It’s human nature to deny a problem or kick the can down the road until the pain of not doing something stings much worse than the pain of action. That appears to be the situation as pallet recyclers come to terms with the lack of standardization when it comes to grades and terms in the U.S. recycled pallet market.
Earlier this year at the Woodpack Global meeting, the Recyclers’ Council, an informal forum of recycled pallet industry leaders, met to discuss pressing issues. And a core concern was the need to develop some consensus guidelines or standards for recycled pallet grades and terminology. This initiative is being led by the industry as recyclers face pressure from customers to improve quality, develop a consensus for what each pallet grade means, and avoid fines and chargebacks from retailers. The association itself is not taking a firm position on the issue; instead it is helping to facilitate discussions that are being led by a group of recyclers that are spearheading research and consensus building.
This standards discussion is not new. It has been around for decades. And little has been done. The reason is that everyone benefits by grey in the system.
The core problem is that there is no consistent, industry-wide definition for recycled pallet grades. The same product might be called an “A,” a “#1.” In the highest-level tier, a top-quality used pallet may be called a “Triple-A,” a “Club Pallet,” a “Premium,” or any number of regional variations – with no shared meaning.
Woodpack Global gets a lot of questions from pallet users on the topic, and it remains a mystery. When the association’s Uniform Standard was updated last fall, the recycled pallet category was deliberately skipped. It was left untouched to avoid slowing down progress on other sections. The Woodpack Global Board of Directors subsequently directed the Recyclers’ Council and Standards Committee to reassess this topic. A recycler’s taskforce on the issue explored the topic, and it reached a consensus that the issue is worth diving into for a broader inquiry.
Looking at Woodpack Global standards, the primary real consensus seems to be when it comes to what makes the “B” or “Class 2” grade and that is the existence of 1 or 2 companion stringer repairs. It is my opinion that the pallet community needs to do more than just address this basic definition.
Historical precedent shows how outdated terminology persists in the industry long past its relevance. “GMA pallet” is a prime example — a term that technically no longer exists but remains in common usage. A recycler at the meeting admitted, “There is no such thing as a GMA. But how many people are still saying it’s a GMA? That’s why ABC and 123 are still in common usage.”
According to one Recyclers’ Council participant, the original recycled pallet classifications were A, B, and C. At some point around the early 1980s, they were changed to 1, 2, 3, but the definitions were never actually updated. This means that technically, an “A” and a “1” are the same thing. The inconsistency has persisted for decades.
Why allow this ambiguity to exist? The reason is simple. It has a business upside but is having a seemingly critical downside. Some council members acknowledged honestly that the lack of clear standards has historically benefited recyclers, offering flexibility and negotiating room. But that same ambiguity is now eroding customer confidence. That ambiguity has allowed purchasing agents to claim lower prices even while a lack of clarity has allowed recyclers to remain in business while degrading standards to accommodate price pressures.
“The pain points are the chargebacks. From these [big box stores], if you start there, that’s where your customers are calling and saying, ‘What are you giving me?’”
— A recycler at February’s Recyclers’ Council Meeting
A major driver in recent years has been the changing attitudes and actions by major retailers. As these large companies invest more in warehouse automation, pallet quality has become a bigger deal. Retailers and product manufacturers are demanding higher quality pallets. But they still want low prices, or in many cases price cuts. Seeking to eliminate low-quality pallets from entering their systems, some retailers are issuing pallet quality chargebacks or fines to product suppliers. In turn, these pallet users are pushing back on recyclers and pallet manufacturers.
Ambiguous grading creates financial exposure through customer chargebacks — when customers order what they think is a specific grade and receive something different. Proponents believe that a defined standard would give recyclers clear footing when disputes arise.
As a recycler acknowledged, “The pain points are the chargebacks. From these [big box stores], if you start there, that’s where your customers are calling and saying, ‘What are you giving me?’”
I believe that if the pallet industry defines the terms first, it has better ground to push back on chargebacks and customer complaints. The good news is that major product manufacturers are starting to ask for help on the recycled pallet standardization issue. The Food Industry Association (FMI) and the Consumer Brands Association and their members are asking for a defined pallet standard. These companies want to know what they’re buying, and they’re looking to the industry for an answer. Of course, the pallet customer always has control of its specifications, and this problem illuminates how pallet users reward purchasing agents on one set of criteria while the supply chain and retail customers realistically have different priorities.
The reality is that Woodpack Global is only facilitating discussions and not directing them, and there is no guarantee that any industry consensus can be reached. But there does seem to be greater movement toward addressing these issues due to changes within both the pallet recycling and pallet user communities. Plus, there is a major risk of inaction. If the recycled pallet industry cannot provide an answer when major buyers ask for a standard, those buyers may define one themselves – or switch to alternative platforms.
Brad Gething, vice president of science & technology for Woodpack Global, stated, “As always, Woodpack Global is here to respond to member driven requests and initiatives. We are glad to be able to facilitate a space for conversation amongst recyclers that hopefully results in consensus to the industry’s benefit”
Currently, the Recyclers’ Council is seeking input from pallet companies to submit information on their internal recycled pallet specifications, representing 57 different specs. The task force is looking for commonalities across regions, sizes and grading systems. Data is aggregated; individual company names are not shared. If you would like to submit information for this assessment, contact Kate Doherty at Woodpack Global at kate@woodpackglobal.org.
If pallet suppliers can’t solve the quality problem, some warehouses
may opt for more load movements without pallets.
The Recyclers’ Council is hoping to develop a baseline for discussion with pallet customers, not a straitjacket standard that has to be used by everyone. This group is not trying to eliminate regional variation or customization. The goal is to establish a shared reference point – a common minimum definition of grades.
One recycler noted why some are so worried about any standardization effort. He said, “The major concern is about this becoming too rigid, and that the nuances or the specifics in your own market, you’re not going to be able to provide that pallet. That can be okay if we can keep these as general reference points.”
From the standards committee’s perspective, the most valuable near-term outcome would be a single agreed-upon name and definition for the top tier, what is variously called premium, triple-A, club, or 1A. I actually think that the grade most needing a definition is an “A” or “#1” pallet. And the reason is simple. It is the largest, most ambiguous section of the market. Sort of in the middle. And everything else can be defined from that. Sort of like a middle C note on a piano.
Regardless of where we start, the top, the middle, the bottom? Consensus guidelines need to start somewhere. And to be effective, they need to go beyond just a name. They need a basic set of characteristics to determine actual pallet quality.
Some at the meeting raised the question about pallet design versus the condition of the pallet. Most notably, the deck board or stringer thickness and wood species can vary significantly. And it can be hard if not impossible to easily determine these characteristics. A recycler cautioned, “Conflating the pallet condition and design would significantly complicate grading… That’s going to be a heavier lift, because then we’re going to have to consider what is the condition of the pallet and then what kind of design, what components are on it.”
Everyone seems to agree that automation in the supply chain is raising the stakes when it comes to pallet quality. It seems that all the competitive concerns are aligning to make a basic recycled pallet guideline work. It will likely be a bit squishy to get approval. But a good starting point is better than what we have now. And the reality is that the pallet industry either gets to lead or be led.
