Pallets Are The Latest Pandemic-related Supply Chain Pinch Point
First it was toilet paper, then yeast, garden gnomes, and gas.
Now, as society reopens, it’s pallets that are in short supply, a behind-the-scenes commodity used to transport goods from factories and farms to distributors, retailers, and us.
Wooden pallets are an essential part of shipping, and a way to contain and protect products as they’re moved from place to place by forklift and truck. A mainstay behind stores, on loading docks, and in dumpsters, the humble pallet is lately commanding more respect.
“Our system is designed to run on pallets," says Karl Millsap. "I think pallets are a good gauge of what the economy’s doing. A warehouse or manufacturer, say, if they don’t have pallets, they have to shut down until they can get them.”
Millsap is founder and owner of Blue Ridge Pallets, a Shenandoah Valley company that repairs and resells 48 x 40 inch wooden pallets. “We play an important part. It’s probably underrated until people run out of pallets, but that’s when they realize how bad they need them. We’re definitely a big part of the supply chain.”
As the economy reopens, pallets are in short supply. Nervous manufacturers and retailers have hoarded them in warehouses, lumber costs have exploded, and there are too few truckers to haul them.
“If I was a Target or a Walmart, I wouldn’t want to lose any customers due to not having a product in my stores," Millsap admits. "We do it here, everybody does it to a certain point, I think, even at home; people carry a little more toilet paper and cleaning supplies now than what we did a year ago, so it’s a natural occurrence.”
Professor Barbara Hoopes, who teaches at Virginia Tech’s Pamplin School of Business, likens the pallet problem to weather-related airline delays. “If the planes can’t fly their usual routes, the following day, there are planes that have to be moved to where they need to begin their scheduled route. It’s not a simple process; a lot of algorithms are involved. It’s also not cheap,” she says.
Some industries are particularly vulnerable in a pallet shortage because their products are perishable, like fruits, vegetables, and plants. Professor Hoopes expects delays and price increases “because alternative ways of transporting the goods have to be found.”
Big pallet rental companies like CHEP have apologized and advised their customers to find back-up supplies. But even small businesses that use only dozens of pallets may need shift their sourcing.
The Wenger family has grown Concord and Niagara grapes on their Waynesboro farm since 1938. “We primarily use pallets during our harvest season in September," grower Mark Hochstedler says. "We sent them out with flats of packaged grapes to go the grocery store; we also use them on the farm to stack logs of picked grapes to transport from the vineyard to the cooler.”
Hochstedler usually waits only a few weeks before harvest to source the 40 to 80 pallets they’ll need but will likely scout them earlier this year. “I haven’t started checking on pallets, but maybe I should,” he says.
He’ll likely pay more, too. Millsap’s pallets now fetch 30% to 50% more than they did six months ago. He’s also hired three more full-time workers, increased production, and offers cash bonuses to employees who exceed daily pallet repair goals. His company is now poised to process nearly 1.5 million pallets by the end of 2021, nearly 20% more than last year.
“One thing for sure is, nobody realizes the value of a pallet until a customer runs out of them. Before, I would have to make sales calls, and I haven’t made any real sales calls in the last six months,” Millsap notes.
Professor Hoopes expects the problem to ease as the economy reopens. Millsap expects pallets to remain a hot commodity through the end of 2021.