Journey from COVID: The State of the Pallet Supply Industry

It is no secret that the COVID pandemic caused significant disruptions across industry.  The new pallet manufacturing industry was no exception. Significant market effects are still being felt today and will undoubtedly continue to do so in the foreseeable future.   Large supply-chain wide swings from unprecedented pandemic-driven demand to wildly below average sales in its aftermath, the challenges have been turbulent for pallet producers and downright dismal for lumber companies.   

Trouble Brewing: Chep Pallets and Big Box Stores

A major contributing factor to the volatility in the pallet supply market was the initial shortage of Chep pallets. Chep pallets are the blue rental pallets primarily used by large distribution centers and big box stores such as Walmart, Target and Costco.  As the world adapted to supply-chain challenges, rental pallets became increasingly scarce, exacerbated by temporary facility closures at Chep.  Distribution ecosystems were compelled to immediately convert their pallet purchases to new and used “white wood” pallets. 

Tipping Point: Supply Woes in the Reconditioned Pallet Market

The next shoe to drop was the increasing supply shortage of reconditioned pallets.  As many businesses closed or scaled back, the number of pallets being recirculated dramatically decreased.  With a shortage of both Chep and reconditioned pallets posing increasing challenges to logistics and distribution, businesses across the globe turned to new pallet manufacturers. Panicked demand for new pallets drove prices upward, creating challenging market conditions that produced pronounced ripple effects felt by all.   

The Current State of the Pallet Supply Industry

As the world continues to recover from the pandemic, an inverse effect is now being felt in the pallet market. What was at once in short supply and high demand during the height of COVID, is now experiencing a significant glut.  The pallet market is flooded causing inventory surplus challenges and liquidation style financial dynamics. 

To further compound the problem, all new pallets that entered the market during the pandemic have now transitioned into the used pallet pool throughout the country.  With the overabundance of affordable and easily sourced used pallets, demand for new pallets evaporated instantly and simultaneously decreased demand for new lumber. This historically low demand for lumber has resulted in lumber company and mill closures nation-wide. 

Cyclical Ecosystem: The Outlook for Pallet Manufacturing

Eventually the pallet surplus will be absorbed.  Once excess pallets are consumed and manufacturing rebounds, lumber supply will become scarce once again.  As a result, prices will increase and so on as the supply-chain waxes and wanes with shifting economic pressures.  While saving a few dollars is typically a positive scenario for short term cash-flow it’s not necessarily best for the health of the overall ecosystem long-term.  

In order to achieve price and supply stabilization, it’s imperative that pallet purchasers align with pallet suppliers who a have solid strategies addressing sustainable pricing models, agile manufacturing processes and supply-chain partnerships.  Fox Valley Wood Products understands the pallet supply market in a way that only three generations of experience can.  We take pride in our strong relationships with lumber producers throughout North America which allows us to be a stable, reliable and proactive partner.  As Tim Daanen, president and owner of B&D warehouse pointed out: 

“I have been working with Jeff and the Fox Valley Wood Products team since 2018.  I am forever grateful that during the Covid-19 pandemic they continued to provide us with high quality pallets at a reasonable cost in spite of the rapidly changing market conditions, especially when other pallet providers took advantage of the situation.  Now, when we or our customers look for savings, Fox Valley Wood Products continues to provide creative solutions in terms of different pallet sizes and configurations to best serve our needs.” 

Fox Valley Wood Products is your partner for a winning long-term supply-chain partner.  Our dedication to service and quality cannot be surpassed.  Our strong work ethic and forward-thinking solutions promise to protect your products wherever they need to go. Click here for more information about us and how we can best serve your needs: