Forest Service, Southern Illinois University, or Industrial Reporting. Established, reliable, industry-wide numbers have been difficult to achieve in the past. Industry company mergers and the growth in industry pools have changed the pallet industry enough that population projections are always suspect. We applaud the Virginia Tech researchers for their efforts with this survey.}
Type of Business
Figure 1 shows that 93% of firms who responded to the questionnaire manufactured new wood pallets; 45% of the firms recycled and repaired pallets. Pallet brokers, lumber brokers and pallet material importers characterize the efforts of 8%, 5%, and 3% of respondents respectively. “Other” type of business accounted for 11%; this group included activities such as dunnage, mulch, pallet parts, wood crates, specialty boxes, survey stakes, cut stock, grade lumber or run their own sawmill. Since respondents may be involved in multiple business activities, survey percentages for type of business add to more than 100%. Many pallet companies both manufacture new pallets and recycle pallets. Some only manufacture new ones. Many recyclers build at least a few new pallets to handle customers’ needs even though they might consider themselves to primarily be recyclers. Many recyclers build combo pallets where they mix new and used lumber, and many build pallets from scratch using used lumber.
Number of Employees
Figure 2 shows the distribution of the number of employees among respondent companies. The highest frequency (38.6% of respondents) corresponded to companies with 20 to 99 employees. Seventy eight companies indicated that they had from 20 to 99 employees, representing 38.6% of the respondents. Companies that worked with 19 or fewer full-time employees represent 54.0% of the respondents. Only 7.4% indicated that they have more than 99 employees. The full time employee ranges (1-4, 5-9. 10-19, etc.) correspond to those used by the Census Bureau in its analysis. The largest Census Bureau frequency corresponded to the smallest range of number of employees per establishment (1 to 4), with the next highest corresponding to 20 to 99 employees per establishment. As the non-response bias assessment demonstrated, smaller companies were less likely to respond to this survey than larger companies.
{Publisher’s Note: It is interesting that small companies continue to be common in the pallet industry, but the larger companies continue to become more dominant over time. When we first started working with the pallet industry, many states had few if any pallet companies that built over 10,000 to 15,000 pallets per week. Now, as Figure 4 illustrates, the larger companies dominate a larger part of the market.}
Major Products
Companies were asked to report their major products in 2009. Approximately 70% of companies reported new wood pallet production as their primary activity, followed by recycled/repaired wood pallets with approximately 18%. Nevertheless, there were many companies who were dedicated to other business activities such as lumber, wood pallet parts, railroad ties, wood containers, and other types of production (see Figure 3). According to respondents, “other” activities included production of dunnage (wood packaging material to secure a commodity), survey stakes, firewood, mulch, sawdust, chips, bark, plywood, and specialty wood packaging. Also services such as pallet disposal and heat treatment were identified in the research.
Pallet Production
The wooden pallet production distribution is shown in Figure 4. Thirty five percent of companies made less than 100,001 wooden pallets in 2009. A little over a half of respondents (51.1%) produced between 100,001 and 1,000,000 wood pallets in 2009. Thirteen percent of companies produced more than 1,000,000 wood pallets. The average pallet production per year per company was 727,229 units, approximately 42% more than the 512,533 units that Dr. Bob Bush and Dr. Phil Araman indicated in their 2008 report for 2006 production. The difference can have two potential explanations. Possibly medium and large companies were more likely to respond to this survey. And/or there was an increase in production from 2006 to 2009.
{Publisher’s Note: Our own survey of Pallet Profile readers indicated that we saw a huge decrease (about 35%) in production by the middle of 2009 in the depth of the biggest recession since the Great Depression. Since an increase in production by 2009 seems highly unlikely, it is probable that larger companies were more likely to respond to this survey. This too is what we have experienced over the years when it comes to willingness to cooperate in industry survey efforts.}
Species and Origin of Raw Materials
In addition to the wooden pallet materials volume, data about species used was collected in order to learn about the wooden pallet market. Approximately 50% of respondents answered this question. Mixed hardwoods had the highest percentage in the mix (27.3%), followed by oak and southern pine with close to 16% each; spruce-pine-fir followed with 12.7%. “Other” species included aspen, larch, Ponderosa pine, black ash, lodgepole pine, cottonwood and cedar (see Figure 5). Other species that were reported with heavy enough volumes to justify reporting them ranged from Radiata Pine and Eucalpytus with 0.2% and 0.4% up to Yellow poplar (8.1%).
Purchasing Decision
Companies were asked about the factors that they consider important at the moment of purchasing raw materials. Respondents indicated (see Figure 6) that cost, availability, quality, reliable suppliers and delivery on time were the most important factors equally in all three group industry sizes. The above factors were followed by technical aspects related to the materials such as machinability, durability, strength, density and workmanship. This might imply that the wood pallet industry could be more concerned with manufacturing costs, customer service, and supplier relationships than physical and mechanical properties of its raw materials. Perhaps surprisingly, environmental certification received the lowest rating (3.1). It was rated as “undecided” by small and medium sized industries and as “strongly disagree” by large firms. This result is interesting considering that the topic of environmental certification is gaining some momentum in the wood products industry.
{Publisher’s Note: Of course the raw materials purchased to build pallets evolved over time due to a combination of cost, availability, and strength. Once a pattern was established, it has had a tendency to maintain itself unless some specific factor enters the market}.
Summary
• Approximately 93% of respondent firms manufactured new wooden pallets and about 45% recycle or repair them. Respondents are often involved in multiple business activities.
• Most respondents (38.6%) had between 20 to 99 employees. The same percentage of companies (38.6%) had 5 to 19 employees. Very small companies (1 to 4 employees) represented 15.3% of respondents.
• Approximately 70% of companies reported new wooden pallet production as their primary activity and 18% reported the production of recycled/repaired wooden pallets as primary.
• The mean average annual production of pallets was 727,229, and the median production was a much smaller 200,000 pallets.
• The most common wood species used were “mixed hardwoods” (27.3%) followed by oak, Southern Pine, and Spruce-Pine-Fir (15.8%, 15.5%, and 12.7% respectively). Some respondents reported importing at least some of their raw materials, with an overwhelming majority importing from Canada. Spruce-Pine-Fir and Douglas Fir are the most common imported materials. Other than Canada, Chile and Brazil were the most cited sources of imported materials.
• On the supply side, the most important factors for purchasing decisions are availability, cost, supplier reliability, quality, punctuality, strength, and workmanship; all with ratings of four or higher.
